An interesting feature of operating in the crypto world is that there is no mediating service to help you out if something goes wrong. That’s kind of the whole point of the decentralized system in the first place — to eliminate the middleman and to return the power of the system back in the hands of its users. But in doing so, cryptocurrencies and their related markets have also gotten rid of the protection that comes along with having a middleman. For example, if someone steals your credit card information, the bank will almost always reimburse the fraudulent charges. If the bank loses all your money (and you live in the US) the government will reimburse you under FDIC. There is a framework of services and protections that limit the user’s exposure to events of extreme misfortune whereby their livelihoods are threatened by forces outside of their control.
Participating in the world of cryptocurrencies is an entirely different ballgame. If something goes wrong with your wallet or assets, there is no one to save you. If someone is able to access information such as your private key and take over your account, no one is going to reimburse you for any damages done. You’re pretty much on your own, which is wonderful in the sense that it grants you unrestricted freedom in making decisions about your own money, but also terrifying in the sense that if anything goes wrong in the process, you’re pretty much out of luck.
This is why it’s so important to practice good information hygiene, and to be educated about the threats that exist online when it comes to your sensitive information related to blockchain technology and cryptocurrencies.
The first rule to be aware of is that you should NEVER give out your private key to anyone one the internet, unless you personally know the person who is asking, you trust them with all of the resources at stake, and you exchange the information over a secure server. And even then, I think it’s a bad idea. You’re still opening the door for trouble, even if only very slightly.
Rule number two, don’t use exchanges like Coinbase to store crypto assets in the long term. Despite how adamant these services are about the top-notch level of their security systems, the nature of their service existing and transacting online makes them vulnerable to hacks. And in the event that a major exchange is successfully compromised, you could lose the entirety of your investment. The ultimate name of the game when it comes to keeping your crypto assets safe is playing a personal role in controlling the security of your private keys. Using a third party exchange or wallet provider strips you of this right, and puts your investment at risk.
Finally, if you’re really serious about ensuring the security of your Bitcoin, use a hardware wallet. This is a physical device that must be plugged into your computer whenever you want to transact Bitcoins out of your wallet. Since the unique nature of security within each individual hardware wallet is essentially impossible to replicate, no one will be able to gain access to your Bitcoin without the original “key.” If you’re interested in taking this route, here’s a good resource to get you started!
As the cryptocurrency world gains more and more traction as a mainstream financial entity, you can be sure that global hackers are going to be keen on exploiting any weaknesses they can find in order to gain access to your assets. Make sure you protect yourself by practicing good information hygiene and taking the necessary steps to protect any long term crypto investments you may be holding!
Any questions, comments, or concerns? Leave them below!