Safety and cryptocurrency comes hand in hand. When you’re essentially acting as your own bank, you’ll need to treat your coins with ultra levels of care. With hackers acting as modern day bank robbers, there are serious reprocussions for not applying best practices to coin management.
First things first…
1. Move your currency off the exchanges!
Look, I get it. It’s really simple to access your coins when you can log into a website and instantly buy and sell. It’s also the worst possible place to store your coins too.
The reason is pretty straight forward: You’re essentially using cryptocurrency for the complete opposite to what it’s actually meant for. A record of your coins are saved on a server that could potentially be hacked one day. It’s the difference between your cash being stored in a bank instead of in your pocket.
Make sure you check out my previous post on recommended wallets for Android, iPhone, PC, Mac & Offline.
Okay – you’ve moved your coins off the exchanges and into your wallet. Next step is to…
2. Back up your wallet immediately!
It’s a fact of nature that phones get lost and computers were meant to bite the dust at some point. And it always happens at the worst possible time. Since you now own, hold, and control your cryptocurrency, you’ll need to backup your wallet – just in case.
Most wallets utilize a sentence based backup system, providing you with a series of words that you’ll have to (physically) write down and store somewhere safe. If you’re looking to restore a lost wallet, or load the wallet on a second device, entering the series of words will retrieve your wallet and your coins.
Remember: spelling and order of words matter. Write it down on a piece of paper and hide it somewhere safe. It’s the only way you’ll ever get your investment back – there won’t be a customer support agent to save you.
Now that your wallet is backed up, it’s time to make a second wallet:
3. Use separate wallets for spending and saving!
Do you use your savings account to buy lunch at Wendy’s? Or do you store your life savings into your chequing account?
Hate to break it to you bud, but if you said yes to either of those, you may want to re-evaluate how you work your finances.
In crypto, you can create as many wallets as you’d like. Why not make more? Make your primary wallet the home for your savings or long term investments. Keep your key offline if possible. Then generate a new wallet specific to your daily spending habits, and keep the float small. You’re free to give out this key, because in the off-chance your wallet is compromised, your investments won’t be affected.
This also applies to e-commerce – if you’re selling products or services online, it’s even more important to have your public facing wallet separate, and coins moved out to your private wallets daily.
Speaking of keys, there’s also another safety measure to add another layer of security:
4. Generate your keys offline!
Every wallet generates keys for you on demand. However this also means your key has already been exposed on the internet. It’s a much longer process, but it’s possible to create your own keys offline by using BitKey. It may be for the ultra paranoid, but if you’re in charge of your own bank’s security with a sizeable investment in Bitcoins, it’s worth considering.
One last tip that’s actually a lot easier to implement than offline keys is to:
5. Use 2FA (two-factor authentication) on all transactions!
It’s one thing to make your wallet only accessible by verifying each login. Take your coins safety even further by requiring authentication on each transaction. Verification is typically done by SMS, or even more secure, Google Authenticator. Depending on your wallet, be sure to take full control of your wallet by verifying each move made in and out of your wallet. The banks do it, don’t they?
Do you have other tips for keeping Bitcoins and other cryptocurrency safe? Leave them in the comments below.