If you have purchased cryptocurrency or invested in crypto assets, recent media headlines must have scared you.
In the month of January alone, there is a series of hacks of crypto firms, one of the most striking of which is the theft of digital currencies worth more than $35 million from Crypto.com, a platform where you can buy and sell bitcoin and others cryptocurrencies.
And what you need to focus on is keeping your crypto safe.
“So this is a different paradigm from the way we look at money today”, said Chris Kline, chief operating officer and co-founder of crypto investment firm Bitcoin Ira. “We either have it attached to gold and we put it in a safe or we have it in a bank, which is FDIC insured and there’s all this institution in the middle between you and your money.”
Crypto, Kline added, is “a paradigm shift towards a more decentralized system of money. And that means that you can hold your crypto on wallets and things but you don’t want to just leave it in risky places.”
Data is Public
Past hacks happened almost at an exchange level. If you leave your coins there, which makes it easy to buy and sell them, that’s when a hack on that exchange gets compromised. Then, you could be compromised.
The most exposed thing is your wallet address because that wallet address is known to everyone and can be queried by anyone. And your wallet is essentially your key into the blockchain. Any of the transactions that are associated with that wallet can be viewed by anyone. You can actually go into the transaction and see exactly what was sent, where it was sent within just a few clicks.
“Most crypto users must realize that their data is public,” said Nick Donarski, a cybersecurity expert and founder of ORE Sys LLC. “So it’s both a benefit as well as a security risk.”
“If you’re not careful about what data or what information that you actually put on the blockchain, then you know that information is public to everybody that has access,” Donarski warned. “So good education, good understanding, good user practices that you would normally have with like your banking system, you know, strong passwords. Don’t share your private key.”
The security expert urges users to know what actual data lives on the blockchain and what doesn’t.
Putting your coins in what’s called cold storage wallet is the best recommendation. It’s a digital wallet that is not connected to the internet. So if you’re not trading a lot and you’re just accumulating bitcoin, you want to keep it safe this could be an appropriate solution.
There are the beginners of cold storage which means that there’s multiple steps of control, and the keys are stored offline. That way if something happens to Coinbase for example or Crypto.com, your coins are off site somewhere else.
“The way I always explained it is your checking and your savings account. So most people have at least one or both right? If you have a checking account, you have a debit card linked to it and that debit card is to get lost if somebody hits him, skim it or whatever. They can steal it and use it to buy things. You don’t want that hooked to your larger sum of savings,” said Kline.
Do Your Due Diligence
“So if you have $20,000 sitting in savings, you don’t want a card linked to it. So most savings accounts don’t have a card linked to it and they just sit isolated. And it’s an adjacent account as a savings. Same concept with crypto, the crypto that you want to be trading otherwise, that’s where you use those centralized exchanges, or you put it in a longer term storage. Now you can get it out quickly. It’s not like something like it’s trapped there,” Kline added.
It is also necessary to take some precautions before investing or buying any tokens. Experts recommend to do your due diligence and don’t just buy for fear of missing out (FOMO) for example.
You should make sure that you take your time to actually look at what the token is, look at what the actual project is. Make sure that the project actually has a goal and make sure that they actually have plans. There are nearly 13,000 coins listed, according to data firm CoinGecko. And coins are created almost every day.
Among these tokens, there are plenty that are memes or rug pools. To avoid them, read their project, try to see if they have a website, if there are posts on social media (Twitter, Reddit) and see what they reveal about the founders or creators. And above all, ask yourself what is the use of the digital currency that someone is trying to sell you or that you are trying to buy.
“Being in crypto means being in the world of hackers. There’s money. If I can get in there, I can get somebody’s bitcoin,” Kline warned. Bitcoin Ira, his firm, is “constantly under attack because people think that if they can knock us down, they can get in and get access to crypto and move it to their wallet.”