Cryptocurrency works on blockchain, a mechanism providing better security than any centralized system. It changes the way we have dealt with our data and money. Not only it safeguards assets better, it brings transparency and fair practices. But those who keep tabs on this sphere know about numerous instances of crypto theft. Not just individual traders but even exchanges have lost their assets to cyber attacks.
Understanding common Bitcoin storage errors is critical for any cryptocurrency investor. So how does one protect their Bitcoin and other expensive assets?
Sure, everyone keeps their crypto in wallets and implements other measures too. However, the security is often compromised, and crypto users lose their money. The problem isn’t really the blockchain technology but the way in which users protect their assets. The keepers of cryptocurrency often commit errors while storing their valuable crypto.
There are ways to prevent these Bitcoin storage errors, but the asset holders must adhere to certain practices. They need to follow all precautions and keep an eye to all updates. Let’s deep-dive into those Bitcoin storage errors that cause massive losses to the digital asset users around the world.
Bitcoin Storage Errors Every User Needs to Avoid
These are easy-to-follow precautions that users often overlook. By following them to the hilt, crypto users can safeguard their assets from most threats.
Taking No Backup
On many occasions, users forget to take a backup of their private keys or seed phrases. This results in the permanent loss of crypto in case they misplace those credentials. Every year, several users lose their assets due to this little yet grave mistake.
Keeping Excessive Amounts in Hot Wallets
This mostly happens to users who engage in trading on a daily basis. They start using their online wallet for storage purposes as well without realizing it. Soon, those wallets begin stashing large amounts of crypto that attract scammers’ attention. This type of Bitcoin storage errors can be easily avoided with proper asset management.
Poor Password Management
Almost every platform recommends their users to choose a strong password. Still, users go for easier ones for the sake of convenience and saving time. Hackers gain access of such accounts easily and siphon off your precious assets in seconds.
Using Outdated Software
Another overlooked practice that results in huge losses to cryptocurrency users. While going about the trade and other important activities, asset holders forget to update the software. Very frequently, these updates make the application’s security more robust.
Not Being Careful with Information Sharing
Cyber criminals deploy smart measures to procure the information. They zero in on the users and extract the information in a very strategic manner. Users, on the other hand, become a victim of these fraudulent activities and share critical information.
Online Storage of Seed Phrases
While not taking a backup is a mistake, keeping it online is an even bigger problem. Asset holders do it to save time neglecting the fact that online storage is vulnerable. Even the paid cloud solutions fail to give foolproof security.
Now, let’s see some smart ways to secure your crypto from theft and loss.
Ways to Secure Your Cryptocurrency
There are many methods that one can use for safeguarding their digital assets and avoiding some common Bitcoin storage errors. Each one has their advantages and downsides too.
Cold Wallets
Also known as hardware wallet, these are typical offline storage devices just like a memory stick. Crypto holders utilize these wallets just for stashing their valuable assets. Since they mostly remain offline, there’s not risk of hacking. Also, you can use them for signing transactions and address generation. However, users must check the authenticity of these products before buying them.
Wallet Applications
These wallets get installed on your computer or smartphone as a software. They have online connectivity and are vulnerable to cyber threats. Still, many crypto users recommend these programs due to security features. Usually, they come with two-factor authentication and other safety measures. But users must not save their 2FA with the cloud. If they do it, there’s a danger of hackers obtaining this information.
Paper Wallets
As the name suggests, it is nothing but a piece of paper with wallet information on it. One can only keep the wallet’s key in this form of wallet. This means that they have to store the crypto somewhere else. Most likely, it would be a hardware wallet. Users have to be very careful about the storage of this paper. They must secure it in some place safe and inaccessible to others. Moreover, they have to protect it from environmental damage, fire, and bugs as well.
Besides switching to safer means of securing assets, users must also follow some wise practices.
Some Practices to Follow For Safeguarding Your Crypto
There is no bank or centralized agency securing your digital assets. Hence, users have to take every possible precaution for protecting their valuable crypto.
Multisig Wallet: Multi-signature wallets have emerged as a robust form of wallet lately. That’s because they include multiple individuals who authorize every transaction. Without every member’s signature, no one can do anything with the assets. They reduce the risk of theft to a great degree and are suitable for enterprises.
Update Software Regularly: Those who use online wallets need to update those programs regularly. If not done timely, they application becomes vulnerable in terms of security and functionality. Hackers and scammers are experts in finding out programs that don’t have tight security. They easily detect them and execute their malicious activities.
Timely Backup and Testing: Bitcoin holders needs to be active when it comes to taking backup. They also need to test their private keys on a regular basis. This practice ensures that a speedy recovery of assets in the event of computer failure. Users need to start it as soon as they start trading or keeping digital assets.
Setting Seed Phrases: A user may or may not choose to have a seed phrase. Experts recommend it as they strengthen the security of blockchain storage. For the uninitiated, a seed phrase is a set of 12 or 24 randomly generated words. Mostly, they are in a form of phrase so one can easily remember them. Once it is formed, you can also keep it in an isolated and safe spot.
Storage Diversification- Diversifying the means of storage is effective in securing your assets. Most crypto thefts happen on wallets that contain a large number of assets. Therefore, it’s a good idea to store your coins in small quantities on different storage devices/applications.
Strengthen Network: A strong and well-defended network can stave off many suspicious activities. So subscribe to a reliable and robust antivirus program. Keep updating it timely and keep an eye on all updates happening on this front in the tech world.
Limited Online Storage: Avoid keeping all your Bitcoin and other cryptos in online wallets. If you trade daily, transfer the required amount of coins to your cold wallets regularly. Make sure you don’t keep a large number of assets in balance. If they remain, transfer them immediately to other storage means post-trade.
Users have lost their Bitcoin either due to hackers or their mistakes. There are ways to recover lost Bitcoin, but the success ratio is very low. Let’s look at some aspects of recovering lost cryptos.
Conclusion
All things considered, following security practices is the best way to secure your Bitcoin and avoid Bitcoin storage errors. One thing that every crypto user needs to understand is that in blockchain, they’re on their own. Decentralization makes you the true owner of your assets. And as it goes, great power comes with great responsibilities. Crypto users also have to take full responsibility of their assets. They have to shun depending on third parties to become their own bosses.
