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5 Ways to Protect Yourself When Using Cryptocurrency

by Olufisayo
Ways to Protect Yourself When Using Cryptocurrency

With cryptocurrencies, there is no centralized authority in charge of the security of your funds. It’s the wild west of finance, which means you, and you alone are responsible for your money and its safety. If something goes wrong, there are no helplines for you to call, and there is usually no way to recover your funds if they’ve been lost.

This is why it is paramount that cryptocurrency users understand how to protect themselves when dealing with online transactions and interacting with the various websites and crypto-related services.

Furthermore, as the space is stil relatively new, it is mostly unregulated. When you couple that with the relative complexity of the services, you can see why the “crypto sphere” has become a paradise for hackers and scammers alike.

Having said that, with the right education and some basic due diligence, you can bolster up your online security with relatively little effort. Here are five ways you can do just that.

1 – Understand the basic best practices of cryptocurrency

First and foremost, you must get to grips with some of the best practices you should be following when using cryptocurrency, such as:

       
  • Don’t ever give out your private key
  • Don’t post your address publicly
  • Never disclose the amount of cryptocurrency you hold
  • Spread your assets across more than one wallet
  • Always make sure your coins are kept on a wallet that you own the key for (i.e., not an exchange)
  • Use a hardware wallet (see point 3)
  • Back everything up
  • Enable 2FA (two-factor authentication) wherever you can
  • Always triple check the address before you hit send
  • Be mindful of scams and phishing attacks

2 – Use a new address each time

In order to better protect your online privacy, you can use a different Bitcoin address each time you intend to receive a new payment. This allows you to isolate each one of the transactions and it makes it far less likely that someone will be able to trace the ledger back to your real identity. Of course, it is still possible, but the trail of transactions becomes much more complex for someone to follow.

Furthermore, when you use multiple addresses it becomes impossible for people to associate your accounts with one another (unless you send and receive between your own accounts).

3 – Use a hardware wallet

Using a reputable hardware wallet is the single best way to protect yourself when dealing with cryptocurrency. To put it simply, hardware wallets are physical devices that are specifically designed to store the private keys of cryptocurrencies.

Traditional crypto wallets that are kept online are referred to as hot wallets, meaning they can be accessed at any time. On the other hand, hardware wallets, otherwise known as cold wallets, can not be hacked into or attacked as they are completely offline unless you are using them to make a transaction. All you have to do is connect them to your computer, enter the pin number that you will have set up, and then use the device to authorize transactions that you wish to complete.

They are an absolute necessity for anybody who holds any significant sum of cryptocurrency as they ensure your private keys remain unexposed and are completely immune to computer viruses and online-based attacks.

       

4 – Use a VPN

When using any of the various online cryptocurrency services such as an exchange, you are leaving yourself exposed to a vast network that’s crawling with hackers, cybercriminals, and scammers. And as the bitcoin network is a peer-to-peer system that relays all users’ transactions on a public ledger, there is always a chance that some of your data can be stolen or intercepted.

One of the primary pieces of data that are targeted is your IP address as it discloses your current location and can be used to discern a number of different things about your personal information. In order to prevent this, you should protect your cryptocurrency payments with a VPN so that you can remain anonymous while sending and receiving transactions and interacting with online exchanges.

5 – Use one of the “privacy coins” for your transactions

A privacy coin is a cryptocurrency that intentionally hides some or all of its user’s data. In general, this makes it much more difficult to track and trace transactions as the amount of cryptocurrency traded and held in wallets is hidden, as well as the user’s identity.

Interestingly, Bitcoin is not considered to be a true privacy coin as users are identified by their public address, and there have been instances where those addresses have been linked to actual identities.

If you really want to ensure complete anonymity, then you should consider opting for one of the popular privacy-oriented cryptocurrencies such as Monero (XMR), Zcash (ZEC), DASH, and Verge. However, it’s important to note that these currencies are typically much more volatile than Bitcoin as their market cap is smaller by several orders of magnitude. This makes them a much riskier asset to hold in the long term, which makes them unsuitable for many people.

       

Image Souce: Freepik

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