Crypto security - how traders secure themselves in the crypto space?
|We’ve all heard the horrifying stories of cryptocurrency investors losing virtually all of their savings due to hackers, or even rogue or incompetent crypto exchange employees. Essentially, any crypto funds that you have in an online storage space is at threat. That could be with an exchange or in an online wallet. The general rule of thumb is that such methods are fine for smaller amounts of crypto that you use for regular trading, but when you find yourself with a substantial amount of crypto sitting in your account, it’s probably about time you looked at your cold storage options. When it comes to what would be considered a substantial amount, it differs from person to person, but for most anything above $500 is worth locking away.
Okay, so what are your options?
In general, three of the more popular options include hardware wallets, paper wallets, and third-party custodian.
Paper wallets
Sometimes the most basic option is the best, right? A paper wallet is exactly what it sounds like. You write down your public and private keys on a piece of paper and keep them safe. You will want to make copies of these keys and store them in safe locations, such as a safe deposit box at a number of banks.
Hardware wallets
One of the more popular options, these are pocket-sized mini computers that hold your funds in such a way as they never have to be exposed online. Among the more popular options include the Trezor One, and the Ledger Nano S, both of which offer an incredible level of security.
Custody accounts
Custody accounts are among the safest options available, as they add an extra layer of security to your funds. You find this method used in many traditional markets, where an unaffiliated third-party who is completely removed from the exchange or financial advisor hold the funds in a secure location.
Coinbase has a platform called Coinbase Custody, which is a secure, third-party who hold your digital assets for you.
Another exchange which will be providing such a service is ETERBASE, a platform that is one of Europe’s first regulation-compliant cryptocurrency exchanges, running external security audits on a regular basis like many traditional financial institutions do. This trend for regulation-compliant exchanges is something that is sure to gain popularity over the coming months and years.
What method you choose will depend on your circumstances, and how substantial your cryptocurrency holdings are.
What you can be sure of, is that cold-storage in some form is the answer.
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