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One of the main benefits of cryptocurrency is that it is decentralized. Unlike assets like stock shares on deposit at a brokerage house, there is no federal insurance backing cryptocurrency investments, and there is little recourse to claim your cryptocurrency if it is lost. That makes crypto an excellent target for hackers, who can theoretically tap into your crypto storage, steal it and escape without a trace. But you can mount your own defenses to help keep your crypto investments safe, according to experts. Here are some of the best.
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Use Cold Storage
Cryptocurrency is generally stored in one of two places: hot wallets and cold wallets. A hot wallet is connected to the internet, which makes it much more accessible for your own personal use — but also much more of a target for hackers. A cold wallet, on the other hand, is stored offline and can only be accessed with a private key, which is often written down or stored on a private USB drive that never makes contact with the internet. As Parker Lewis, head of business development at bitcoin custody and loan firm Unchained Capital, told CNBC’s Make It, “The only way that funds can be moved is if you have the private key, and that’s why securing private keys is so important.”
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Set Up Multifactor Authentication
When you open a bank account, you’re often asked to set up two-factor or multifactor authentication. These security measures require both a login and some additional bit of information, such as a code sent via email or text message, in order to access your accounts. However, Philip Martin, chief security officer at Coinbase, said even this is insufficient. If your crypto exchange allows it, Martin also recommends using a YubiKey, which is a USB authentication device that he calls “the gold standard for two-factor authentication.”
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Spread Out Your Assets
If you’re worried that a hacker could decimate your crypto holdings in a single blow, consider spreading out your assets among different accounts. Although this theoretically gives hackers more targets to access your crypto, it does prevent you from losing everything you’ve accumulated via a single hack. For example, Terence Jackson, chief information security officer at Thycotic, suggests keeping crypto in a combination of both hot and cold wallets.
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Talk To Your Mobile Provider
SIM swapping is a fairly common scam in which hackers convince your mobile phone company to switch your number to a new one. Then, when your two-factor authentication kicks in, the confirming text message goes to the hacker’s number, rather than to yours. Because of this, Nick Neuman, CEO of bitcoin security and self-custody company Casa, said, “we flat-out say never use SMS text message for two FA [two-factor authentication] if you can avoid it.” However, if you must, then Philip Martin, chief security officer at Coinbase, recommends that you call your carrier and ask to add a password or other barrier to your account.
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Keep Your Keys to Yourself
Brandon Hoffman, chief information security officer at Netenrich, said that you should never share your secret or private keys. According to Hoffman, “The safest way to store your private key is by using cold storage…[which] essentially means printing out your key and removing all digital traces of it.” Once you’ve done so, no one can access that key unless you give it to them.
Update Your Safeguards Regularly
Whichever steps you take to protect your crypto investments, it’s important to update your safeguards regularly. Remember, banks and other financial institutions have insurance and fraud guarantees that can help replace any hacked accounts, and they still ask for you to update your password regularly. Crypto wallets and accounts generally don’t have these types of safeguards, so it’s up to you to continue updating the way you keep your assets protected.
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One important thing to consider when you’re securing your crypto assets is having a contingency plan. For example, if you’re the only one in the world who knows your encrypted crypto passkey, no one will be able to access it in the event of your death. While you don’t necessarily have to provide your heirs with your digital key while you’re alive, you should develop a plan to give them access in the event of your death. Otherwise, your crypto assets will remain locked away forever, with no way for anyone to get to them.
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