By Louis H-P on August 4, 2022Reading Time: 3 minutes
The emergence of the booming cryptocurrency industry has offered a brand-new opportunity for traders. The fluctuating nature of the market means there is high risk and high reward available to savvy investors. People who want to get involved with crypto trading need to be careful with their funds, as some online exchanges have been hacked in the past. Therefore, the best course of action is to remove profits and keep them in offline hot wallets.
Since 2012, it is estimated that more than $2.66 billion has been stolen from various crypto exchanges. Hackers employ a range of techniques to get access to crypto keys, with phishing scams being employed frequently. The consensus among holders is that large funds should not be kept in online exchanges, otherwise known as hot wallets.
Some crypto users may feel safe using hot wallets, as their password protection of them appears to be more secure than on many other web pages. However, this may not be all that secure in that research has shown that a lot of internet users opt for simple, easy-to-remember passwords online.
This isn’t a region-specific issue, either. Around the world, there are numerous generic passwords that stand out as being the most commonly used. For example, among Italians, one of the most commonly used passwords was “Juventus” (based on the football team, of course). Germans commonly choose terms like “passwort”.
Other common options include “qwerty” on English keyboards and “azerty” on the French equivalents. These options simply wouldn’t suffice on a crypto exchange where there is a vast amount of wealth at stake.
Crypto exchanges have been wise to ensure that users key in more secure options than these popular passwords. They are forced to create a password based on the key principles of security. These are that they should be long, random, and unique. Exchanges also employ multi-factor authentication. Unfortunately, however, cybercriminals have found ways around these protocols.
If you’re trading Bitcoin and other cryptocurrencies, you will need to keep some capital in the exchanges that you can use to jump on price rises and falls. Nonetheless, you do need to be aware of the risks involved with keeping funds online. If your money is in a hot wallet, that exchange could be breached at any time.
When you put your funds into a hard wallet, you can remove them from the online world. It’s simply a case of taking the USB stick out of your computer. Then, there’s no chance that cybercriminals can get hold of that wealth.
Of course, putting your capital into an offline wallet isn’t completely secure. There are numerous other risks that come with storing it there. Cybercriminals may not have access, but there’s nothing stopping an old-fashioned burglar from breaking into your house and taking it.
There are also plenty of horror stories about people who have forgotten the password to their offline wallets and have lost access to large fortunes because of this. Numerous people bought Bitcoin before it blew up and became the phenomenon it is today. Their small investments would be worth millions now, but they are locked out of their ultra-secure wallets.
There’s no doubt that hard wallets are the safest and most secure place to keep your crypto funds. However, you need to be aware of the risks involved. This also means keeping your password locked away somewhere safe.