How Do People Keep Their Crypto Safe?

Cryptocurrencies are valuable assets. Today, they can be used for investment, trading, and as payment for goods and services. This is why safety is a huge priority for crypto owners. Losing your crypto is equivalent to losing money, which nobody ever wants to do. 

So, how do people keep their crypto safe? 

1. Protecting Crypto From Unauthorized Access

Crypto owners manage their assets from crypto wallets. These can be hot wallets like Trust Wallet and Metamask, exchange wallets like Binance and Coinbase, or hardware wallets like Ledger and Trezor. 

With each kind of wallet, there’s at least a slight risk someone will get a hold of your phone or computer and try to access it without authorization. This is where having a strong password comes in. 

Modern wallets require users to set a password that must be provided every time they try to open the wallet. This is a security measure to protect against unauthorized access. 

Overall, crypto holders are advised to set a strong password, usually a combination of letters, numbers, and symbols, to make it hard to guess the correct password. That way, if someone gets ahold of the device with your wallet on it, they can’t open the application to get to your assets. 

2. Protecting Crypto From Phishing Scams

Being some of the most valuable assets on the internet, cryptocurrencies attract their fair share of crooks. Some of these are scammers, and their favorite trick is phishing. 

Phishing is an internet crime in which the attacker tries to trick you into revealing sensitive information. In crypto, this is usually a wallet’s private keys. To get you to give them up, the scammer will masquerade as a trustworthy person or entity. 

If you think of your wallet as a vault, its private keys are, well, its keys. So, having a wallet’s private keys gives you complete, unrestricted access to it and the assets it contains and the ability to transfer them. That is the level of access scammers seek to steal from you. 

They typically go about it in two ways:

• Contact the victim on social media or through email pretending to be wallet support. They’ll ask for the seed phrase, which contains private keys, to solve some urgent problem. 
• Set up a fake website copying a decentralized protocol. When the user interacts with it, they inadvertently reveal their private keys. 

To protect against phishing, many crypto owners know not to give up their private keys. These are meant to only be in the hands of the user. So, no legitimate wallet developer will ever contact you asking for your private keys.  

It also helps to make sure you’re on the right website before interacting with it. For example, before connecting your wallet to a decentralized exchange (DEX), make sure you are on the right URL.  

For more scams to watch out for, don’t skip this one!

3. Protecting Crypto From Third-Party Risk

One mantra you’ll hear many times in crypto is, “Not your keys, not your crypto.” And it’ll probably be followed by a recounting of FTX or Mt. Gox. 

Mt. Gox (2010-2014) was one of the earliest Bitcoin exchanges to emerge. It was also the largest, handling up to 70% of Bitcoin trades at some point. But, in February 2014, the exchange announced it had lost around 850,000 BTC to hackers. 

FTX (2019 – 2022) was also one of the largest crypto exchanges of its time. It had a billionaire, philanthropist founder, and the endorsement of some big celebrities. In November 2022, $8 billion couldn’t be accounted for and the exchange filed for bankruptcy. 

In both these cases, the platforms held the users’ private keys. This essentially means they stored the assets on behalf of the users. So, the 850,000 bitcoins stolen from Mt. Gox actually belonged to its users. They’re the ones who suffered the losses. 

Similarly, the $8 billion that went missing on FTX was customer money. The CEO and Founder, Sam Bankman Fried, was later found guilty of seven counts of fraud and sentenced to 25 years in prison. Many FTX users have yet to recover the funds they lost. 

Due to these and similar incidents, many users don’t trust arrangements where someone else gets custody of their crypto. This includes exchange wallets, which are custodial. They prefer to use non-custodial wallets like Metamask, Trust Wallet, Rabby Wallet, Ledger, and more. 

Non-custodial wallets give you their private keys. With these, you retain complete control over your crypto, eliminating the third-party risk of a Mt. Gox or FTX scenario. 

4. Protecting Crypto From Hackers

Cryptocurrencies are always on hacker’s radars. Today, hackers target exchanges, decentralized finance (DeFi) protocols, and individual wallets to steal crypto. 

This makes all crypto owners potential targets. Realizing this, many crypto users choose to keep their private keys offline — where hackers can’t reach them — at all times. 

This begins with not storing your seed phrase on a Google Doc or on the cloud, where it can be found if someone hacks your password. The best way to store a seed/recovery phrase is to write it down on paper and keep that paper somewhere safe. 

For extra safety, some users also prefer cold wallets to hot ones. This is because hot wallets, like Metamask and other Web3 wallets, are online applications. Therefore, they can be hacked remotely, and their private keys can be stolen.

Cold wallets, on the other hand, never connect to the internet.  They let you manage your assets and conduct transactions with the private keys neatly secured offline. This keeps them safe from hackers. 

Examples of cold wallets are hardware wallets like Ledgor and Trezor.

5. Protecting Crypto From Market Volatility

Stock traders often say that stocks take the stairs up and the elevator down. This is ten times as true of crypto. Every trader tries to capitalize on these sudden ups and downs, but to an investor, an unexpected fall in price isn’t usually a good thing. 

To prevent devastating losses, seasoned investors know to diversify their portfolios. This means investing in different assets. For example, a portfolio might include Bitcoin, Ethereum, Solana, and some meme coins. This ensures that your entire investment isn’t affected if one asset unexpectedly falls in price.

Overall, staying safe in crypto is a multi-layered approach. It’s an ongoing process where having the right precautions in place for different threats ensures you can have greater peace of mind as you participate in the crypto ecosystem.