Bitcoin and cryptocurrencies have earned a reputation to be prone to scammers and hacks. Right from big exchanges hacks that have resulted in hundreds of millions of dollars worth of crypto being lost to Twitter impersonating scammers trying to lure new investors to send them their tokens with the expectation of getting more, there have been many instances that justify the popular belief that it is unsafe to keep your tokens online. Since there is no middle party like a bank to guarantee the security, users must learn how to secure Bitcoin and other crypto tokens.
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To understand the security of a cryptocurrency, we need to understand how the ownership works.
In Fiat, if a credit card is stolen or a bank account has been broken into, there are authorities who can track and even reimburse the loss to the holder. The transaction can be reversed if the owner of the money can prove that it was a fraud transaction. This is because the bank, in all practicality, controls your Fiat. They can reverse the transaction because they own the ledger in which the entry that states XYZ person owns $1000 is stored.
In crypto, the ownership lies completely with you. Also the transactions, once executed, cannot be reversed. Since the proof of ownership is stored on a decentralized ledger called Blockchain, the ownership is verified with a Private Key. The person who holds this private key holds ownership. In cases where we use various wallets and exchanges to store our crypto tokens, this private key is with them. We just have access to those tokens via a username/email id and password to that wallet or exchange. This is risky since the ownership is not with us. Most of the times the exchange wallets are on the internet and such wallets are called Hot wallets. Hot wallets pose a maximum security risk since they are connected to the public internet while those stored no a “cold wallet” are not.
The most common kind of scam is a phishing scam where a hacker sends emails or directs the user somehow to a fake site where the user enters their password. This password is received by the hacker. Be careful of the sites you open, check their security certificate and do not open emails from unknown sources.
Another common method of hacking is to install some kind of malware on your phone or computer and then steal sensitive data as it is being entered by the user. The device that you use for trading cryptocurrencies should be kept free of any kind of unknown programs and with an anti-virus at all times.
Do not store your crypto tokens on exchanges. They get hacked all the time. Centralized exchanges do not provide you with your private keys. This means the crypto is stored in their wallets – hot or cold. And if they were to get hacked, you lose your tokens.
This may seem like a trivial thing to say, but a two-factor authentication is a powerful tool and its importance cannot be understated.
Public Wi-Fi can be easily rigged to install malicious software or to read the information being passed on that network. This could be an easy way to steal your password or other sensitive information.
Keeping your holdings private and using it only with trusted parties is wise. Because cryptocurrencies are anonymous, it attracts criminals who lure Bitcoin or cryptocurrency owner for a transaction and then steal their tokens. In some countries, even the police will not help since there is no regulation pertaining to crypto.
These are some other ways scammers try to steal cryptocurrencies. Many fake trading groups have been started to lure traders by promising them abnormally high returns. These groups charge a fee for membership. Be wary because once you’ve paid them, the transaction cannot be reversed. Similar is the case with crypto gambling sites and cloud mining services. They charge in cryptocurrency without any commitment to provide a return or having the most secure platforms. These platforms are often run from countries where the laws are really lax and founders of these companies can shut shop at any point in time. Be sure to read reviews online and try out their service before transferring a large number of crypto tokens on these platforms.
A paper wallet is actually a piece of paper that has your private and public keys printed on it. Blockchain.info is the best paper wallet out there and it is easy to print and store. But this method provides the least flexibility if you want to spend a small amount on a regular basis. Paper wallets are the best cryptocurrency wallet in 2019 on how to store BItcoin offline.
How does one store Bitcoin on a USB? Using a hardware wallet. A hardware wallet is usually like a pen drive that stores your private key away from a computer and hence protects against viruses, malware or keyloggers to steal your passwords or private keys. They still provide full ownership of your coins.
Ledger Nano S and Trezor are the most popular hardware wallets and these provide a mix of ease of use and complete ownership. How does one store Bitcoin on a USB? The best bet is one of these two wallets.
These are wallets installed on your desktop or mobile phone that hold your private keys but are not recommended for long term storage. These wallets are as secure as your computer but still vulnerable to attacks if your computer is connected to the internet and has other software installed.
Paper wallets, Desktop/mobile wallets, and Hardware wallets are the ways on how to store cryptocurrencies offline.
It is important to know who owns your coins and make a conscious choice about how you store your coins. Hacks and scams are very common and since cryptocurrencies provide freedom from middlemen like banks, they also come with the responsibility of securing your assets.
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