5 Ways to Secure Your Crypto Assets
Near the end of 2018, investors experienced the greatest risk of owning crypto. When the founder of Canada-based QuadrigaCX exchange, Gerald Cotten, unexpectedly died, the exchange declared bankruptcy. As a result of his death, QuadrigaCX announced that it was ending withdrawals to 115,000 customers, and that it had lost access to $190 million worth of its cryptocurrencies.
How could this happen? The answer is simple: Cotten was the only one who had the passcode to access QuadrigaCX’s offline storage. And no one was able to find the private keys (passcodes) when he passed — causing a hold on customers’ cryptos.
It seems that now would be a good time to know how to secure your crypto assets…
5 Ways to Protect Your Cryptos
Cryptos are digital goods. So, they can only be stored in software programs called digital wallets. These are highly password protected, and some even use face recognition.
There are five types of digital wallets: desktop, exchange, mobile, hardware and paper. Each has its own benefits … and its own risks.
Sit directly on your computer (which also stores your private keys). While they are secure, easy to use and have limited attack points, they are the most at risk for hacking and viruses. Using them creates a digital footprint that can be traced to your IP address for hacking.
Are more convenient and user-friendly. You can access them through your iPhone or tablet whenever you want, and many of them are free. However, as you may have guessed, they have the highest risk of attack because your information is stored with a third party.
Are app-based. Accessible through your phone, they allow you to pay in crypto while shopping. Of course, there’s the added risk of getting hacked or losing your phone.
Digital storage devices that can be connected to the internet to make transactions. While this makes them less susceptible to hacking, they can still be lost or stolen. In this case, you can buy a new one, recreate the same wallet and access your coins with a recovery passphrase.
These wallets are one of the cheapest and easiest to use. They are exactly what they sound like — pieces of paper. Your public and private key info is printed on them (typically as a QR code). However, they are easy to lose track of, and they are easily destroyed.
Of all five types of digital wallets, hardware and desktop wallets are some of the best options for safe storage… Just make sure to create a recovery passphrase to recreate your wallet if you lose access to it!
None of these wallets are foolproof. However, they don’t all hold the risk of a small exchange whose founder could disappear with your crypto! Trading cryptos can reap high rewards in the long-term, just make sure to follow the necessary precautions when trading.
Editor, Crypto Profit Trader