2020 has been a wonderful year for the leading cryptocurrency, Bitcoin. After falling below $4,000 in March at the onset of the coronavirus pandemic, Bitcoin recorded an all-time high of $23,400 on 17th Dec. Such occurrences encourage more investors to buy bitcoins and hold onto them with the hope of selling them at an even higher price.
Regulatory progress has also seen an upward trend as banks realize that bitcoin is indeed beginning to revolutionize the economy. Banks can now store bitcoin and other cryptocurrencies on behalf of their customers. One other institution that has finally accepted crypto on its platform is Paypal. The financial giant and perceived enemy of crypto announced that in 2021, Paypal users in the U.S.A would be able to buy, sell, and hold specific cryptos directly through their Paypal accounts. This shows that the mainstream acceptance of bitcoin has begun to occur, and nothing can stop it.
Risks that Come with Storing and Trading Bitcoins
Although people use Bitcoin for financial privacy and security, it still has its own risks, just like everything else. First, we all know that cryptocurrencies are volatile, and their price keeps fluctuating. Then there is the issue of bitcoins being stolen from compromised exchanges and other risks. To manage your coins appropriately, it is good to be aware of the dangers that come with them so that you can know how to protect yourself. Let’s look at these risks in detail.
Lack of Consumer Protection
The bitter truth is that bitcoin doesn’t offer any consumer protection. You cannot reverse a transaction performed on the blockchain. The only course of action you can take after a wrong transaction is to convince the recipient to send back the funds voluntarily. This is because a crypto transaction has no intermediary guarantor like the one for bank cards.
Loss of Private Keys
Bitcoins and other cryptocurrencies are held in digital wallets guarded by using private and public keys. Simply put, private keys are what control your assets, while the public key is your wallet address. If you happen to lose or tamper with your private key, you risk losing access to your coins. And, if the private keys were to land in the hands of a hacker, then you risk losing your entire digital fortune.
Phishing and Malware
Like traditional money, bitcoin users can be tricked into clicking on a phishing link and visiting a malicious site where they are lured into providing their crypto wallets and entering a password, which may lead to their coins being stolen.
Some malware comes disguised in undetectable websites, while others crawl from one device to the other through public networks. The hackers use malware to take your personal data and use it as they please.
While users of traditional payment methods can also face the fate of phishing and malware, they have the advantage of being able to cancel/reverse the transaction; something that cryptocurrencies cannot do.
Ways to Keep Your Coins Safe
With the growth of bitcoin and other cryptocurrencies comes an influx of new users, and since this is a digital currency, the large numbers also means more scammers. Cryptocurrency has become an attractive target for cyber crooks who are eagerly waiting to benefit from your ignorance. Don’t become a victim! Here are some of the ways to protect your digital fortune.
Use Offline Storage
The offline way of storing bitcoins is known as cold storage. Unlike online wallets, cold storage (offline wallets) are not internet-connected, making them susceptible to hacking. Cold storage decreases the chances of theft since the private keys are in an offline mode. But, accessing the cold storage wallet can be inconvenient sometimes, so it’s good to split your bitcoins and keep some in online storage for daily trading needs and the rest in cold storage.
Cold storage is a good practice for individuals and even for cryptocurrency exchanges that handle vast amounts of money and are always under constant hackers’ attack. The most common cold storage methods include sound wallets, paper wallets, hardware wallets, and storage devices such as USB drives.
Use an Independent Email for your Bitcoin Wallet
Most individuals have a primary email address for daily communications. The problem is that we use the same email for our Twitter, Facebook, and Paypal accounts, among other things.
We also share it with family, friends, and coworkers, who might even share it with other people, eventually reaching malicious hands. If you have connected your online wallet to this email, the cybercriminal has one of the most critical pieces of information required to access your wallet.
Therefore, it is recommended that you use a different email account for your online storage—one that you don’t use for other things. This way, the chances of your wallet being hacked are minimal.
Enable Two-Factor Authentication (2FA)
By activating 2FA, you will be linking your account to a mobile app, phone, or physical dongle. That means if a hacker obtains your first line of defense, which is the username and password, they will still require the second authentication to access your account. Most online wallets support two-factor or multi-factor authentication, so make sure you enable it on your account for that extra protection.
A history of routine backups could be the only way to retrieve the coins in your digital wallet in the event of a computer glitch. So, backup your whole bitcoin wallet early enough and often, and then put away the backup at different secure locations, such as on CDs, hard drives, and on a USB. Also, ensure you set a secure password on the backup.
Update your Software
A wallet running on old, non-updated bitcoin software is a prime target for hackers. So, ensure your software is always up to date. The latest version of the software will have better security features to keep your wallet safe from hackers.
Consistently update your mobile or computer software and operating systems to keep your bitcoins safer.
As bitcoin continues to infiltrate into the mainstream, the number of bitcoin scams also continues to increase. And, since many investors are still new to the system, hackers are taking advantage of their lack of knowledge of the proper ways to secure their investments to steal from them. Don’t just sit and watch as your hard-earned fortune goes down the drain. Use the above tips to help protect your digital wealth and safely store your Bitcoin.
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