How to Keep Your Cryptocurrency Safe

Many people wrongfully assume that cryptocurrency is by its very nature safer than national currencies. In some ways, this is true. Cryptocurrency does offer better privacy than, say, a credit or debit card. However, your cryptocurrency is only as safe as the place where it is stored. To keep your cryptocurrency safe, use a secure wallet, maintain strict security protocols, and create multiple backups so you can recover a lost wallet quickly.^[1]

EditSteps

EditUsing a Cryptocurrency Wallet

1. Transfer your cryptocurrency to a wallet as soon as possible. When you buy cryptocurrency, you have the option of simply leaving it in your exchange account. However, cryptocurrency exchanges are major targets for hackers. Any cryptocurrency left in an exchange account is extremely vulnerable to theft.^[2]
   
   • While exchange accounts may be the most convenient, they are also the least secure. With cryptocurrency, the basic rule is that the more convenient it is to access your cryptocurrency, the less secure it is.
   • Generally, your cryptocurrency should be okay if you leave it in your exchange account for a few days. Any longer than that, and you should find a more secure location.
2. Buy hardware or paper wallets to hold cryptocurrency long-term. Hardware wallets are devices that are designed for the sole purpose of storing cryptocurrency. Since they aren't online, they aren't vulnerable to hackers. Paper wallets are likewise invulnerable to hackers.^[3]
   
   • Expect a hardware wallet to cost you a minimum of $100. The expense may not be worth it if you have a small amount of cryptocurrency. However, if you have cryptocurrency worth thousands of dollars, a hardware wallet may be your best option.
   • A paper wallet generates QR codes that you print. Before you create a paper wallet, make sure your computer and the network it's on are free of malware or spyware. Ideally, use a brand-new computer that has never been used for any other purpose or been connected to the internet before.
   • While hardware and paper wallets are the least convenient methods for holding your cryptocurrency, they are also the most secure. These wallets are ideal if you don't intend to spend cryptocurrency, but are keeping it as an investment.
3. Evaluate the security of online wallets carefully. A strong online wallet has an active development team, robust backup and security features, and is compatible with multiple operating systems. The wallet also should allow you to maintain control of your private keys.^[4]
   
   • Anyone who has access to your private keys can move your cryptocurrency. Avoid online wallets that require you to give up control of your private key. Cryptocurrency wallets are not banks, and are not subject to the same regulations. If the wallet company loses your cryptocurrency, you may have no recourse.
   • You may also want to look into the background of people handling security for the wallet company. Search people's names online to learn more about their reputation in the industry.
4. Keep only small amounts in less secure wallets. Any wallet you can access online, including web wallets and mobile wallets, are more vulnerable to hacking than hardware or paper wallets. Essentially, you trade convenience for security. Don't put more cryptocurrency in these wallets than you can afford to lose.^[5]
   
   • If you plan to use cryptocurrency both for regular transactions and for investment purposes, it may be best to keep the bulk of your cryptocurrency in a hardware or paper wallet, and a small percentage of it in a web or mobile wallet.
   • Think of this in terms of keeping your money in the bank and a small amount of cash on your person. Just as you wouldn't walk around with your life's savings in cash in your pocket, don't put all of your cryptocurrency in an online wallet.
5. Try a multi-signature wallet to give someone else access. Multi-signature wallets require more than one person to enter a separate passcode or phrase to enable a transaction. This provides the ultimate in security, but should only be used if there is someone you trust with access to your cryptocurrency.^[6]
   
   • For example, if you are married, both you and your spouse could be signatories on a multi-signature wallet. You would both have to enter your separate passcode before either of you could complete a transaction.
   • Multi-signature wallets also are ideal for businesses that have cryptocurrency wallets. At least 2 officers or managers in the company would have to sign off on a transaction before it could be completed, helping prevent embezzlement of company funds.

