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How to Keep Your Cryptocurrency Safe?

Cryptocurrencies can sometimes get an unfair and inaccurate reputation for being insecure. This is not the case at all. However, as with anything valuable precautions do need to be taken to keep them safe. In this section of the Lisk Academy we will advise how to keep your cryptocurrency safe by sharing all best practices**.**

Write Everything Down

First and foremost, the most important thing to remember when using cryptocurrencies and blockchain is to note down anything you think may be of importance. Passphrases and private keys cannot be recovered once lost, it is simply impossible. In that regard, it is better to be safe than sorry. 

In Lisk Hub for example, there are numerous reminders and time delays, ensuring users note down their passphrases appropriately. This is done solely for the benefit of the user to ensure that they take their time with the process of creating a Lisk ID and can guarantee access to their funds.

Naturally, there are some risks associated with having sensitive information written down anywhere. For example, it can be destroyed or accessed by another party. However, taking suitable precautions, such as using a safety box and making more than one copy, can help negate such problems. When setting up any account on the blockchain, please take your time and take all necessary steps as a precaution. It is worth doing so to avoid problems at a later stage.

Do not write down information on an electronic device, such as a smartphone. Such devices are vulnerable to being hacked. Traditional pen and paper is far more advisable.

Do Not Store Cryptocurrencies on Exchanges

Some people are skeptical about the security of cryptocurrencies due to the fact that mainstream media will report on hacks that happen to cryptocurrency exchanges. However, this is a problem that you can easily avoid.

Cryptocurrencies themselves are distributed and decentralized, as well as highly encrypted. This makes them extremely secure. However, many exchanges are CEX. This means that the cryptoassets that are sent to them are kept in a centralized wallet. Meaning should a hacker gain access to that particular wallet, they will have access to all the funds stored in that particular wallet, making them an appealing target. Generally, exchanges are safe however it is very much advised to keep funds, especially those which are not used to trade on a regular basis, off exchanges and in wallets, such as Lisk Hub.

Always do your research to make sure a wallet is compatible with the token that you are sending to it. If you send an incompatible token, those funds will be lost.

Undeniably the future of exchanges is the DEX. A decentralized exchange is an exchange market that does not rely on holding customers funds in a centralized wallet. Instead, trades occur directly between users through an automated process. 

Passwords

Certain aspects of blockchain and cryptocurrency trading require passwords, such as logging into an exchange. In order to ensure the safety of cryptoassets there are a few best practices that are very important to follow.

  • Always use different passwords on different accounts. This way if one account is somehow compromised this does not put all of your assets at risk.
  • Do not use personal information as a password. Use a combination of uppercase and lowercase letters, numbers and symbols.
  • Use long passwords, as they are harder to hack. A minimum of 15 characters is recommended.
  • Using a Password Manager tool makes carrying out these steps possible and easy and it is highly advisable, even at a cost. It is simply not worth risking having your cryptoassets stolen. Such practices in regards to password are recommended outside of the cryptocurrency space too.

Double check any address that you send a cryptocurrency too. This may seem challenging as public addresses are entirely random combinations of numbers and letters. However, it is worth doing. Transactions that occur on the blockchain cannot be reversed and there is no mediating party that can assist with funds that have been wrongly transferred. Always take your time when sending funds.

Enable Two Factor Authentication

Two Factor Authentication is a system wherein two different forms of identification are required to confirm a user's identity. The first is knowledge based, this being an email and password, the second being rooted in the physical, like having access to a device associated with that user, such as their smartphone.

There are different applications that offer this extra layer of security, including one created by Google. The system works by having the user can a QR code. This gives the device it’s distinct identity and makes it generate a different 6 digit number every few seconds. These six digits will now be required to log in to the particular account where 2FA is set up.

If 2FA is associated with a device that is later lost, it can cause a serious problem with logging into an account. As such, it is highly advised to set up 2FA on more than one mobile device. This can be done by downloading the Authenticator application on more than one device and scanning the QR code with both devices, at the same time. One device can then be stored in a secure location, guaranteeing a user access to their account, no matter what happens.

This extra layer of security means that in order for a hacker to gain access to an account, they would need to get access to the users’ email and password, as well as compromising their device, and in particular 2FA app. It makes it considerably harder, if not impossible.

Phishing Sites

A phishing site is a website designed to look like a legitimate site, one that a user is possibly looking for. However, the phishing site is solely there to steal private information or convince a user to transfer money to an illegitimate account. Such scams are relatively common within cryptocurrency and it is very important to be wary of them.

When searching for a website ensure correct spelling at all times and be cautious when following any link that is clearly an advert. Furthermore, always look for the green padlock by the URL. Once you are certain you are on a legitimate site, bookmark it.

Set up an encrypted email specifically for cryptocurrency trading. We suggest using protonmail, it is highly encrypted, open source, protected by Swiss data laws and offers a convenient mobile app.