How Can I Keep My Cryptocurrency Safe?

Last updated on 01/14/2019

One of the unique aspects of cryptocurrencies, as opposed to other valuable assets, is that the underlying blockchain technology inherently puts the responsibility of control over these assets directly in the hands of users.

That’s why it’s important to take several precautions when choosing and setting up a cryptocurrency wallet in order to maximize the security of your crypto assets.

Cryptocurrency Wallets

Cryptocurrency wallets are the main tool for keeping your cryptocurrency safe. A crypto wallet is an application that stores the private and public keys that you need to send and receive cryptocurrency.

Wallets are designed to store cryptocurrency safely. However, there are a variety of different types of wallets that provide better security features than others.

In general, the following advice should help you take measures to keep your cryptocurrency safe:

  • Use a hardware wallet. Hardware wallets store your keys on a dedicated physical device — usually, one that plugs into your computer’s USB port — instead of on your computer’s hard drive or in a cloud server. This strategy provides an extra barrier of protection against viruses and theft. The major risk of using a hardware wallet is that you could lose or destroy the device; however, to address that risk, most hardware wallet vendors provide ways to recover keys from lost wallets using “seed words.”
  • Take your wallet offline when you don’t need it. If you use a hardware wallet or a software wallet that runs as an app on your local device (and does not store any information remotely), you can disconnect or shut down the wallet when you’re not sending or receiving cryptocurrency. Doing so is not necessarily a complete guarantee against theft — keys stored on a local computer by a software wallet could potentially be stolen even if the wallet app is not running — but disconnecting your wallet will reduce potential attack vectors.
  • Use a multisignature wallet. Some wallets are designed to support multisignature transactions. This means that multiple keys are required in order to authorize a cryptocurrency transaction. That way, if one of your keys is compromised but the others remain secure, your crypto is still safe.
  • Use multifactor authentication. Multifactor authentication is another way to improve wallet security. Multifactor authentication — sometimes abbreviated as MFA or 2FA (for two-factor authentication) — requires multiple login methods to access a wallet. It’s different from multisignature transactions because multifactor authentication protects access to the wallet itself, whereas multisignature transactions provide extra security on the protocol level when carrying out a cryptocurrency transaction.

Other Cryptocurrency Security Best Practices

Beyond the steps you can take to maximize cryptocurrency wallet security, you can follow some additional best practices to keep your crypto secure.

One is to keep the device that you use to access your wallet and crypto accounts secure. Whether that device is your PC, your phone or something else, make sure that you apply security updates regularly and avoid downloading software — even if it does not appear to have anything to do with crypto — from untrusted sources.

While this pertains to keeping your funds safe, regardless of whether it is in fiat money or cryptocurrency, another practice is to be careful about which types of cryptocurrency you buy and sell. The world of cryptocurrency remains young and largely unregulated. While there are plenty of very legitimate, serious projects and initial coin offerings out there, there are also more than a few scams. Be careful when investing in a new cryptocurrency or project.

Along similar lines, make sure that you use a secure exchange and that you take steps to secure your web browser when accessing an exchange (if you use a web-based exchange). In general, it’s a good idea to stick with trusted, reputable exchanges.