The author is CEO & co-founder of Giottus Cryptocurrency Exchange
Every new age technology has its challenges with respect to safety in its early years. While blockchain and Bitcoin especially are unhackable by design, its users can be prone to human errors that can be detrimental to their hard earned investments. Scammers and hackers are often a step ahead of the normal investor in crypto. Unlike bank accounts, not all crypto wallets (which store or transact in crypto) are trackable to an individual and hence, it is easy for hackers to steal and hide your investments. You can, however, mitigate your risks by adhering to certain best practices as well as by updating your knowledge base on security. This article is a primer to the best practices as they exist today.
Centralized exchanges act as gatekeepers to the world of crypto for the majority of investors. Exchanges offer in-built wallets where your purchases are stored. While they offer great convenience, your exchange password is all it takes for a hacker to access your investment. It is ideal to never store your password on any internet connected service (such as on email). Also, always have two-factor authentication enabled which requires a pincode via SMS or your biometric on your phone to access your account.
There are global players who store crypto on your behalf with insurance coverage. Some exchanges also provide this feature by parking most of their user assets in an insured wallet so that any hack will not affect a majority of assets under management. These parked assets are called cold wallets (that is, they are no longer an active transactional wallet). It is wise to keep some of your portfolio in such wallets or exchanges so that you can be at peace.
Keeping your assets in an exchange is similar to a bank locker. While they are usually safe, they are not directly under your custody. In the crypto ecosystem, a few follow a principle called ‘not your keys, not your coins’. Essentially, they question why any internet connected service should have access to your assets. As your crypto portfolio grows to a meaningful value, you can purchase something called as hardware wallets, a pen drive like device which are essentially like a locker in your own house. Hardware wallets stores your private keys that allow access to your assets. You can lock your hardware wallet via a pin or a passphrase (which again must be memorized or written in paper – not stored digitally) giving a strong additional security to your assets. This is comparatively an inconvenient way to store your crypto assets though it is usually the safest.
All common rules that apply to you as a bank account holder apply in the crypto world as well. A few are – 1) Do not encourage anyone trying to contact you as a representative of an exchange or an agent. 2) Never give out your OTP or other info when not required. 3) Do not send your crypto to a wallet not owned by you in the promise of better returns in quick time.
Always remember the mantra: when in doubt, avoid any action.
This article was authored by Giottus Cryptocurrency Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.