- 1 Introduction
- 2 Security Risks Involved with Trading Cryptocurrency
- 3 5 Ways to Stay Protected While Trading Cryptocurrency
The latter years of 2017 saw cryptocurrency enter the mainstream. Bitcoin opened the doors for cryptocurrency to become more than a niche form of digital currency, and nowadays, many people dedicate all their time to mining cryptocurrency.
And while there are advantages to using cryptocurrency over traditional currencies, it’s not free of problems. The problem the industry should focus on the most is the issue of security.
Cryptocurrency and the systems surrounding it are still new and budding, meaning security issues are bound to arise. Issues like what, though?
Security Risks Involved with Trading Cryptocurrency
The current COVID-19 pandemic has not only exposed the unpreparedness of the world in dealing with a pandemic, but it has also put a spotlight on the various schemes of scammers and fraudsters on the Internet.
In April, the FBI published a report warning cryptocurrency investors about a potential rise in cryptocurrency-related scams. These scams include fraudulent investments, blackmailing, and paying for potential rewards.
Unregulated Trading Platforms
The 2010’s saw banking giant Wells Fargo under fire for a number of scandals, the biggest one being their account fraud scandal. This scandal only highlighted the need for security and accountability when it comes to finances.
The same goes for cryptocurrency trading platforms. Not every trading platform is 100% secure, and some even exist solely to scam users.
5 Ways to Stay Protected While Trading Cryptocurrency
1. Use a VPN
Keeping tabs on potential investments and your already-existing investments is a part of trading cryptocurrency. This means that you need to have constant access to the internet, no matter where you are. This doesn’t sound too terrible at first—not until you realize that you spend a large amount of time on a shared or public network.
Cybercriminals lurk on public networks, waiting for someone to expose themselves. Many people do. And if you expose your information on these networks, your investments—even your wallet—become vulnerable.
To avoid this, make sure your data stays anonymous and encrypted no matter where you’re connecting from. You can accomplish this by using a Virtual Private Network. As you connect to a VPN server, the tool masks your IP address and encrypts your data, enhancing the security of your crypto assets.
2. Stay on Reputable Trading Platforms
Earlier, I mentioned cryptocurrency trading platforms, also known as digital cryptocurrency exchanges (DCE), which allow cryptocurrency investors to store, trade, and move their cryptocurrency. Think of DCE’s like banks: they allow you to withdraw or deposit your funds.
DCE’s also allows you to convert your cryptocurrencies to other forms of tender, such as conventional money (USD, Euros, etc.). However, just like banks, it’s important you choose a reputable DCE.
Studies show that a large chunk of trading platforms lack proper cybersecurity, putting users at risk. Studying potential trading platforms and choosing one that prioritizes user security will make sure your crypto stays safe.
3. Store Crypto in a Cold Wallet
Cryptocurrency is stored in “crypto-wallets”. Crypto-wallets require a form of identification (usually an access code or PIN) before the user can access the contents of the wallet. In other words, crypto-wallets prove digital ownership of the cryptocurrency stored in it.
However, not all crypto-wallets are safe to use. To minimize the risk of your wallet being hacked, store all of your cryptocurrency in a “cold storage”, a crypto-wallet that is disconnected from the Internet.
4. Use Two-Factor Authentication and Strong Passwords
Even if you decide to use a cold wallet, you’ll still want to secure it with a strong password. After all, without strong passwords, all a hacker needs to do to break into the wallet is locate it.
Some crypto-wallets even offer two-factor authentication, which will—after the correct password is entered—verify the identity of the user by sending a text or email with a code that must be entered before the user has access to the wallet.
One thing cybercriminals love is when investors overshare information about their investments and what they’re invested in. See, cybercriminals need to find targets, and what paints a target on someone’s back like talk of finances?
Avoid oversharing information about your current or future investments. The last thing you want to do is attract the attention of scammers and cybercriminals.