Wednesday, January 31, 2018

How To Protect Your Cryptocurrency

Storing your crypto currency and keeping your crypto safe

Crypto currencies like Bitcoin and Ethereum are stored and managed by way of decentralized systems and as such require users to take extra precautions when dealing with their assets. Unlike centralized banking systems which have a point of contact such as support personnel, crypto does not. If passwords (keys) are lost or funds are misplaced, there is nobody to call. The security of funds is completely in the hands of the holders. This point has proven to be confusing to many just starting in crypto currency.

There are no companies, no customer support, no refunds and no password resets. Bitcoin and Ethereum are not companies with a central office or employees to help. They are technologies,  networks made up of non-related computer systems that together create a global network. That network has no central authority or organization controlling it. For users of these networks, it means a transaction sent to an incorrect address cannot be returned. There is no one to call for a refund, no customer service department to complain to, not even a company to address. Users must understand that mistakes will not be overturned and precautions must to be taken in order to secure your accounts.

The past few years have seen many scams aimed at crypto currency holders. Many of these scams target social media with offers that often times seem legit. Your private keys are the digital equivalent of a combination to a safe. If anyone gets your keys, they have complete access to your money as well. Many people have been scammed by following links from social media, email and website locations. The rule of thumb is NEVER follow a link to a wallet, exchange or any site that requires your keys.

Popular web wallets such as MEW (Myetherwallet) should be bookmarked with only those bookmarks used to enter the wallet. In the past few months, there have been quite a few sites that are fakes. If you enter your keys into one of the fakes, your money will be gone within seconds.  If you must open your wallet on another computer, do not use Google Search.  There have been many reports of phishing / fake sites is search results. If you must go to the url directly, be sure to type it into the address bar and double check the url to make sure it is correct.

These types of fake sites have been around for years and are far from a new idea. Since the internet came about, these types of scams have been trying hard to trick banking customers into entering their passwords. But, cypto is not a bank.

If a bank customer is tricked into entering sensitive data, there may be a resolution since the bank is responsible for your funds. If this happens with crypto, there will be no one to hold responsible other than yourself.  While crypto wallets provide a convenient way to store and move crypto, they are not responsible for your funds in any way.  Wallets in crypto act as an interface that allows you to interact with the network.  The actual funds are stored on the network and your keys allow you access to those funds from various wallet applications.

So how do you keep your crypto safe?

The best answer to that question is a hardware wallet. In order to move any of your crypto, one must have the keys. A hardware wallet such as a Trezor or Ledger store those keys for you and require the physical device to actually approve (sign) a transaction. While the devices have a cost of around $100 each, they will protect your assets from many exploits and give you some peace of mind.

Protecting your assets means protecting your keys and if a hardware wallet is out of the question there are other things you may do to give yourself an extra layer of security. Many people use an “air gapped” computer to store their wallet keys. Air gapped simply means a computer that is not connected to the internet and therefor cannot be hacked. Many wallets allow account holders to actually print out the keys on paper and some people like to backup their keys to flash drives.

No matter which way you store your keys, you must understand that those keys cannot be replaced if lost and backups should always be created.
For more about keeping your crypto currency safe, please see the following page provided by MEW (My Ether Wallet).