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Cryptocurrencies may be a secure way to conduct financial transactions online using blockchain technology. However, there are serious risks storing this virtual currency in digital wallets. There are no security guarantees for the digital economy, so wherever there are weaknesses —and there are a few—criminals have used the opportunity to exploit those vulnerabilities.
Some of the Security Risks with Trading and Storing Cryptocurrencies
As a technology-based instrument, sophisticated hackers are always creating new ways to attack the crypto market. Cryptocurrencies are stored either in digital wallets or on exchanges, and while both options come with strict safety features, investors have lost bitcoins because of hacking. Last year, there were 12 major cryptocurrency exchange hacks, totaling over $292 million.
Fraudulent activities are a significant concern in the crypto market as criminals take advantage of the COVID-19 pandemic to pitch investment scams. These scams involve fake COVID-19 cryptocurrencies or digital wallets. In one astounding incident on social media, Twitter handles for prominent individuals sent out scam messages seeking bitcoin for COVID-19 relief, promising to double their value. The schemes have increased during the pandemic causing the FBI to warn persons to be on the lookout for COVID-19 related cryptocurrency fraud.
As most governments shun cryptocurrency as an acceptable form of payment, there is little to no regulation in the crypto market. This means if your account is hacked, there is no recourse for investors. Also, transactions are irreversible, so if a mistake is made while moving money around, there is no way to undo it.
5 Ways to Secure your Digital Wallet
While your digital wallet is susceptible to hacking and other cyber threats, there are safety measures you can practice to improve its security:
Use a Secure Email
Gmail can read your email and also track your online activity. Consider using a more secure email account such as ProtonMail that does not read your email.
Install a VPN
Another way to secure your digital wallet is by installing a VPN. The benefits of VPNs include encrypting your data and hiding your IP address, so you stay anonymous when trading online. Using this tool is especially helpful when accessing your online wallet and exchanges.
Choose Offline Storage
Securing your cryptocurrencies in an offline wallet is a worthwhile strategy because not only will you be the only one with the private keys, it also takes your money out of the reach of hackers. Offline wallets cannot be hacked. On the contrary, a service provider secures your private keys and exchanges are a hot target for hackers.
Choose Privacy-Focused Crypto
With security and privacy concerns surrounding cryptocurrency, it’s best to choose one that’s more privacy-oriented. These cryptos offer enhanced security features and help to conceal investors’ online trading activity.
Enable Two-Factor Authentication
The final tip is to use two-factor authentication (2FA) to access the device your digital wallet is stored on. 2FA is an extra layer of security to get to your account. We also recommend using an authenticator app to provide the 6 digit code.
As a crypto trader, you must be mindful that there are security risks. The safety tips we provided are by no means exhaustive, but they are simple measures you can make a part of your daily habit when storing and trading cryptocurrencies.