The Basics about Cryptocurrency
Cryptocurrency comes under many names. You have probably read about some of the most popular types of cryptocurrencies such as Bitcoin, Litecoin, and Ethereum. Before converting real dollars, euros, pounds, or other traditional currencies you should understand what cryptocurrencies are, what the risks are in using cryptocurrencies, and how to protect your investment.
What is cryptocurrency? A cryptocurrency is a digital alternative currency which can be used as a payment method in a place of physical currency such as dollar, pound, euros and others. Cryptocurrencies serve as a virtual accounting system in addition to being a form of money thanks to the usage of encryption technology. You need a cryptocurrency wallet in order to use cryptocurrencies. These wallets may be saved on your computer or mobile device, or they may be software that is a cloud-based service. You store your encryption keys, which verify your identity and connect to your cryptocurrency, in wallets.
The risks of using cryptocurrency? The market for digital currencies is quite unstable, and cryptocurrencies are still relatively new. Since banks or other third parties are not required to oversee cryptocurrencies, they are frequently uninsured and difficult to exchange into physical money (like US dollars or euros). Cryptocurrencies can also be hacked, just like any other intangible technological asset, because they are technology-based intangible assets. Last but not least, since you save your bitcoin in a digital wallet, you will lose all of your investment if you misplace your wallet, your access to it, or your backup wallet.
Tips to help you protect your cryptocurrencies:
- Use two factor authentication for your exchange: When you first buy cryptocurrency, it will usually be in an exchange account. If a hacker obtains access to this account, they can withdraw your crypto to a wallet address under their own control. One of the best ways to avoid these attacks is to enable two-factor authentication (2FA) for withdrawals in your exchange app. 2FA requires you to input a code from your phone every time you make a crypto withdrawal. If you don’t have 2FA enabled, you have to rely on the security of your email address and password to protect your crypto against cyber criminals.
- Use strong passwords to protect your crypto: The longer the password, the more difficult it is to crack. If a password has both capital and lowercase letters, numbers, and special characters, then it’s even more difficult to crack. Avoid using the same password on multiple platforms and remember to change your passwords periodically.
- Avoid public Wi-Fi when carrying out crypto transactions: When you’re away from home and need to connect to the internet, free public Wi-Fi at a restaurant or coffee shop may seem like a convenient option. However, when you’re carrying out sensitive transactions such as crypto trading, it’s advisable to avoid public Wi-Fi.
- Back up your seed words properly: When you download wallet software and start to set it up, you are usually asked to back up your seed words. Also known as a ‘secret recovery phrase’ or ‘master key’, seed words are a series of words used to cryptographically derive all your account keys. You can use your seed words to recover your accounts if your device crashes. Anyone who has access to your seed words has access to every account tied to these words.
- Don’t enter your seed words on a website: If you use a browser-extension wallet, it will ask you for your crypto password frequently. If you close your browser and reopen it, it will ask for your password. If you step away for a few minutes, your wallet will close, and will ask for your password when you come back. But a browser-extension wallet such as Metamask, Coinbase wallet, or Brave wallet will ask for your seed words only the first time it is installed.
