Online cryptocurrency trading is likely to face the same risks that most online ventures have to deal with every day. Those who are new to the world of cryptocurrency are often at risk of being victims of online threats. Crypto professionals who have researched the downsides of cryptocurrency are usually better equipped with strategies to protect their investment. Just like any other investment outside the crypto world, protection is necessary, particularly for those of a high-risk nature. When trading online in crypto coins like Bitcoin, it helps to be aware of these four common ways to lose Bitcoins and take steps to prevent them.
1. Poor private key storage system
This is the most common way to lose your crypto investment. For every crypto investment, your private keys need to be properly kept away from prying eyes. The private key is the only way to ascertain your right to that investment. Losing that key means you have lost your entitlement to it and anyone holding that key automatically has access to the investment. You could lose your private keys to hackers or just through negligence on your own part.
How to prevent losing your private key
- Your private keys need to be kept in a safe place. It is advisable that you keep all these keys on a separate device that is not internet enabled. And keep it safe. If you lose the phone, you have also lost the key as well.
- Ensure that these keys are kept in a place that is easily accessible to you so you don’t forget. Forgetting where you kept the key also means losing your right to that investment because you won’t be able to access it without the private key.
- Back up keys in a journal that only you has access to and keep it hidden. This way, if something happens to the phone, you can pull out your backup storage and retrieve your keys.
- Store your keys on an electronic wallet but be sure to use a password and ID that you can easily remember. Be aware that there have been instances where some platforms do not protect against corrupt practices that encourage money laundering by hacking into people’s e-wallet. Therefore it would serve you well to conduct thorough research on the e-wallet platform you may select. If you do choose an e-wallet, again, be sure to store your e-wallet ID and password in a secure place such as a journal or a non-internet-enabled device safe from other kinds of physical threats like water, fire and so on.
All this being said, if you still desire to store your keys on a phone or computer-based system, ensure that you safely store your keys somewhere else before doing any major update or upgrade on your system or phone. Additionally, you can store your keys on a very good hard drive. If you can get hard drives specially built for cryptocurrency (like Trezor and Ledger), that would be an excellent idea.
2. Sending to an address on a different chain
This is also a very common way people lose their Bitcoins. While carrying out a transaction, if you enter an incorrect address, the coin is lost forever! This happens a lot when carrying out a transaction through cryptocurrency exchanges or online electronic wallets. It is also possible to send to the right address on a blockchain that no longer exists – a defunct platform. Doing this also results in the loss of the Bitcoin.
How to prevent losing your Bitcoin to the wrong address or blockchain
Ensure that you type in the right address when carrying out any transaction – check three times before pressing send. Double-check the blockchain or cryptocurrency currency to ensure that it is not defunct. Initially send a very small amount of money to test if the transaction is successful. If it fails, that should tell you that something is wrong and you need not bother to send a larger sum. When making transactions in the crypto world, your mind and eyes have to be very alert.
3. Falling for scams and being victims of blackmail
There are various scammers online looking for people to prey upon. They are particularly searching for gullible, greedy and inexperienced crypto users. For example, why on earth would you believe someone who asks you to send some Bitcoin to them and in return you will receive double or more of what you sent? Where is the logic in that? How does it equate to those who spend the time to explore trading strategies to get more profits? Simply put, it doesn’t!
How to prevent losing your Bitcoin to scams and blackmail
- Firstly, ensure you never fall prey to any claims of instant quick profits. Rather focus on researching or developing more trading strategies that would help you maximize profits for your investments
- Secondly, avoid going on social media to rave and rant about how you have just gotten a “Bill Gates bank-breaking kind of profit”. Rather, you can simply share your strategy instead and keep your wins to yourself. Don’t even mention your wins or how you store your private keys to anyone offline too. It is called “private” for a reason. People can cook up any kind of story to blackmail you into giving up your private keys. So keep your success to yourself and only those you truly trust.
4. Hackers who hunt for e-wallets or weak cryptocurrency exchanges.
This is also another way to lose your Bitcoin. While the first three ways are largely dependent on the individual and are within their circle of control, this, however, is outside their control. Nobody goes looking for hackers in their e-wallets systems or cryptocurrency exchange platforms. These hackers are the ones who go about carrying out such fraudulent activities and prey on innocent crypto users.
How to prevent losing your Bitcoin to hackers
- Keep your private keys safe! This cannot be over-emphasized enough! You lose your keys; you lose your investments. Paper is the best place to store your keys. So print it out on paper if you can’t afford a special hard drive for storing such sensitive keys.
- Be sure to install a credible antivirus program if you decide to store your private keys on your computer system or phone.