The Web3 Rabbit hole
January 23, 2023

How to Safeguard Your Digital Assets?

With Bitcoin and other crypto-assets going up in value, it becomes imperative that you protect your digital assets or risk losing them. There are several measures and practices that you can take to protect your assets

How to Safeguard Your Digital Assets?

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Cryptocurrency is disrupting every industry and has continued to gain momentum because of how valuable it has become. There’s a downside to this widespread surge in crypto: thieves and hackers have also become interested in these assets.


And since these digital assets are different from money stored in a bank account or kept with a broker, personal caution and oversight is required.


Individuals and digital assets exchanges are susceptible to malicious hacking with no means of retrieving what has been stolen. The hackers sometimes disappear into the thin air of the anonymous internet.


Does that mean investing in digital assets isn’t safe? No, it only means investors need to take precautionary measures to ensure their tokens are safe and stay ahead of scammers.


In this article, we will highlight effective methods to keep your wallets and assets safe. But first, let’s talk about digital assets.


What Digital Assets Are?


According to Forbes, digital assets refer to virtual representations of items and their corresponding values. They can be issued and transferred from one person to another without a paper trail. They include items such as videos, audio, websites, digital stocks, art, and of course crypto tokens.


Our focus here is on cryptocurrency as a subsection of digital assets. As such, we can narrow our definition of digital assets to be crypto assets or virtual currencies that use cryptographic technology to create a medium for encrypted (secured) financial transactions such as Bitcoin, Ether, Litecoin, Solana, and NFTs.


The idea of self-sovereignty is at the center of cryptocurrency, where individuals can act as their banks. That would also mean taking responsibility for the safety of their assets to be on the safe side.


One thing that sets cryptocurrency aside from other digital assets is the fact that they are built on blockchain technology. This technology is used to create, authenticate, and enable transactions.


Let’s take a deeper look into this blockchain technology.


Understanding Blockchain Technology


Blockchain technology is a structure that stores transactional data (also known as the block) of different individuals in several databases, called chains, via a network of peer-to-peer nodes. This system of storage is also called a ‘digital ledger’.
Each transaction in this digital ledger is granted access by the digital signature of the owner that authorizes the transaction and ensures its safety from fraudulent acts. Therefore, all information in the chain is highly secured.


To further simplify digital ledgers; they are like the Google spreadsheet, which several computers can share in a network, and each record contained on the sheet is an actual transaction. One interesting fact is that anyone can see the data, but they cannot tamper with it.


The blockchain consists of three vital pillars:


1. Cryptographic keys


2. A peer-to-peer network that contains a shared ledger


3. Computing system to store transactions and other records happening on the network.


Now, let’s dive into how you can safeguard your assets

Best Practices to Protect Your Digital Assets With Bitcoin and other crypto-assets going up in value, it becomes imperative that you protect your digital assets or risk losing them. There are several measures and practices that you can take to protect your assets and here they are:


Store Your Digital Assets On a Hardware Wallet


Storing your password and information on devices connected to the internet still poses theft risks, as you are exposed to phishing attacks and viruses by fraudsters.
Hardware wallets are a great option for you to safeguard your assets. It’s not connected to the internet, so it’s literally safe from hackers. They are also known as cold wallets.


Secure Your Seed Phrase Using a Seed Protection Board


Crypto-wallets nowadays have a seed phrase given to you to access the wallets when you’re changing a device or transacting. Anyone who has them can access your assets; they can import the keys and steal your funds. The seed phrase is usually 12, 18, or 24-word.


As such, there is the need to be extremely careful about how you keep your seed phrase. Storing your seed phrase on a device connected to the internet will not be recommended because you can download a virus or hackers, infiltrate your system remotely and sweep away your funds.


What can you do then? Use a seed protection board. It is a non-digital private key cold storage made of high-grade stainless steel that will safely store your seed phrase, and it can never be hacked.


The board can allow up to 24 words and it is indestructible by fire and water. Alternatively, you can write the seed phrase on a piece of paper and keep it secured in a fireproof box in your home so it won’t be easily destroyed.


Review Crypto Before Buying


The hype in the crypto market can almost push anyone to rush into it. But as a smart investor, you have to take time to study the crypto-assets you want to buy, considering the unpredictability and volatility of these digital assets.


There are thousands of crypto, coins, and tokens, so choosing what coins to buy usually seems like a herculean task to new entrants. To understand a project, study the white paper. It will tell you all you need to know about the project, the intentions of the developers, and overall guarantee the security of your investment


Choose A Trusted Digital Asset Exchange


The cryptocurrency exchange is the platform where buyers and sellers of crypto assets meet to trade cryptocurrency or exchange digital assets with fiat currencies. There are centralized exchanges, decentralized exchanges (DEX), peer-to-peer, crypto-ATMs, and many more. However, you cannot guarantee the safety and security of all the choices, and they have varying levels of security.


Because digital assets are not backed by central institutions, the platforms you buy from can be compromised or your account hacked, and all your assets lost. So, you will need to choose a trusted and secured exchange.


You can get that done by accessing what security measures they have in place for their users. If you intend to keep digital assets on exchanges rather than transfer them to your wallet, you should consider exchanges that use cold, offline storage and have strong security policies against theft.


Enable 2FA


This is a step further in securing your digital assets. The 2FA is short for two-factor authentication, and it is often added to various digital procedures to provide an additional layer of security. The 2FA ensures you can access a website or app after multiple security checks.


The 2FA differs from your password; it is a secret code sent to you via email, SMS, or push notifications from a cryptocurrency exchange or wallet. The secret codes will expire after some time, to ensure hackers do not bypass and use past codes to access your account.


In addition, you could also use Google authenticator, and once you enable 2FA, you will be sent a secret code each time you want to log into your account.


Consider Using Custodial Services


Custodial services are offered by third-party providers of storage and security services for crypto owners. The provider of custodial services often use hot storage, which means your assets will be connected to the internet, and cold storage. In any case, they are responsible for the safety of your asset.


The hot storage that is connected to the internet offers easier liquidity; however, it is susceptible to hacks because of its exposure to the internet. On the other hand, cold storage is more secure, but you might find it difficult to generate easy liquidity due to its offline nature if you need it on short notice.


Set Up an External Hard Drive


Another means of keeping your digital assets safe is by storing them on an external hard drive. Your assets are not necessarily stored there, but your private keys are. It’s in a way similar to hardware wallets, but they are completely different devices.
The hardware wallet stores your asset, but a hard drive helps to keep your keys or seed safe from prying eyes.


Conclusion


There are now over 100,00 people who’ve become millionaires in 2021 by holding digital assets, compared to only 15,000 in the previous year. By all indications, that trend would continue to grow.


As that continues, securing your assets and keeping that millionaire status is as important as buying and holding more crypto.


That’s why we took the time to explain best practices to protect your digital assets. We hope you found them helpful.