Crypto safety guide for beginners
Be your own bank!
One of the revolutionary aspects of decentralised cryptocurrencies is that you can transfer funds independent from third parties (e.g. banks). Crypto is a digitalised form of money, which also means that its entire transaction history is publicly accessible for everyone. Furthermore, anyone can participate in validating and verifying transactions. It’s a form of money that is not issued nor created by governments. But all this freedom and independence also entails that you carry responsibility for the security of your crypto assets.
Fortunately, there are plenty of measures that can be taken to protect your assets. In this guide, we explain step-by-step which steps you can take to provide your assets with the highest possible level of protection. Take some time for this, read up on our tips, and try to implement them wherever you can. This way, you remain in charge of your crypto assets responsibly.
Secure your cryptocurrency wallet
Managing a cryptocurrency wallet demands some attention as you will need to secure it well. Compare it to an ordinary wallet that you use to store cash. The only difference here is that the assets contained in your crypto wallet are much more valuable than the money in your regular wallet. As such, always remain aware that you are solely responsible for the security of your crypto assets. Keep that in mind, and there will be nothing to worry about (in principle).
Beware of using online services
Would you rather outsource the security of your cryptocurrencies? Then exercise extreme caution when choosing a service provider. Many of these enterprises have become a target for hackers due to the vast sums of money involved. Because these companies are (yet) unable to properly insure themselves against theft, they cannot guarantee their customers to return any stolen assets after a possible hack has occurred. It serves as an important reminder to always manage the storage of your cryptocurrencies yourself. If you do wish to entrust your funds to a service provider, then make sure to evaluate each provider critically.
Consider cryptocurrency as everyday change
You can best compare a cryptocurrency wallet on your smartphone or computer with a regular wallet. Now, assess whether you would feel comfortable walking around with hundreds or perhaps even thousands of euros in your pocket. The same applies to digital cryptocurrency wallets. That’s why we advise you to only store a small number of cryptocurrencies on your smartphone or computer for daily payments. It’s best to save the rest of your assets in a highly secured environment, one which you don't access every day.
Make a backup of your wallet
You should always make a backup of your wallet before transferring cryptocurrencies, even when it is just a small amount. It protects you against unfortunate mistakes, which may cause you to lose your wallet, but also protects you against irreparable damage incurred by your computer or smartphone. Make sure to store this backup somewhere safe, because everyone could use it to gain access to your wallet. Your backup usually consists of a combination of twelve words, and there are plenty of ways in which you can hide and secure these words. Carefully consider your options.
Some cryptocurrency wallets feature internal and invisible encryption. If you have only made a backup of the visible keys, there is still a chance that you will lose part of your funds when you can no longer gain access to your wallet, simply because you will be unable to unblock the wallet in its entirety. That’s why you should always make a backup of your entire wallet.
Also, if you use online backups, make sure that you always encrypt these. If you store your backup in a cloud or another online environment, you will still run the risk of it getting stolen. Keep in mind, for instance, that a computer with a direct internet connection is vulnerable for malware. In of itself, it already serves as sufficient motivation to encrypt your online backup. To a large extent, you can mitigate this risk by installing a good virus scanner.
Never rely on a single storage location for your backup
Aeroplane engineers know this like no other: always ensure that an alternative is available in case of system failure. This concept is also referred to as redundancy. We advise you also to apply this method when encrypting and storing your wallet. You always run the risk of your house burning down, or your backup getting destroyed in some other way. You could, for instance, store a copy of your private key on a CD, USB-stick, or even on a piece of paper.
Protect your wallet with a password
Without the right password, no one else will be able to obtain data from your phone or wallet if it has been encrypted well. Always make sure that you have arranged this well, as it protects you against criminal interference. However, you will still run the risks of someone installing malware on your computer, allowing them to log your keyboard presses with special software or equipment. Therefore, you should always protect your wallet with complex passwords and have a good virus scanner installed
Never forget your password
This may seem self-evident, but you should set a password that you can easily remember. Although banks and companies like Facebook have standard password reset procedures in place, you cannot request a password reset from the Bitcoin network. Well, you could submit your request, but resetting your password is impossible. After all, you are the one responsible for the protection and encryption of your funds. As such, always opt for a password that you can easily remember, or note it down somewhere in a cryptic manner. You can also write your password down, cut it in pieces, and hide the individual parts throughout the house.
Although you should easily be able to remember your password, it should also be as complicated as possible. Passwords that only consist of letters and simple words are easy to hack; they may even be guessed. Strong passwords do not only consist of letters and simple words, but they also contain numbers, capitalised letters and special symbols. A secure password contains at least 16 characters. The only downside of strong passwords is that they are more difficult to remember. One final tip concerning passwords: never use the same password for multiple wallets.
Keep your savings in cold storage
A cold storage wallet is a wallet that is not connected to the internet. In principle, this is the most secure way to store your cryptocurrencies. If you are planning to trade large quantities of crypto, you don't want to run the risk of hackers seizing control of your device through its internet connection. With a cold storage wallet, you don't run this risk. When combined with the necessary encryption and backups, this method is by far the best way to secure your crypto funds.
Keep your software up-to-date
Make sure that you have always installed the latest version of your wallet. Wallet providers usually bolster their protection with every update. Hence, you must always download and install these updates as soon as they become available. You will avoid unnecessary risks this way. In addition, make sure to timely update all your other applications and programs, as this may prevent a security breach present in one of these programs to also pose a risk for your cryptocurrencies.
Counter theft with multiple signatures
You can configure your wallet to require two or more signatures before you can proceed with a transaction. This may be helpful for organisations or companies, where multiple employees often share access to the bank account. This way, you will not avoid the risk of the treasurer deciding to run off with the enterprise’s debit card. It simply offers an additional security layer against theft. Your security also no longer depends on just one person, and as such, you're effectively decentralising your security. Not all cryptocurrencies are equipped with this feature yet, but this will undoubtedly be the case in the foreseeable future.
Don't forget your testament
Have you informed your family members of your backup? If you haven’t yet, then you may want to get in touch with a notary on how to obtain access to your crypto assets. Compare it to hiding a bag of gold. If you are using gold as store-of-value, then you would also want your family to be informed of this when you pass away. It's highly likely that they will never find your gold if you have never shared its location with them. But if you choose to hand your backup and passwords to someone you trust (e.g. a notary), then your family will at least still benefit from your crypto funds, even after you have passed away.