Blockchain is an extremely popular, efficient and promising modern technology. The industry of cryptocurrencies has gained such popularity not only due to the advantages of the blockchain technology, but also as a result of its market ideology, which fully corresponds to today’s public demand for anonymity, freedom and security on the Internet around the world.
There are two major ways to approach cryptocurrency. Proponents of the first way are ideologically convinced that the future lies in using cryptocurrency, and the reason people purchase it if to use cryptocurrency as a means of payment — this is what Steve Wozniak did. In his recent interview, he said that he planned to go on a world trip and pay only with bitcoins on the way. He was disappointed, however, when it the reality proved to be incapable of fulfilling his goal of paying only in crypto anywhere he went. Meanwhile, the annual volume of transactions with cryptocurrency grows, along with the general capitalization of cryptocurrencies, which means such trips might become possible in the future.
Others have a more pragmatic approach and view cryptocurrencies as an opportunity for highly profitable investments. Today, not only medium-sized investors and amateurs invest in crypto and ICO-projects, but also big companies and hedge funds with large capital.
Regardless of your goals, executing all possible operations with cryptocurrency and storing them requires good judgement and caution. The expansion of cryptocurrency into our lives is happening under the flag of decentralization, which offers many solutions for a variety of tasks: wallets, stock exchanges, crypto exchanges, etc.
Let’s try to learn more about all this diversity and to understand what services to use and how to get the most of cryptocurrency, including freedom and anonymity — its undeniable advantages; and to learn how to keep your assets safe.
You are in Control of your Safety
Benjamin Franklin drew an inextricable link between safety and freedom. In one of his official letters to Governor Thomas Wharton in 1755, he said: “ Those who would give up essential liberty to purchase a little temporary safety, deserve neither liberty nor safety.” Some people may find this expression somewhat rude, but it reflects young generations’ moral grounds very accurately — people crave freedom, which is closely connected to their safety.
This interconnectedness is especially evident from the popularity of cryptocurrency — after abandoning fiat money, cryptocurrency users voluntarily give up on certain security provided by banks and governments. If you use cryptocurrency, your safety becomes your own responsibility, for the industry lies mostly in the gray zone, which is not regulated by the government. In this situation, crypto-exchange services are rarely ready to accept obligations to protect your account and cover all associated risks.
Types of Threats and How to Protect against them
Cryptocurrencies and ICO projects are at the height of popularity today. This popularity attracts large financial flows to the market from both investment funds and large companies, as well as from private investors and ordinary users who see digital currencies as a substitute for traditional money.
Here we can observe a manifestation of a well-known rule that says, where big money is, there are always a great deal of scammers. Threats can be divided into two types according to the level of risk: in one case you can reduce this level, in the other you cannot influence it at all.
Let’s start with those aspects of security that you can control directly. The thing of crucial importance is a wallet in which you will store your cryptocurrency. There are so called “hot” and “cold” wallets. The advantage of hot wallets over cold alternatives is the possibility to process instant transactions. Hot wallets include mobile apps, online services and some desktop solutions.
Online wallets and mobile apps seem to be the most popular within this category. Statistics indicate that mobile apps are more prone to hacking compared to trustworthy web wallets. Moreover, providing that users follow the safety instructions that are always detailed on such resources, web wallets can secure the highest level of protection.
Cold wallets are of limited access. The best example is hardware wallets that can be compared to a memory card storing your money. Since these devices do not have continuous access to the Internet, they are more secured in terms of hacking. That’s why this option seems to be much safer.
Now let’s turn to those aspects with levels of risk you cannot control. First and foremost, cryptocurrency exchanges. Exchange can be hacked and all the clients’ funds can be stolen. In this case you, being an ordinary user, cannot do anything.
However, that does not mean that you should not make a thorough research before choosing an exchange. The primary criteria for choosing an exchange are for how long the exchange has been operating, its trading volume and its credibility. But yet it is not enough. Since operation of an exchange is not free from the influence of human factor, in theory, any exchange can be hacked. The recent example is the plunder of more than $500 million worth of NEM cryptocurrency from the Japanese cryptocurrency exchange Coincheck.
The way the exchange tackles such problems is also an essential factor. Coincheck is working on reimbursing fully the funds of affected customers. Another major platform Bitfinex has also refunded clients their money after attack. Thus, although the vulnerability of these platforms is quite obvious, their readiness to take risks on behalf of their clients means a lot.
How to Secure Investments
Other risks are stemming from investing in ICO projects. In 2017, of all the teams that held fundraising campaigns via token sale, only a few were ultimately able to develop a working and popular product from scratch.
Nowadays, there are less and less ICO projects that can raise millions of dollars in just a few minutes due to increasing competition. These projects have to spend a lot of money on marketing, and you can benefit from it. You do not have to be a blockchain expert or a financial analyst to be able to screen out many fraudulent ICOs. For this purpose, it is enough to study their White Paper, evaluate their experience and the team’s credibility and simply assess the possible demand of the product.
Besides the general advice about the careful examination of all the information in the net about the project you want to invest in, there is one more recommendation. It is using authoritative independent opinions. A group of rating agencies was formed, which conduct due diligence of the projects and sum up their audit.
Such services, which examine upcoming and ongoing ICOs and rate the projects, appear in the cryptocurrency industry. Of course, a five-star rating is not a guarantee of the investment growth and it does not eliminate the risk of losing all the investments. But your task is not to eliminate these risks but to minimize them, because there are no investments without risk.
Safe Tools and Tips
But enough theory, let’s move on to practice. Below we will refer to useful and safe services and tools, which could be used by every crypto investor, and also give some useful tips.
Speaking of well-established services it is worth mentioning MyEtherWallet, the safety record of which is practically perfect, if you try searching the web. It is an e-wallet, which is perfect not only for storing Ethereum but also for any tokens compatible with the ERC-20 standard. Most ICO issue tokens of this standard. That is why this wallet is convenient for everyone who wants to invest in different projects during token sale.
As we have said earlier, the safest way to store a cryptocurrency is using a cold hardware wallet. The Ledger company is the leader in this sphere. It is worth mentioning that recently the company has issued a press release in which they mentioned vulnerability they discovered. This vulnerability is related to generating an address while making transactions. Hackers could use this vulnerability to replace the address of the recipient to their own address. It is pretty easy to save yourself from such a situation. You need to check your address every time before transfer confirmation. Even despite this and complaints some users have about the display and technical parameters, these e-wallets stay the safest of all the wallets available.
If you are a frequent user of the same Internet service, try not to enter the website address manually. Add it to bookmarks and carefully check the website domain in the address bar before entering your password. Scammers often create absolute copies of popular resources aiming at stealing passwords of careless users.
Remember that simplicity and comfort in use are often inversely proportional to the safety level when picking a wallet or any other cryptocurrency service.
Without any doubt, there are always risks when it comes to cryptocurrency investments but we, the members of the Universa team, want you to learn to manage these risks and be able to safe protect yourself from any threats possible.