As cryptocurrency has no physical form, it initially seems strange to worry about protecting it from becoming compromised. However, just as hackers can compromise other virtual assets, they can compromise the integrity of cryptocurrency. As a result, it is important to take steps to safeguard your virtual wealth.
When tourists visit particularly notorious ports of call, they are often advised to store their valuables in pouches around their necks and beneath their clothing. These non-traditional wallets help to ensure that pickpockets cannot use slight of hand in order to boost any valuables that tourists may be carrying. Similarly, it is advised that cryptocurrency be stored in an online wallet that is not easily accessed by those seeking to compromise it. Default custodial server wallets provided by exchanges are as potentially vulnerable as a wallet sticking out of a tourist’s back pocket. Like a back pocket, custodial exchanges are easily accessible and easy to utilize frequently, but they are also vulnerable to hacking for these reasons.
Instead of utilizing an exchange’s custodial server wallet, it is preferable to use either a software wallet or cold storage for your virtual assets. Software wallets are not immune to hacking risks, but they are usually more secure than custodial server wallets. They ultimately add several steps to each transaction which make them less vulnerable to potential compromise. Many also contain private key storage and integrated currency swapping features.
Some software and app server wallets are more secure than others for your virtual assets. A little research into the security of any server wallets you may want to use can go a long way. Regardless of which you choose, make sure to outfit them with very strong passwords, utilize multisignature security, keep track of backups and hide your mnemonic seed well. Because your cryptocurrency is not stored behind the safeguards of a bank vault, you must work carefully to construct comparable virtual safeguards for your virtual wealth.
Large amounts of cryptocurrency and long-term investments should ideally be placed in cold storage. Cold storage can be achieved through a hardware wallet or a computer lacking an Internet connection. Unlike exchanges and third-party wallets, cold storage allows investors to store private keys in an offline way. When private keys are stored online (and especially when they are being held on behalf of an investor by an exchange) they remain at risk of being lost instantly if the entity possessing them shuts down or is otherwise compromised. Offline storage allows investors peace of mind, as cold storage protects keys from technical and intentional infringement.
It may seem frustrating to spend money on either a spare computer or a USB hardware wallet. However, the landscape of cryptocurrency is evolving so quickly that you may not want to risk regret in this way. To quote the old cliché, you are likely better off safe than sorry when it comes to your virtual wealth. And even if you only possess a minimal amount of cryptocurrency, you can opt to generate cold storage via paper wallets that allow you to generate your private keys offline. Cold storage may allow your private keys to remain vulnerable if you do not keep your paper, USB drives or spare computer away from prying eyes, but it will keep your private keys protecting your virtual assets from online infringement. No storage method is completely safe, but cold storage is certainly safer in many ways than online storage and infinitely safer than failing to seek out cryptocurrency protections at all.
Things to Keep in Mind
However you choose to keep your cryptocurrency protected, it is important to seek experienced counsel if you are unsure of how to proceed. Many individuals are becoming suddenly and staggeringly wealthy due to the evolution of cryptocurrency.
Just as you would consult a financial advisor if you were to become suddenly and significantly wealthy by traditional means, it is generally a good idea to consult professionals experienced in cryptocurrency protection for your virtual wealth. The team at LawTrades would be more than happy to aid you in making the most out of your virtual wealth and protecting your virtual assets.