EditSecuring Your Wallet

1. Create a complex password and change it regularly. When you first set up your wallet, come up with a long password that includes numbers, special characters, and both capital and lower case letters. It should be difficult for anyone else to guess, but also relatively easy for you to remember.^[7]
   
   • Set reminders for yourself to change your password once every 3 or 4 months. When you change it, use something that differs significantly from the previous one. Don't simply recycle an old password.
   • If your computer has a password manager, it can create a random, encrypted password for you. However, if you use a password manager, make sure you have a strong, complex password for your computer. With a password manager, anyone who can access your computer can access all of those passwords.
2. Use a separate email address for cryptocurrency purposes. If your email is hacked, the hacker could also gain access to your cryptocurrency. Set up a free email address that doesn't include any information, such as your name, that would be easy for a hacker to guess.^[8]
   
   • For additional security, use different email addresses for your exchange account and for all wallet accounts. Use those addresses solely for that account, and for no other purpose.
3. Enable two-factor identification (2FA) on all cryptocurrency accounts. With 2FA, the service will send a code to your phone or email account every time you attempt to log in to your account. You must enter that code within a brief period of time to access your account.^[9]
   
   • Opting for a text message rather than an email is more secure. Even if someone manages to learn the email address, username, and password associated with your wallet, they won't be able to access it unless they have your phone.
4. Download all security updates promptly. Software and mobile wallets update periodically to protect and counter new threats. To ensure you're using the most secure version of their software, update these downloads as soon as they become available.^[10]
   
   • If you turn on automatic updates, your computer or other device will install these updates for you the second they become available.
   • In addition to the specific app or software, download all updates for your operating system and virus protection software as well. The app or software is only as secure as the environment it operates in.
5. Encrypt any device where you access or store cryptocurrency. Operating systems typically come with encryption technology that you can enable in your preferences. You can also download encryption software to run on any devices you routinely use to store cryptocurrency or make cryptocurrency transactions.^[11]
   
   • Also encrypt your wireless network to ensure no one can access information stored on a networked computer or transferred over the network. Do not make any cryptocurrency transactions over public WiFi or any other insecure network.
6. Safeguard your seed phrase or mnemonic passphrase. Secure wallets generate mnemonic phrases that you can use to recover your cryptocurrency wallet if your hard drive crashes or you otherwise lose access. Write these passwords down, and keep them locked away in a safe or other secure location.^[12]
   
   • Don't rely on memorization for storage of mnemonic phrases. In the heat of the moment, you could forget or mistake the phrase.
   • Make more than one copy of the phrase and keep them in different places, in case one of them is destroyed.

EditBacking Up Your Wallet

1. Create multiple backups of different types. Any individual backup could be lost or corrupted. Multiple backups ensure that your wallet remains secure. Use different media, including physical media (such as a thumb drive or CD-ROM), cloud storage, and paper storage.^[13]
   
   • For example, you might make one backup on a CD-ROM and keep another backup on a secure, encrypted cloud.
   • If you use cloud storage, the service should be end-to-end encrypted. The storage service should not be able to access any unencrypted data you store there, or break the encryption.
2. Keep backups in different locations. Physical media may be less vulnerable to hackers, but it could still potentially be destroyed by physical risks such as fire or flood. If you have backups in different places, you lessen the risk that all of them could be destroyed.^[14]
   
   • If you keep a backup at home, have at least one back-up off-site, such as at your place of business or at the home of a trusted friend or family member.
   • You might also keep a backup on your person, for example on paper or on a small USB thumb drive.
3. Tell at least one person where your backups are located. If something happens to you and no one knows how to get to your cryptocurrency, it is completely lost. At least one friend or family member you trust should know how to access your cryptocurrency.^[15]
   
   • This doesn't mean they need to know your passwords or have access to your account. They simply need to know where to locate the information to access your account if necessary.
   • If you have a will or trust, you might leave this information with the attorney or solicitor who drafted your estate documents.
4. Update your backup after every transaction. The balance of your wallet will automatically update when you transfer cryptocurrency into or out of it. However, your backups won't change until you create new ones.^[16]
   
   • Destroy old backups so that they cannot be used again. Even though the balance has changed, the old backups may still be used to access your cryptocurrency. Remember: anyone who has your private keys can move your cryptocurrency. They don't need access to your wallet to do so.

EditTips

• When transferring cryptocurrency from one wallet or account to another, transfer a small amount first. That way, if you make a mistake and never the wrong address it won't prove too costly.^[17]
• Particularly if you have large amounts of cryptocurrency, diversify with multiple wallets so you won't lose all of your cryptocurrency if one wallet is compromised.

EditWarnings

• Avoid talking about cryptocurrency in public, including online forums and social media platforms. You give hackers an opportunity to target you.^[18]

EditSources and Citations

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