How to keep your capital safe with cryptocurrencies?
From the crypto ecosystem, we often talk about being the real owners of our money. While this is a great and liberating purpose, it comes with a huge responsibility, as we will be uniquely responsible for our money. To successfully overcome this task, today I bring you some tips to keep your capital safe with cryptocurrencies.
As with all emerging technologies, the crypto world is in what can be called a beta phase. The dangers involve not only volatility, but also hacks.
Evidently, to stay safe, we need to protect ourselves from these scenarios. Let’s look at how we can mitigate these risks and succeed in the crypto world.
Is it possible to be in crypto and be safe?
Without a doubt, it is a question that a large majority of those who haven’t yet entered this world are asking themselves. Taking into account the percentages by which certain cryptocurrencies’ prices have dropped, plus the amount lost to hackers, it isn’t an invalid question.
However, for those of us who know the ecosystem, it’s important to provide some reassurance. The answer, clearly, is a resounding yes. You can be in the crypto world and remain safe.
As I wrote in the introduction, this ecosystem pursues the dream of freedom. What kind of freedom are we talking about? Financial freedom, being the actual owners of our money. But, before we start this journey, we must ask ourselves, are we willing to pay this freedom’s price?
The responsibility of keeping your capital safe with cryptocurrencies
It is necessary to clarify from the beginning that, with crypto, we are free. But, that freedom also includes the custody and protection of our capital.
In crypto, there is no one to complain to if:
- We lose our seed phrase
- We make a mistake when making a transaction
- We interact with a malicious platform
- All our money is stolen
In this ecosystem, we’re uniquely responsible to protect our capital. However, this is not an impossible task. There are certain principles to respect and today we will review them. Let’s get started.
Don’t commit more than you are willing to lose
It’s a simple but controversial phrase that we have all been told before we started in crypto. While for every human being, the amount they are willing to lose will vary, there is one parameter that is identical for everyone:
- In crypto, we can lose everything
As I mentioned at the beginning, anything from a hack to the volatility of cryptocurrencies can lead to this situation. Therefore, it’s up to each of us, in front of the mirror, to determine how much we are willing to lose.
Once we gain confidence in this ecosystem, it is simple to increase these amounts and expand our exposure. However, this simple phrase should be with us all along the way.
It doesn’t matter if you arrived yesterday or have been in the ecosystem for years:
- Never commit more than you are willing to lose.
Not your keys, not your coins
This may be the most repeated phrase in the crypto ecosystem. Born back in 2014, by the hand of one of the best well-known bitcoin disseminates in the entire world, the Greek Andreas Antonopoulos.
The story, which took place in that year, could easily have taken place in the present day. In fact, with certain differences, we experienced just a month ago. The centralised exchange Mt. Gox, the largest of those years, was hacked. In the event, no less than 850,000 units of bitcoin were stolen.
Given that it was the first major theft of a crypto-centralised platform, which was presented as more secure than a decentralised wallet, the impact was enormous. Andreas, who advocated for a decentralised world and bitcoin’s self-custodianship, came out with a phrase that will last for years to come:
- Not your keys, not your coins
Its explanation is quite simple. When we create a crypto wallet, we receive a 12-24 word phrase that represents our private key. This key provides access and full availability of the cryptocurrencies related to that wallet.
By depositing our cryptocurrencies in a centralised exchange, we don’t have this phrase. In short, we give custody of our coins to a third party, the exchange in this case.
Evidently, standing up against the principle by which bitcoin was born has its consequences. The year 2022 will be remembered as the year of the FTX debacle. But, it will also, once again, be remembered for the utmost ubiquity of the phrase:
- Not your keys, not your coins
Find the wallet that makes you feel safe
There are several types of wallets, in which you act as the unique custodian of your funds. We can list the following:
- Browser extension wallets
- Desktop or mobile phone wallets
- Hardware wallets
The order of the previous list is far from casual. It respects an order in terms of security, from lowest to highest.
Browser extension wallets
These are the ones that are installed as extensions to our browsers, such as Chrome, Brave, Firefox, etc. They are the most widely used, as they are simple, convenient and allow us to interact with decentralised platforms. We count on several examples of this kind of wallets such as Metamask or Raby.
But their vulnerability comes from the place where they store their private keys. They do so in the browser’s memory, a relatively simple place of vulnerability. However, if we are careful when surfing the Internet, our funds will be safe.
Desktop or mobile phone wallets
Regarding these types of wallets, such as Bitnovo’s mobile wallet, and the desktop version of Exodus, we can say that they are more secure than the previous ones. Despite having, on certain occasions, limitations when it comes to interacting with decentralised applications. In short, the private keys are stored on the device where they are located. Although they are not impenetrable, they are more secure than a simple browser.
Finally, we have the most secure wallets in the industry. In this category, Trezor and Ledger definitely stand out among the options available. These are devices that generate our private keys offline. To approve a transaction with these wallets, you need to have the device and do it from it. Obviously, the decision to purchase one will come when our funds exceed the cost of one of them.
You just need to be careful
The key to keeping your capital safe with cryptocurrencies is nothing more than being cautious. We need to do our own research and take the necessary steps to ensure peace of mind.
For example, it’s extremely important to be careful when sending and receiving cryptocurrencies. It will never hurt to double-check the recipient’s address to ensure that you are sending your funds to the right address.
Obviously, as in the real world, promises such as:
- Send me an “x” amount of cryptocurrencies in exchange for future payments or refunds, which are classic scams.
When interacting with smart contracts, we should check that they are official sites. Twitter is a great help here. By looking for the official accounts, we will be able to get the correct addresses within them to interact safely.
By following these simple steps, we will be able to reduce the risk of losing our money.
Total security is an illusion. There are not many absolute certainties on our planet, and cryptocurrencies are no exception. However, it is clear that by following these simple-to-apply tips, we will increase our chances of successfully navigating this far west known as the crypto world.
As a general rule, we can say that we should be careful when making our moves. Hackers are on the watch, waiting for our mistakes. It would be better not to give them a chance.
In crypto, we are free but responsible. Let us take this task with the level of seriousness it deserves. Following these simple tips, keeping your capital safe with cryptocurrencies will be something achievable.