Thu 09 Aug, 2018
Securely Storing Your Cryptocurrency
Whether you’ve invested in cryptos with an SMSF or not, knowing how to securely store cryptocurrency is vital to keeping your investments safe. Not only is cryptocurrency a highly volatile investment, but it also has a high risk of hacking. In this blog, we’ll discuss the risks cryptos can face if they’re not properly stored, and what steps to take to securely store cryptocurrency investments.
Remember, we are not financial advisers and this post is for educational purposes only.
Risks of Hacking
Hackers are able to get their digital hands on your cryptocurrency by accessing the passwords and login information required to make exchanges.
Here are some of the ways they obtain this information:
From fake trading sites to dodgy buyers, always have your wits about you. Do your research on coin exchanges and currencies before handing over any personal information.
Much like data leaks and password hacks, Trojans are used by scammers to lurk on your computer and grab your passwords and crypto keys. Often this involves hacking your copy and paste clipboards.
Savvy hackers are finding ways to divert funds from cryptocurrency owners to malicious wallets by preying on unchanged default login credentials.
Once a device has been stolen, your cryptocurrency’s security is compromised. If the thief is well-versed in crypto, they may be able to steal your currency.
What Happens if You Fall Victim to a Scam?
Unfortunately, if your information gets leaked or your currency is compromised, it’s gone forever. Cryptocurrencies just don’t have the same support systems as banks.
The best way to keep your currency safe is to focus on protecting your devices, access keys and currency files – preventing a hack is far easier than rectifying one.
How to Securely Store Cryptocurrency Investments
The best way to store your cryptocurrency is to take it off the exchange you bought it in and transfer it to your SMSF’s cryptocurrency wallet. Your cryptocurrency wallet is essentially a digital wallet that holds the information required to access your currency. If you buy more currency, you can receive it using your wallet.
A cryptocurrency wallet also comes with a public and a private key. Your public key acts as an ‘account number’ to which you receive funds. On the other hand, your private key is what you use to send money to others, or to spend your currency. It’s important to never tell anyone your private key, and to store it in at least two secure places.
Online and offline storage
Often referred to as hot and cold storage, online and offline storage options are available to all cryptocurrency owners.
Online storage (hot storage) is any device or program that will ever be connected to the internet. That includes mobile, laptop, digital wallets, and desktop storage.
Offline storage (cold storage) is any storage method that is never connected to the internet.
The benefit of online storage is that you can easily and quickly access your cryptocurrency and send it to an exchange.
However there are some benefits of offline storage:
- More secure
- Protection from hacking
- You have full control over maintenance of the storage vessel
- Ideal for long-term SMSF investors
We suggest that you keep your crypto investments on a hardware wallet. These USB wallets are cold storage and are what most of our clients use to store their SMSF’s cryptos on.
Staying Protected Online
In order to securely store cryptocurrency investments, it’s important to keep your cryptos well protected on the internet. This means practising cryptocurrency-friendly behaviour online. Here are some more tips on how to securely store cryptocurrency and keep keep protected online:
- Install and update a good quality anti-virus software and pay attention to the reports it generates
- Stay away from untrustworthy sites like video streaming or chat sites where security could be compromised
- Do not connect devices that are involved with your cryptocurrency to WiFi networks
- Don’t physically leave your devices unattended in public
- Don’t give out your home WiFi or personal hotspot passwords to anyone you do not know or trust
- Carry out all cryptocurrency trading and exchange conversations on a separate device to the one used to manage your funds
- Don’t talk about cryptocurrency via social media, messenger, iMessage or other application – hackers may be watching
Knowing how to securely store cryptocurrency is important for keeping your investments protected, especially when you’ve purchased the cryptos with your super.