The appeal of cryptocurrencies, regarded as a highly lucrative if volatile asset class, has filtered into the mainstream. The combination of advanced technological innovation with possible widespread use cases that cryptocurrencies can empower, adds significant potential to their evolution. With over 9,000 coins and tokens cumulatively worth over $250 billion, it is shocking to witness the growth of this market that only came into being 11 years ago. As we continue to observe a growing influx of individuals entering the market, there is increased concern regarding various security aspects that must be understood before investing in digital currencies.
In 2019 alone, over $283 million worth of cryptocurrencies were stolen by hackers in various prominent cryptocurrency exchanges globally. 2019 saw the highest number of security breaches of crypto platforms in a single year within the past decade. This increase can be attributed to advanced hackers’ increasingly sophisticated methods of penetrating cryptocurrency exchanges.
Given the infancy of this technology and the fast pace of innovation, it is vital to protect yourself against the risk of losing your valuable coins. Integrated and regulated platforms such as eToro are a good way to start investing in cryptocurrencies, with its straightforward interface that hosts many free resources, all of which are useful for both beginners and advanced traders.
Here are three simple ways to protect yourself and ensure the safety of your cryptocurrencies.
Avoid Shady Exchanges
The most common way to acquire digital currencies is via a cryptocurrency trading platform that offers a wide variety of coins and tokens. With more than 300 crypto exchanges and over 22,000 trading pairs available, it could be daunting to choose a suitable platform. For starters, there are two main types of platforms: fiat-gateway and crypto-only. Fiat-gateway platforms facilitate the acquisition of cryptocurrencies using local currencies.
Users can utilize their local bank accounts to fund their accounts and start buying cryptocurrencies. It is essential to buy cryptocurrency solely from licensed and regulated platforms such as eToro. Since platforms need to be licensed if they accept local fiat currencies, only serious contenders with extensive safety mechanisms would be licensed. A regulated platform ensures the protection of users’ deposits and interests.
On the other hand, there are cryptocurrency-only platforms, which solely accept cryptocurrency deposits. Users usually trade on cryptocurrency-only platforms due to their sheer liquidity, as well as the comprehensive list of coins that fiat-gateway platforms do not list. Cryptocurrency-only platforms operate on a global scale and are usually not bound by a specific jurisdiction.
You should only open an account on a platform with an established track record, which has garnered good reviews from the community. A deep liquidity pool, which can be inferred from its high trading volume, is a good indicator of an exchange’s popularity. A highly liquid platform could mean that there are many users, although it is also standard practice for certain platforms to superficially increase their trading volume by employing trading bots. Such highly secure and regulated cryptocurrency exchanges as eToro have great liquidity, more than 11 million users, and comprehensive availability of coins and tokens for users, making it a top global trading platform.
Activate 2FA on all of your Exchange Accounts
Crypto traders usually have more than one cryptocurrency account, to leverage liquidity in certain exchanges, exploit arbitrage opportunities, or simply access coins that other platforms have not yet listed. After opening any cryptocurrency account, the first thing you must do is to activate two-factor authentication (2FA) to secure your account against unauthorized access. 2FA represents an additional layer of security — besides the standard username and password combination — which ties your smartphone to your cryptocurrency trading account.
Each time a user wants to access their account, a 2FA authentication PIN from their smartphone authenticator application is required to provide an additional layer of verification. Almost every cryptocurrency platform — including the reputable eToro — enforces the use of 2FA to tighten user security and prevent loss of funds. A common 2FA smartphone application is Google Authenticator, a free mobile app that anyone can download and initiate their 2FA across all platforms.
Storing Your Coins in an Exchange? Think Again
You do not own your coins if you do not own the private keys associated with your cryptocurrencies. Having control over your private keys means that you have absolute access and total control over your coins. Storing your coins in exchange — no matter how regulated or secure it is — opens up the possibility that your coins may be lost in the event that the cryptocurrency exchange closes. News of cryptocurrency exchanges being hacked and losing all of the users’ funds is a common occurrence in the space. Mt. Gox, Quadriga and Cryptopia are prominent examples of exchanges that have lost hundreds and millions of dollars of user funds.
Securing your coins is the most important aspect of your cryptocurrency journey. The best way is to safely store them in a hardware wallet after you have done your trading on an exchange. A hardware wallet is a physical device that securely stores your private keys offline to ensure that they cannot be hacked or stolen. A convenient and secure way of securing your coins is on eToro’s multi-currency digital wallet which is encrypted with the highest security mechanisms and supports more than 120+ existing coins and tokens.
Maximum Security for Peace of Mind
Technology is constantly evolving; there are always new and sophisticated ways to hack cryptocurrency applications and steal users’ funds. The complexity of blockchain technology has actually created numerous risk vectors for hackers to exploit. Occurrences of users losing their cryptocurrencies and cryptocurrency exchanges being hacked are so widespread that it is seen to be common in this space. To protect our coins, we must ensure that we engage in best practices that secure our assets, such as storing our cryptocurrencies in a hardware wallet, as well as enabling 2FA across all of our cryptocurrency exchange accounts.
Besides 2FA, it is also vital to understand the risks involved in cryptocurrency trading and utilize mechanisms that limit your risks. eToro offers various risk management features, including a free repository of analysis and market reports as well as encouraging the use of stop-losses to reduce your risks. It is also vital to ensure that you choose a platform that is well established and regulated to ensure that your funds and interests are protected.
 Data derived from CoinMarketCap, the most popular cryptocurrency data aggregator globally.
 Report from Chainanalysis
Disclaimer: This is a paid post and should not be considered as news/advice.