source: IDS Delaware
We’ve all heard the horror stories relating to stolen or lost cryptocurrency. From multi-million dollar hacks on centralized exchanges, to lost hard drives and private keys, there are so many things that can go wrong. Even though there are some basic precautions that can significantly reduce your risk, many people do not follow them. With frequent and rapid price swings, crypto investment is risky enough as it is. You don’t need the added stress of worrying that you could lose everything without even realizing you made a mistake.
Cryptocurrency Storage Best Practices
There are many articles listing basic steps one should take with crypto exchange account information. These include using 2FA or U2F authentication, setting up VPN, never logging into the exchange on public Wi-Fi, etc…
These are all smart rules, and if you’re going to trade with a centralized exchange you should definitely follow them. But as we’ll explain, there is an degree of risk with centralized exchanges that was unavoidable…until now.
Crypto storage best practices include saving copies of your public and private keys for all your wallets, as well as seed phrases, user names and passwords, etc. Store them in multiple secure locations, such as thumb drives, CDs, external hard drives, or even a dedicated computer that is not connected to the internet. Consider encrypting the files afterward for an added layer of protection. Writing the information down on paper and storing in a secure place like a safe deposit box is also wise.
If you want an actual method to follow, the 3–2–1 Backup Rule is great for securing your sensitive crypto data. This means storing 3 different copies of your data on 2 different types of storage media, and have at least one of the copies stored off-site in a secure location.
Credit: ISG Technology
The wallets on a centralized exchange are generated for you by the exchange, and they have the private keys to those wallets. This is how they are able to freeze access to your wallets when performing system maintenance. If they get hacked, the hackers can gain access to those keys and can drain your wallets. All exchanges have cyber security measures in place, but that has not stopped hackers from getting in anyway and stealing around $1 BILLION of cryptocurrency directly from those hot wallets this year alone.
Keeping your money in an exchange hot wallet is roughly analogous to walking around with hundreds or thousands of dollars of cash in your pocket. Would anyone agree that this is a smart thing to do? Of course not. But millions of people essentially do the same thing every day with their cryptocurrency.
So where should you keep your crypto assets instead?
Software wallets offer an excellent compromise between security and ease of access. Browser-based wallets like MetaMask or MyEtherWallet are very popular, and allow you to quickly access your funds from any computer (provided you have the login credentials). Always make sure the wallet app or website URL is real (save the real URL to your bookmarks). Fake phishing apps/websites have been created by criminals to steal users’ wallet info.
Hardware wallets are a form of “cold” (meaning offline) storage, and are probably the safest way to store your holdings short of engraving your seed phrases in metal and placing it in a nuclear fallout shelter. The user experience is not quite as frictionless, but you get an added layer of security due to the fact that it remains offline unless you connect it. We recommend using either a Trezor or Ledger wallet.
Using a Trezor wallet to store cryptocurrency safely. Image credit: trezor.io
Lastly, don’t keep all or even most of your funds in only one wallet. It’s best to set up multiple wallets — some that you use for long term HODLing, and others for smaller, more frequent transactions. Spread your assets around to avoid having a single failure point.
The good news is that you don’t have to do this anymore. Now you can use Faast to trade cryptocurrencies directly from your own wallet. You simply go to https://faa.st/portfolio/connect, connect the wallet of your choice, and begin trading with our easy and intuitive user interface.
Using Faast with your wallet allows you to bypass most of the risks associated with trading cryptocurrency, while still enjoying all the benefits.
This is crypto trading made smarter, faster and safer.
This is what the future looks like.
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