Cryptocurrency Wallet Security

Cryptocurrency Wallet Security

Securing your wallet

Your cryptocurrency wallet really is the keys to the castle without it and the private keys within it you will have funds locked into the blockchain with no way to access them. You need to consider wallet security to protect your wallet, firstly from loss or damage,  and secondly from theft.

This is pretty much like the physical world you need to protect your money from theft and loss. As cryptocurrency is a virtual asset it is easy to forget its value and do things we would not do in the real world, we would not for example leave a wallet full of money on a table in a restaurant. To avoid these kind of errors with cryptocurrency wallets we just need to think about what we are doing and take some precautionary steps.

Online v Offline

Very broadly wallets fall into two categories online and offline.   Online wallets exist on a device that is connected to the internet and therefore provides a direct attack point for hackers. Offline wallets such as paper wallets are not connected to the net and therefore cannot be directly attacked. You can understand more about wallets in the Cryptocurrency wallet choices guide

Don’t have more than you need online

We have established that cold wallets are inherently more secure than hot wallets since they are disconnected from the internet reducing it’s accessibility and vulnerability to attack significantly.  In the physical world you will need a certain amount of money in your wallet for living and day to day spending, but you would not want all your savings in your wallet for fear of theft or loss. It is the same in the crypto wallet, you may wish to keep a small amount of your funds in a hot wallet such as a mobile wallet to allow daily spending and trading but you would want the majority in offline cold storage like you would with your savings.

Backup

Whichever wallet you choose ensure that you have a backup of it, remember due to the decentralised nature of cryptocurrency there will be no one to turn to if you lose the private key that allows access to your funds and they will effectively be lost. Some wallets have a built in backup tools whilst for others such as paper wallets you will need to make a secondary copy. Remember this is not a one time process you will need to backup as additional private keys are added to your wallet.

Offsite

Remember decentralisation in cryptocurrency gives high availability and no single point of failure.  Follow this principle when thinking about how you store your wallets, do not keep all your wallets and backups in a single location, if there is any kind of natural disaster or fire all will be lost.  Ensure at a minimum your backups are kept off site. Wallet security is about not only protecting it from would be thieves but also protecting it against mishaps with steps like offsiting and backups.

Find a Suitable Crypto Wallet

Cryptocurrency wallet finder

Make sure you are using a suitable wallet for your crypto.  You can use our Cryptocurrency Wallet Chooser tool to help find a suitable wallet.

Strong Passwords

For any wallets that require a password ensure that you are using a strong password

2FA

Some wallets will use two factor authentication (2FA) this is where you will use a password plus an authentication app such as Google Authenticator to logon.  Make sure that you have a backup of your authentication codes as if you loose your phone on which you use the authentication app you will also loose access to your funds. If you are already using 2FA disable and then re-enable it, this should give the opportunity to make a note of the backup codes. Also when you enable 2FA there is no restriction to the number of devices you can register this code with.  So if for example you have a tablet and a phone you can register the 2FA code with both devices in case you lose one.

Diversify

Do not lock all of your coins and tokens into a single system.  No one can predict what will happen in the future and you don’t want all your crypto to be exposed to a vulnerability exposed with a wallet type or for support to be suddenly discontinued and you loose access to your keys.

Update

Whichever wallet you choose ensure that you keep it up to date with software and firmware updates.  This will ensure you are running latest version of the software and patched against any known vulnerabilities.

Hardware wallet recovery

Hardware wallets generally work by being setup with pass phrases, it is sensible that once you have made a note of the seed words that you reset the device and enter the pass phrases to see if you can recover the device.  This way you can be confident that you can recover the wallet should you ever need to .

Multisig Wallets

A standard wallet requires only a single private key to authorise a transaction. A multisig wallet allows you to require multiple private keys in order to allow a spend.  This is more secure than a standard wallet since a thief would need to steal all the required private keys to allow a transaction

Encrypt

Ensure that any backups or other information that you keep online is encrypted

We hope these tips help you to secure your cryptocurrency wallet, did we miss any methods you use to secure your crypto wallet? Let us know in the comments

 

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