Crypto Security for Dummies: A Complete Guide for 2023 and 2024
Learn the basics of cryptocurrency security in an easily understandable way. We go over the whole lifecycle, beginning with a purchase, storing, transacting, and selling.
When it comes to cryptocurrency, the learning curve is pretty steep, and each security mistake can be very costly. To spare you a few common beginner mistakes we present this straightforward security guide. You will learn basic security tricks that will help you safely acquire your coins, store them, and use them without worry.
By following these simple precautionary practices you will be able to avoid common security breaches and keep your crypto future-proof.
TL;DR:
- The crypto learning curve may be steep, but with a few precautionary practices, you can drastically lower the chance of you getting hacked or scammed.
- Major security pain points in the crypto user lifecycle are First purchase, Transferring to a wallet, keeping seed phrase, and interacting with smart contracts.
- When buying crypto on a centralized exchange it is best to withdraw it to your own wallet. For the highest security use hardware wallets like Trezor or Ledger.
- Secure your seed phrase by writing it on a physical medium - that way it stays offline. Do not share your private keys with anyone, it is the quickest way to get scammed.
Buying and Selling Crypto Safely
Transferring from crypto to fiat or backward is a major pain point for regular users. It consists of confusing, technical operations, which could make you more susceptible to mistakes or fraud. It is crucial to know this process well and understand its actions in order to prevent security breaches.
Let's say I want to exchange some fiat for crypto, but I am not really seasoned in this regard. These are some of the options readily available, with each one having a different security profile:
Centralized Exchanges
Centralized crypto exchanges like Binance, Coinbase, or Kraken are definitely the most visible options when it comes to exchanging fiat for crypto and vice versa. Here are a few points to keep in mind if you want to keep your experience with CEXs pleasurable and secure.
- Account security - When creating an account with a CEX always check the URL manually to confirm that it is the official site in order to avoid Phishing. Use a secure password and enable Two-factor authentication. Consider using a free VPN for an added layer of security.
- Be mindful of fees - The less complicated the buying process, the higher will the fees be. If you purchase crypto directly by card, you can expect a hefty fee. The best transfer options are generally fintech apps like Revolut.
- Your coins and KYC - In order to use a CEX you are asked to complete an identity verification in the KYC (Know Your Customer) process. Depending on where you live these are often required by the government. Keep in mind that if you complete KYC, your assets on the exchange will be connected directly to your identity. This can limit your privacy and potentially result in regulatory problems. A rule of thumb says that no one should know about your coins but you.
- Transfer to your own wallet - Once you make the purchase, transfer the coins to your crypto wallet immediately. Do not leave your coins on any centralized exchanges for a prolonged period of time. Not your keys - not your coins.
Peer-2-Peer Buy and Sell
A proficient and effective way of acquiring crypto is to buy it directly from another person. Bitcoin was originally designed with this thought in mind. During a P2P transfer, it is required that there is mutual trust between the participants. Do not send random strangers your money expecting some Bitcoin will land at your address.
It is best to do this in person with someone you know or with someone who has some common friends with you.
Sending to Crypto Wallet
Crypto withdrawal refers to the act of taking the coins off of the centralized exchange or other custodial services into your own crypto wallet. By having your own crypto wallet you will become self-custodian, which means that you exclusively control your assets and therefore are responsible for them.
Sending coins from a centralized exchange to a crypto wallet will depend on which exchanges you are using and which coin you will be withdrawing.
Keep in mind:
- Different crypto assets usually operate on different blockchains - For example, you cannot send native BTC to an Ethereum address.
- Always check the address format - If you send assets to the wrong address, they will be lost forever.
- Different wallets support different types of assets - For Ethereum and Ethereum-based chains, you can use Metamask. For Bitcoin hardware wallets like Trezor or Ledger.
How to Store Crypto
In order to store your crypto assets in a secure manner, you need a resilient wallet.
Hot Wallets - Web and Mobile Apps
They are very quick to set up and usually free. Your assets are accessible from anywhere on any device and you can quickly confirm any transaction.
The problem is that Hot wallets are perpetually online and therefore they have an extra surface area for hacks and exploits. It is a step up from keeping crypto on centralized exchange, but they are still not recommended for storing larger amounts of assets.
Cold Wallets - Hardware Devices
With hardware wallets, you have to put in some investments to be able to use them. They cost something and the set-up process can be a bit complicated. But in exchange, you will get unprecedented security and full custody of your assets.
A hardware wallet like Ledger or Trezor is a must-have if you intend to accumulate large amounts of crypto and hold it for longer periods of time.
Keeping your seed
A seed, or a seed phrase is a series of 12 to 24 random words needed to recover a lost crypto wallet. Whenever you set up a new wallet, you will be generated a new seed phrase.
These are some basic precautions for seed phrases:
- Write down your seed on a physical medium - Paper, metal plate, stone wall, etc.
- Do not store your seed online - Keep it private and offline.
- Make a few copies of your seed in case you lose it.
Transacting with Crypto - What to look out for
Transacting and operating with your crypto can be technically complex and therefore is another major risk point. Hackers and scammers know this and they happily target users during transactions.
- Never send your private keys to anyone.
- Always double-check the receiving address.
- When interacting with smart contracts, make sure they are audited by a reputable security auditor.
- Be mindful of memecoins and low-caps.
Use CoinBrain to conduct a simple security check of smaller projects to verify their legitimacy. Search the coin in a search bar and open its profile. Search the security sections for any red flags.
Avoiding Scams and Fraud
Crypto is notoriously known for its high concentration of scams. It can be very difficult to dodge these sneaky practices because they evolve and innovate constantly.
Begin your anti-scam education here: Unmasking the Top Crypto Scams in 2023 & How to Evade Them
Then, once you have the basics down, you can continue learning about specific scam types in crypto, such as Phishing scams or Romance scams.
