01, Jan 1970
Best Practices for Storing and Safeguarding Your Cryptocurrencies
The use of Bitcoin and other cryptocurrencies is seeing rapid growth in low- and middle-income countries, as it offers a reliable and convenient means to send remittances, save money, and access financial services that are not easily available locally.
Despite the growing popularity of cryptocurrencies, they have also attracted the attention of cybercriminals. According to a recent analysis by Chainalysis, the year 2022 saw a record-high value of stolen cryptocurrencies, amounting to $3.8 billion.
However, it is possible to take measures to enhance the security of your digital assets. Even though there is no perfect way to store cryptocurrencies, this article will show you different steps you can take to keep them safe.
When you buy bitcoin, you gain ownership of the amount you paid. You are given two keys, one public and the other private. The public key is used to encrypt data and generate your wallet address, while the private key allows you to decrypt data and access your bitcoin. This is the key you're keeping and protecting.
The blockchain securely records, stores, validates, and encrypts your bitcoin ownership. Due to the encryption methods used, no cryptocurrency has been stolen by altering the information on a blockchain to date. Using current technology, brute-force hacking a blockchain would take centuries, if not millennia.
The wallet you use, however, is where you store your private key, and wallets are typically software on hackable hardware. As a result, there is a weak link connecting the user and the blockchain.
Non-Custodial vs. Custodial Wallet
Your crypto wallet can be custodial or non-custodial. This relates to whether or not you have access to and control over your private keys. If you use an online service, such as a cryptocurrency exchange, you are not truly in possession of your coins at the protocol level.
Instead, the exchange takes custody of your funds and keys and manages them on your behalf. To keep your coins safe, most exchanges use a combination of hot and cold wallets.
If you want to trade BNB for BTC, the exchange will decrease your BNB balance while increasing your BTC balance in its database. However, no blockchain transaction is involved. When you decide to withdraw your BTC, you ask the exchange to sign the transaction on your behalf. They will then send a transaction to the Bitcoin address you provide.
For users who are not bothered about the third-party custody of their cryptocurrencies, cryptocurrency exchanges offer a far more convenient experience. One disadvantage of running your bank is that no one can come to your aid if something goes wrong.
You will never be able to recover your funds if you lose your private key. If you forget your account password, you simply need to reset it.
Wallets are classified into two types: hot wallets and cold wallets. Both provide different levels of security.
A "hot wallet" is any cryptocurrency wallet that has an internet connection. Hot wallets offer the most seamless user experience. They are useful for sending, receiving, and trading cryptocurrencies and tokens. However, this convenience frequently comes at the expense of security.
Due to their internet connectivity, hot wallets are inherently vulnerable. Though private keys are never broadcast, there is a chance that your device could be hacked and remotely controlled.
This does not mean hot wallets do not have loopholes; rather, they are not as secure as cold wallets. Hot wallets are easier to use and are therefore the best choice for holding smaller amounts of money.
Cold wallets, on the other hand, do not connect to the internet. To avoid the significant online attack vector, many people prefer to keep their keys offline at all times.
Some crypto owners used to keep a paper wallet (i.e., a printed piece of paper containing the wallet's private key). However, we now consider this to be a risky security method. A hardware wallet is unquestionably the best option for cold storage.
Safety Precautions for Storing Your Cryptocurrencies
Back Up Your Entire Crypto Wallet Frequently
If the computer fails, the only way to get the money back from the digital wallet may be to find an old backup.
Include all wallet.dat files, and then store the backup in multiple secure locations (such as on a USB or another removable device). You should also ensure that the backup is encrypted and has a strong password.
Regularly Update Your Crypto Software
A wallet that is running outdated crypto software can be a target for hackers. The most recent version of wallet software will have updated versions and fixes, increasing the security of your cryptocurrencies. To keep your crypto safe, keep your mobile device or computer's operating system and software up to date.
Consider Using Multi-Signature
Multi-signature requires transaction approval from several people (typically three to five) before it can take place.
This reduces theft since a single controller cannot execute transactions. The people who can transact are decided at the start; when one of them wants to spend or send bitcoins, the transaction must be approved by the rest of the group. This is also known as a "shared wallet" and should be used with extreme caution.
If you have the option of using multi-sig, make sure you know and trust the other people before joining the wallet.
Seed phrases are a set of randomly generated words that serve as your wallet's master password. They are also known as recovery phrases, mnemonic phrases, or mnemonic seed phrases.
If you ever lose your storage devices or access, you can recover your keys using these phrases. Your keys are encrypted, and the encryption produces a series of words that allow you to access your wallet.
Convert Your Cryptocurrencies to Naira or Cedis at the Best Rate
Pgoldapp is a one-stop shop for people and businesses who want to turn their cryptocurrency into cash. It is the right platform for you if you want to convert your bitcoins and other cryptocurrencies into Naira or Cedis or if you want your business to join the crypto culture and get cash equivalents.
Also, developers who want to add cryptocurrency to their payment gateway can take advantage of the competitive exchange rates that Pgoldapp offers in Nigeria and Ghana.