Beginner
Lesson 12
8 min

How can I keep my cryptocurrencies safe?

A key advantage of blockchain technology and cryptocurrencies is that it is really hard to hack or manipulate the decentralised, secure peer-to-peer network.

  • Drastically increase your computer’s security without spending any money
  • Start by evaluating your own behaviour as a user
  • Updates, backups and safe passwords are vital for ensuring security

In this lesson, you will learn how to keep your computer or smartphone safe and to minimise the risk of losing your cryptocurrencies.

Hence, the most pressing threats regarding security issues do not originate from blockchain technology or from cryptocurrencies such as Bitcoin themselves, but in the locations where we handle them: our smartphones, computers and laptops; the places we store wallets and keys for cryptocurrencies and on websites we use to buy or sell cryptocurrencies. 

In other words, anything you use as a sort of “bridge” to connect to a blockchain-based network is subject to the risk of a hack. Read our suggestions below to help safeguard yourself against such vulnerabilities. 

Be cautious

There is a saying that it is people, humans like you and I, that are the weakest link in computer security. Despite a vast range of security measures available to us, we all have to remain cautious and need to develop a healthy sense of judgement regarding trustworthy sources and tools. 

This applies to everything related to the Internet, but is even more important when it comes to cryptocurrencies. And if this wasn’t enough, there is also the fact that money is involved and that your assets can be stolen in the digital realm without you even realising. 

There are a number of practices and habits we recommend become second nature to you, in order to ensure maximum security of your assets in the crypto realm.

Practice safe cyber habits

As all of us love a free wi-fi network, it may be tempting to log in wherever we get a chance. However, before you access a network that you are not familiar with, make sure that it is safe. Unsafe and sketchy networks and websites may pose serious risks to any wallet you keep on your phone or computer, and thus to your funds. 

It is generally recommended to keep your assets offline. If you must keep a wallet on your smartphone or computer, do make sure it is encrypted and only contains a minimal amount of funds. 

  • It goes without saying that you should use a non-public email address.
  • Never leave your smartphone or computer unattended or lend them to anyone.
  • Also make sure you remove all funds from wallets on your devices before having them serviced.

Keep your software up to date

This is a pretty basic and yet important rule to remember: Keep all of your software up-to-date and execute updates as soon as they become available. Malware often exploits weaknesses in older versions of software and operating systems, so it is crucial to be prepared. 

We highly recommend you make updating your software a habit. You could, for instance, define a specific day and update all your devices on Fridays.

However, do not enable automatic updates for crypto applications. Newly released versions may contain bugs. Thus, it is best to wait for a few days to see if an application is running smoothly before installing it on your smartphone or computer. This extends to firmware updates that are recommended by blockchain companies whose services you use. 

Use an encrypted password manager

Even as an average internet user you have probably created hundreds of accounts already for the numerous services you use online. And let’s be honest: you probably use the same password for your email account, small online shops and your favourite music streaming service. So if someone finds out this one password, then he or she has access to all your accounts. 

There is an easy workaround for this issue: make sure to generate and to use unique passwords - a different one for every service. There is no need to worry - you don’t need to memorise dozens or even hundreds of passwords. Using unique passwords is actually easy. You just need to store them all in an encrypted password manager, such as LastPass or Dashlane. 

Make sure you set up your encrypted password manager right away to make password management safe and convenient.

Make sure to generate and to use unique passwords - a different one for every service.

Activate Two-Factor Authentication (2FA) wherever you can

Another way to significantly avert the risk of your accounts and assets getting hacked is to use Two-Factor Authentication - also called “Two-Way Authentication” or 2FA for short - whenever possible. Whether it is for your Google account or any service that involves handling cryptocurrencies, this technology is low-cost and easy to implement while adding an additional layer of security. 

After downloading an authenticator app to your mobile phone and enabling two-factor authentication for services or applications, you will be asked to enter a six-digit code in addition to your password every time you log in. So download your authenticator app, look at all relevant services, apps and wallets you are using and activate 2FA. It’s a small step that makes a huge difference. 

Activating 2FA on all relevant services, apps and wallets you are using is a small step that makes a huge difference. 

For reasons of convenience or expediency, you may be tempted not to use a hardware wallet and store your assets online. As comfortable as it may be, we do not recommend you store digital assets online. Make sure you get into the habit right away and always use a hardware wallet. 

At this time, we only recommend hardware wallets from two manufacturers: Trezor or Ledger. These two manufacturers are both long-time players in the crypto realm and continuously improve technological features of their products.

Choose a trustworthy platform to buy or sell cryptocurrencies

Choosing the most suitable platform for your digital asset transactions is vital to ensure maximum safety and convenience. Once you have decided to get into cryptocurrencies, an integral part of getting set up is researching the best platforms online to find out which is the most suitable for you. 

The seemingly infinite number of platforms out there vying for your attention and business may feel overwhelming. However, there are a number of factors that help you narrow down your options. 

You want to look for a platform that operates in a safe and regulated environment with an experienced team. The platform should provide sufficient liquidity, reasonable volumes and employ state-of-the-art technology and safety while offering customers an easy-to-use, intuitive interface. You also want the platform of your choice to support fiat currencies as well as cryptocurrencies, so as to provide reliable, international customer support.

Bitpanda is Europe’s most innovative platform for digital assets based in Vienna, Austria for newbies and experienced users alike. The platform offers fast, safe and convenient access to buying and selling digital assets as well as a vast range of payment options. The Bitpanda Global Exchange offers the lowest fees in the industry for professional traders and institutions along with a large number of trading pairs and is available in 54 countries worldwide.

Avoid single points of failure and diversify risks

In terms of security, any single point of failure or attack is bad. A single point of failure (SPOF) is defined as a component of a system that stops the entire system from working if it fails. This means you should not create one backup but multiple backups (for example, on different USB-sticks), multiple wallets and multiple passwords.

This is where we once again want to repeat the importance of cold storage or hardware wallets. Do not trust anything that has a constant connection to the internet or even a constant connection to your computer. Despite the fact that we just mentioned choosing a trustworthy platform for buying and selling your cryptocurrencies: please trade online but do not store online. 

If you trade on an exchange, you do require some funds that stay on the exchange to establish liquidity. However, decide how much you really need for trading versus how much you might want to trade. You don’t want all of your crypto holdings sitting in an exchange wallet if said exchange suffers an attack by hackers - just remember Mt. Gox. Even the most reputable exchange may be at risk of being hacked. 

Do not trust in anything that has a constant connection to the internet or even a constant connection to your computer.

In conclusion: Use a hardware wallet or better yet, hardware wallets, to store your funds without being connected to the internet to eliminate the risk of losing funds when an exchange is hacked. 

Get into the habit of practicing these safety measures and schedule checks of all of them on a regular basis to make sure all your dealings in the crypto space are what they were intended to be: fast, safe and private.

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