Crypto Hot & Cold Wallet Security Tips
Securing your crypto assets is a fundamental aspect of investing in crypto. Learn how you can improve your crypto security with our tips below.
Now that you’ve got some skin in the crypto space, the next step is to think about ways to keep it safe and out of reach from potential hackers, scammers, and other malicious parties from accessing your assets. Taking your crypto wallet security seriously early on in the game will save you a lot of headaches later on.
To help you with that, we’ll be discussing some important things to keep in mind with regards to keeping your crypto secure.
We’ll be highlighting some of our curated tips and best practices to store your crypto safely. We’ll also be covering both hot and cold crypto wallets – to make sure we cover our grounds.
New to crypto? Start with our 101 guide on crypto.
How to store your cryptocurrencies safely
When it comes to crypto storage, many people are happy leaving their crypto on an exchange. However, this is risky business and there are arguably better ways to improve your security than to leave it on an exchange.
While exchanges are inherently secure, they are still vulnerable to potential threats that could compromise your data and/ or access.
Over the years there have been a number of security breaches:
The last thing you want is to have your hard-earned crypto investments compromised – not to mention your personal information along with it.
Here at Easy Crypto, we have a philosophy where holding onto your private keys are the way to go.
“Not your keys, not your coins (#NYKNYC)!”
Best security practices to secure your crypto
Just like protecting your bank pin number is important, keeping custody of your keys means that you are the one in control of your crypto.
If you are trading or leaving some dry powder in exchange so you can make a quick purchase when your favourite altcoin goes on sale, leaving some crypto on an exchange is sometimes unavoidable, just be aware of the risk.
Our preferred options of how to store your cryptocurrencies safely are by using a hot wallet or cold wallet.
Not sure which wallet to choose?
Keep your seed phrase confidential
When you first create a crypto wallet, you’re given a unique 12-24 word seed phrase that will serve as your only credential to access your wallet.
It’s important that you keep write down and store this seed phrase in a secure location – preferably offline, where it’s away from any potential security breaches.
Do not share your seed phrase to anyone – and remember, no one will ever ask you for this information, not even the wallets themselves.
2FA, or two-factor authentication should be mandatory for all online accounts that you own – not just your crypto credentials.
Having this additional layer of authentication helps to deter any potential hacks from accessing your wallet or account, because it requires an additional step to verify the action of accessing your accounts.
You can use services such as Google Authenticator or Authy, to set up a 2-Factor Authentication process for your accounts. Or if you happen to use an iOS device, you can use the iCloud keychain to create a unique passkey for your account.
Strengthen your passwords
We’re all guilty of using the same passwords across many accounts. While this is certainly convenient, it does present a huge security liability if just one of those online accounts are compromised.
On average, modern computers take less than 7 minutes to crack a substandard password. Creating strong passwords doesn’t have to be hard.
In fact, you can strengthen your passwords by simply adding complexities to its string of words by using numbers and symbols. This will drastically increase the time it takes for a malicious party to break your password.
Use a password manager
This tip goes in tandem with the previous one – by creating a strong password and using a password manager to gatekeep your passwords ensures your credentials have the maximum security possible.
Password managers allow you to encrypt your credentials, create complex passwords, and store your information behind a master password.
A benefit of using a password manager is that most of them come with an extension for your browser, so that you can autofill your long passwords as long as you’re logged into the password manager.
Some options you can consider are Bitwarden, LastPass, and Dashlane.
Hot wallet security tips
Crypto hot wallets, or software wallets, are crypto wallets that take the form of an app on your phone or computer. They require an active internet connection in order to access and manage your crypto, hence the term hot wallet.
Hot wallets are the most common crypto wallets in the market due to their accessibility, beginner-friendly interface, and ease of use.
While this certainly has some advantages, such as accessibility and ease of use – there are some downsides as well.
Being connected to the internet means that it can potentially be targetted by hackers or fall prey to other malicious parties attempting to steal your assets or personal information.
While the majority of hot wallets today incorporate all sorts of security measures, it doesn’t mean you should rely solely on their promises. There are ways you can further improve the security and minimize the chances of your data or access from being compromised.
Below are some hot tips to improve your crypto hot wallet security:
- This may seem obvious, but make sure you download your hot wallets from the official website. There are seriously talented scammers out there copying apps and listing them in the play stores faster than a lightning transaction.
- Avoid transacting over a public Wi-Fi. If you must, consider installing a VPN on your device before proceeding.
- Password protect your device. Another obvious one, but you’d be surprised how many people still leave their devices with no password for easy access.
- Check your PC, Mac, and other devices up-to-date with the latest software. This includes antivirus programs, and OS updates, and any other apps that contribute to the accessibility of your hot wallet.
- Use a 2FA app like Authy or Google Authenticator, not text confirmation. This additional layer of protection will require a code for every login attempt, making it more difficult for any hacker to gain access.
- Backup your wallet – record your seed phrase in a safe place, preferably written down in an offline environment.
Further reading: Learn more about protecting your crypto.
Cold wallet security tips
Cold wallets are the opposite of hot wallets, in that they are not connected to the internet. This creates an isolated environment in which to store your digital crypto assets, away from the likes of malicious hackers and scammers.
This also reduces the likelihood of them being compromised is much lower than that of hot wallets, but it is not completely risk-free.
There is nothing quite as heart-stoppingly painful as inputting your pin or password to a cold wallet and being told you only have 2 more attempts!
Below are some things that can help reduce the risk even more:
- Backup your wallet information and store in another location.
There are many ways to do this, from recording your seed phrase on different pieces of paper and leaving them in different places, to engraving it on a titanium plate or Trezor’s new Shamir Backup, which protects against theft and destruction.
- Beware of phishing scams – scammers will use text messages or email to trick personal information out of you. Often the emails come from companies you know, so never log into any account or site through a link in an email or text.
- Only buy a new device from an authorized retailer or directly from the manufacturer.
What’s the difference between a hot wallet and cold wallet?
- Hot wallets: require an active internet connection to access and/or manage your assets. User-friendly interface, accessible on mobile devices and computers.
- Cold wallets: also known as hardware wallets, take the form of a physical device to authenticate transactions. Requires more learning curve, but is the most secure form of crypto storage available.
If you’d like to learn more about hot and cold wallets, visit our guide.
Due to the nature of crypto and the very personal nature of the industry, following these general crypto security steps will add another layer of protection to your crypto and internet activities.
Choosing the right option for where to store your crypto is a personal decision that involves some due diligence to make sure your assets are protected to the best of your ability.
Further reading: Read our guide on how to avoid cryptocurrency scams.
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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.
Last updated September 5, 2023