Cryptocurrency Security: How to Avoid the Inherent Risks

Technology is rapidly changing how people work, shop and communicate. Companies and consumers do not always like using bank transfers or credit cards because of lack of privacy, high transaction costs, and lengthy periods required to complete transactions. These challenges, plus a lot more, have made people look for alternatives and the most preferred options are cryptocurrencies.

When the term cryptocurrencies is mentioned, what runs through the mind of most people is Bitcoin. Well, this is just one of them, and it happens to also be the pioneer crypto coin. However, there are about 6,000 crypto coins out there and the list is still growing. As you make the big decision to go crypto, one thing that you need to appreciate is that they are not without some risks. Keep reading as we highlight some of the strategies that you can use to avoid or minimize these risks.  

Understand How Cryptocurrencies Work

The first step into addressing the risks associated with cryptocurrencies is to understand how they work. Let’s start with the definition of a cryptocurrency. A cryptocurrency is a form of digital payment that works on a peer-to-peer basis as opposed to relying on centralized parties such as banks. 

Unlike with fiat currencies, which are minted in coins or printed in notes, the cryptos only exist in their native blockchains. For example, BTCs only reside in the Bitcoin blockchain while ETH resides in the Ethereum blockchain.

When you buy cryptocurrencies, what you get is a string of codes that represent your stake in the respective blockchain network. To store the coins, you are required to have a digital wallet. To send the coins, you need to direct them to the wallet of the recipient using his/her public key/ address.

Understanding this type of operation is crucial because it makes it possible to understand where most of the risks are likely to happen. For example, you are required to keep your private keys and wallet private because revealing them to another party is like giving him/her access to your coins.

Ensure to Have a Secure Wallet for Crypto Storage

There are a number of wallets available for storing cryptocurrencies, but which one do you select? The secret is to identify the one that is most secure to reduce the danger of the coins getting stolen. So, consider doing some research to understand the security measures used by the developer of a specific wallet. You might also want to ask a few questions, such as “has the wallet ever been hacked?” and “what remedial measures were installed to prevent further attacks?”

Ensure to Follow the Performance of the Cryptos on the Market

Another common risk associated with cryptocurrencies is that they are highly volatile. This means that the value of a coin might be very high today and fall down days later. The crypto market is particularly responsive to the latest happenings. For example, when the Chinese government indicated that it was banning cryptocurrencies, the price responded by a sharp decline. 

However, positive news such as Elon Musk buying Bitcoin or banks in Europe considering blockchain technology makes the value shoot up. Therefore, it is a good idea to follow the performance on the market and take advantage of the gains.

Work with Secure DeFi Platforms

Another awesome method of avoiding the risks associated with using cryptos is working with DeFi platforms. The platforms are designed and run by experts, making it easy for you to follow the right track when investing in cryptos. For example, you can use Mantra Dao to stake your cryptos through a pool as opposed to doing it alone. A great DeFi platform also provides more services, including crypto lending.

One fact about the globe today is that the world is adrift towards cryptos and you should not be left behind. However, it is important to ensure you understand the risks we have highlighted above and minimize them as much as possible. Remember to always keep your eyes open about the latest news in the world of cryptocurrencies and take the right actions, such as selling your coins when the value hits the peak.