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How to Stay Safe When Trading Cryptocurrencies
The world of cryptocurrency is an exciting and somewhat risky place. With the right security measures, you can stay safe while still enjoying all the benefits that cryptocurrencies have to offer. In this blog post, we will take a look at different safety precautions for trading cryptocurrency as well as some information on how to choose your exchange wisely!
Just to recap, what is a cryptocurrency?
A cryptocurrency is a digital currency that uses cryptography for security.
What is the difference between a cryptocurrency and, say, Paypal? Paypal uses an email address to send payments. A cryptocurrency does not use any personal information about you in order to process transactions. Instead of using names or social security numbers as identifiers, they rely on complicated algorithms instead for validation purposes.
This means that if one person gains access to your email account, they can also access the assets that are in your Paypal account.
A cryptocurrency is always stored on a blockchain which cannot be hacked and where each transaction has a record of verification before it?s accepted. The blockchain is like an electronic ledger with records that are time stamped and publicly viewable by anyone.
Before you start trading, it?s best to do your research on the exchange and make sure they are trustworthy. You should check their reputation online through forums or articles about them as well as chat with people who have used them before.
Other things to look out for when choosing an exchange would be if they support fiat currencies (ease of use), country restrictions and deposit/withdrawal limits. There are even some exchanges like Bitmex which only allow Bitcoin deposits!
For those more technologically minded, there are many ways to protect yourself while trading cryptocurrencies such as enabling two-factor authentication where possible or using offline storage methods with hardware wallets.
The different types of wallets to store your cryptocurrency
There are many different types of wallets to store your cryptocurrency. The most popular option to stay safe is to use the hardware wallet which stores private keys on a device that?s not connected to the internet and is typically encrypted with a pin code or password so they can only be used by you.
Another option for storing cryptocurrencies offline would be paper wallets which you print out from an online generator and then write down as much information about them (private key, public address) as possible before cutting off access to any computer afterwards.
You could also use the more traditional software program based wallet but this comes with greater risk because if someone hacks into it, there will potentially be no way to get those funds back unless you have two-factor authentication enabled.
Use different strong passwords for each platform you use
Another way to stay really safe when trading cryptocurrency is using a different and strong password for each platform you use.
This means you should use different passwords for your email, phone, and exchange account (and if they are all the same then at least make them strong).
This is a really easy way to stay safe because it makes life harder on hackers. They have to hack in three places instead of one place before being able to access any cryptocurrency or personal information.
This combined with the next measure you can in staying safe and secure is already a pretty strong and secure buffer.
What is Two-Factor Authentication?
Two-factor authentication requires two different "factors" in order to be completed.
This means that you will need a password and something else, generally your cellphone or the Google Authenticator app on another device. It is an extra layer of security for when someone has access to one thing (your username/password) but not both things required. You can also use other devices such as fobs with time based codes which are often used for business purposes.
In this case, if somebody had your account information they would still have to go through many steps before being able to transfer funds out of it because typically there is a waiting period where the request needs approval from either yourself or an admin at the exchange who knows about it.
Now that we?ve recapped what a cryptocurrency is, the different types of wallets there are, you?ve set up strong and secure passwords and know about 2FA, it?s time to choose a reputable exchange for trading.
How to choose a reputable exchange for trading
Choosing a reputable exchange for trading is important, especially if you plan to trade cryptocurrencies.
Different exchanges offer different features. It is important to do your research and choose an exchange that meets your needs. Make sure the company you select has a strong reputation, good customer service, high security standards, etcetera.
Always check for multiple reviews before using any given cryptocurrency exchanger since not all of them are trustworthy. Consider researching how long it takes to withdraw from this trading platform as well as other criteria.
Consider the following factors when picking a cryptocurrency exchange:
- Reputation of company and employees (check reviews, take screenshots)
- Security measures in place including two factor authentication, like we discussed above.
- You should also set up encrypted passwords for every service used with this exchange so if someone gets access to one thing they won't have access to all of them. If any credentials are leaked during data breaches due to poor security practices then change these right away!
Common cryptocurrency scams
There are different types of scams you may encounter:
Phony exchanges
Phony exchanges are ones that look like the real thing but actually steal your money by either asking for funds upfront (i.e., PayPal) or withdrawing it from accounts without authorization later on (i.e., Wire Transfer).
Phishing
Phishing is when someone tries to get sensitive information about an individual such as their password or credit card number through deceptive means?which usually takes place over email, SMS, and social media channels.
It's important to keep in mind what type of sensitive information you put on these platforms because they're often targets!
On top of this, there can be counterfeit sites designed to look like the real thing!
Trading bot scams
There are a number of scams related to cryptocurrency trading bots, and they're usually social engineering attempts. If you are unaware what a trading bot is, here is a beginner's guide into the theme.
The first may be an email you receive from the bot company that asks for funds upfront (i.e., PayPal) or withdraws it without your consent later on (Wire Transfer).
The second is when someone tries to entice you into giving up sensitive information about yourself such as password or credit card numbers by using deceptive means?which could take place over email, SMS, FB Messenger, etc.?and then steal your money!
This has been reported by people who have fallen victim before. These types of sites can imitate legitimate ones but instead ask for private data in order to collect more personal information with which to extort ransom.
A great way of minimizing your risk of falling for a trading bot scam is by building your own bot! If this sounds good with you and you are up to programming your own trading bot with Python, check up the following tutorial to begin with.
