Explore the security risks associated with storing crypto on third-party platforms and individual wallets. Learn how to secure your crypto and reduce the risks of hacking, theft, or fraud.
In recent years, the popularity of cryptocurrencies has grown exponentially among individuals and businesses alike. However, with this growth, cases of hacking, theft, and fraud have become more common. This highlights the need for increased security measures when dealing with cryptocurrencies.
Notable events such as the Mt. Gox and Bitfinex hacks have resulted in the loss of millions of dollars in digital assets. More recently, the FTX case has brought the famous phrase “Not your keys, not your coins” back into the limelight. These events demonstrate the risks associated with storing crypto on third-party platforms.
Individual wallets can also be vulnerable to theft due to device vulnerabilities or lack of proper security measures. In 2020, one cryptocurrency user lost over $400,000 due to malware installed on their computer.
It is essential to understand that crypto wallets are not designed to store assets, as they are stored on the corresponding crypto blockchain. In this article, we will explore the security measures you can take to protect your crypto assets and reduce the risks.
There are two main types of crypto wallets: custodial and non-custodial.
When it comes to securing your crypto wallet, the type of wallet plays a crucial role. Custodial wallets involve a third-party, typically a regulated entity such as a centralized exchange, to store digital assets on behalf of the user.
While non-custodial wallets give users full control over their digital assets, meaning they are responsible for their security.
Custodial wallets offer increased security measures such as advanced security protocols, insurance against loss or theft, and rigorous verification processes for accessing funds. However, they come with the risk of trusting a third party and their security systems.
On the other hand, non-custodial wallets are popular for those looking to maximize their anonymity and privacy, but come with the risk of user error and fraudulent activity.
There are several types of wallets available, including paper, digital, online, physical, and hybrid wallets.
Each comes with its own set of advantages and disadvantages when it comes to security and accessibility.
Hardware wallets are generally considered the most secure, as private keys are stored offline on the device and equipped with advanced security features. However, it's important to note that no wallet is 100% secure, and it's essential to take steps to protect your assets.
🚨 To keep your crypto assets safe, it's crucial to keep your private keys secure and never share your seed phrase with anyone. There are several options for saving a seed phrase, including local backup, online backup, paper, physical support, and secure USB keys. 🚨
By following these security practices, you can avoid losing your recovery phrase and keep your digital assets safe. It's essential to consider which storage method is best for your situation and take steps to protect your recovery phrase accordingly.