This weekend a Korean cryptocurrency exchange was hacked. In total, around $40 million in cryptocurrencies were stolen from the accounts of customers on the Coinrail exchange. The headlines that followed painted a bleak outlook for the industry as a whole, but the news outlets were focusing on the wrong issue; why in the hell would someone keep their digital assets on an exchange?
The world of cryptocurrencies and blockchain technologies is rooted in personal responsibility. When you eliminate third parties, the burden that they used to bare is now placed firmly on your shoulders. Those who self-bank need to take steps to ensure that their digital assets are safe and secure. Here are some of my recommendations:
Get Your Money Off of the Exchange
There have been a few hacks in the history of crypto that have led to significant losses of digital assets, and they all have something in common: the personal accounts of customers using the exchange were hacked. Now mind you, it wasn’t any of the assets of the exchange itself that were stolen, because they take good care of their own stuff. These accounts are not intended for long-term storage of your coins. They are made to facilitate buy/sell transactions. Once it has served that purpose, it is time to put them into something capable of ensuring safety and security.
Private Wallets – The Colder the Better
If you hold your crypto as near and dear to your heart as I do, then you need to invest in a cold wallet. You need to own and control the private keys for your coins, and a cold wallet enables you to accomplish this. Using a cold wallet brings another level of security to your “personal bank”, since the scammers have to physically hold your wallet in addition to knowing the encryption code to unlock it and access your digital assets. If someone is attempting to steal something that is rightfully yours, we need to take every precaution to deter them.
Get a Safe or a Safety Deposit Box
And not some tiny safe that a potential thief can tuck under his arm and walk out with. You need something impervious to being carried off or even an act of god. On the internet, if you forget your password, you are a confirmation email and 3 security questions away from being logged in again. This does not exist in crypto; if you forget your pin, lose your recovery seed, or accidentally delete your private keys you are shit out of luck. Always keep hard copies, don’t pull a Balina and keep them stored online only for some hacker to find. If you don’t believe me, Google “Ian Balina hack video” to see what losing $2 million on a live video stream looks like.
Use an Authenticator
Any exchange worth using either offers or requires the use of a 2FA authenticator; this is an app that generates unique codes that are required to be entered prior to gaining access to your account. I recommend taking this one step further: do not put this app on your phone. Thieves are getting craftier as the prices of these coins go up and with it their potential windfall. Recently, scammers have been calling phone companies and impersonating the owner of the account to gain access to their phone and with it their authenticator app. Instead, go get yourself an Apple iTouch. Download the authenticator app and then keep the iTouch on Airplane Mode until you need it. If the iTouch is offline except when in use, we have eliminated the possibility of scam artists utilizing it for their misdeeds.
Do not use your personal email address for your crypto exchange accounts. In the same manner that they can contact your phone company to gain access to your cell phone, they are doing the same with email addresses. Create an email address that’s sole purpose is for use with crypto exchanges, and make it some ungodly mix of numbers and letters. The harder it is for them to find out that this email even exists, the better.
If you invested in and owned a precious metal, would you leave it sitting in the trunk of your car? Of course not, it would be locked up in a vault or given to a custodian for safekeeping. Why should your digital gold be any different? Take the necessary steps to protect your investment today to ensure that when the day comes to reap the rewards of your investment, it is still right where you left it.