Any online transaction entails its own share of security risks and the cryptocurrency exchange platform is no exception. Incidents of hacking abound of bitcoin trading companies, two of which have even declared bankruptcy. The silver-lining is that there have fortunately been fewer hacking incidents concerning individual investors vis-a-vis the million-strong investor base the world over. That said, you will do well to become familiar with a few best practices for a safe cryptocurrency exchange experience.
To robustly protect against security risks, you must first be aware of the myriad security holes. As the adage goes, “Being forewarned is forearmed,” knowledge of these holes will come in handy when you want to perform secure digital currency transactions.
Safeguard Your Identity on Social Media
To perpetrate phone-porting attacks, cyber criminals listen for conversations regarding cryptocurrency transactions, on social media, where unsuspecting investors leave behind their contact details such as their phone numbers and email for easy contact. Once the attacker has gleaned such critical information, they masquerade as an affected victim to the phone service provider and have the phone number routed to a device under the attacker’s control. All the attacker then needs to do is access the cryptocurrency account, reset the password and syphon off the cryptocurrencies from the account.
To protect against such a situation, be extremely discreet with your details or better yet never discuss matters related to digital currency exchange over the social media. Another bullet-proof strategy is to use a dedicated email account with a very strong password.
Spread Your Cryptocurrencies Across Various Exchanges and Platforms
Another hack-proof strategy is to spread your bitcoin currency across several cryptocurrency exchanges. The inherent defence mechanism involves that you use a unique email and password for each cryptocurrency exchange account. This approach will create layers of security, where even if one cryptocurrency account is compromised, the others will stay secure.
Create a Cold Wallet for Cryptocurrency Trading
A cold wallet is not a brand, but refers to storing your bitcoins offline. This approach greatly minimizes the possibilities for hackers to launch an attack. On the other hand, a hot wallet is one that is connected to the internet. While a cold wallet is akin to your savings account, a hot wallet can be thought of as your checking account. However, this is not entirely without its share of trouble. Unless you securely store the cold wallet, and know where you have stored it, you run the risk of physically losing your cold wallet.
Use Decentralized Exchanges
If you use a centralized exchange, then withdrawing tokens and storing them on a hardware wallet often is a sure way to protect against hacking.
When it comes to trading tokens on Ethereum, you may opt for decentralized exchanges. The greatest advantage of this approach is that decentralized exchanges never hold users’ funds and hacking into them cannot be achieved without first compromising your private keys, which is much too difficult if you stay alert enough.
Take Cognizance of Other Security Best Practices
Here are certain other best practices for safe cryptocurrency trading:
- 1. Have your private key written down. You may even store it with a third party or in a hardware wallet.
- 2. Add another layer of security by leveraging multi-signature technology, which entails multiple private keys.
- 3. Use encryption, deploy 2F authentication and encrypt hard drives and mobile devices and more importantly, make backups at regular intervals.