What makes cryptocurrency on exchanges unsafe?
There are a number of reasons why cryptocurrency on exchanges is unsafe. Firstly, exchanges are subject to hacking. In 2018 alone, there were 13 reported data breaches. These include the $500 million Coincheck hack, the $195 million worth of NEM stolen from Coincheck, as well as the $72 million attack on Bitstamp. In fact, roughly $9 million worth of cryptocurrency is stolen globally every day. Furthermore, when exchanges are hacked, they are often unable to reimburse investors as they may have insufficient insurance coverage. For example, in the Bitfinex hack of 2016, the exchange was unable to reimburse its investors. Another reason is that exchanges do not have proper security protocols in place, which makes it easy for hackers to steal cryptocurrencies. Some examples of this include not using proper passwords, keeping funds online, and not having the right security features in place. Additionally, the risk of poor security protocols is even higher when trading on an unregulated exchange. This is because the staff working at these exchanges do not have the required skills or training to protect your money.
How to protect yourself when trading on an exchange
When trading on an exchange, you have to ensure that you protect yourself from hackers, poor security protocols, and mismanagement of funds. To do so, you can follow the following tips:
- First, you should use strong passwords. This is because hackers will often try to crack your password by using software to test different combinations for it. If your password is weak, it can easily be hacked.
- Second, you should use two-factor authentication. This is a security feature that requires you to enter a code from your phone when logging into your account. This way, even if a hacker gets hold of your password, they will not be able- to get into your account.
- Third, you should use a hardware wallet. A hardware wallet is a device that stores your funds offline, making them less susceptible to hackers.
- Fourth, you should diversify your investments. This means that you should not keep all your money in one place. Doing so would mean that if something bad happens to that one place, your investments will be lost.
- Finally, you should never leave your funds on an exchange for a long period of time. This is because exchanges are not designed to store large amounts of money for long periods of time.
Use strong passwords
Strong passwords are important to protect your funds on cryptocurrency exchanges. Why? Because if a hacker gets into your account and sees that you have a lot of funds, they will try to crack your password. If your password is easy to guess, they will likely be able to get into your account easily. This can cause them to steal your funds. If you want to create strong passwords, there are a few things to keep in mind. You should use a combination of letters, numbers, and special characters. Additionally, you should avoid using your name, birthday, or anything else that can be easily guessed. Finally, you should change your passwords every 3 to 6 months. This way, even if someone manages to hack into your account, they will only have 6 months to steal your funds.
Use two-factor authentication
While strong passwords are important, they are not enough to protect your funds from hackers. That’s because many hackers use software to try different passwords until they find one that works. That’s why you should also use two-factor authentication. This security feature requires you to enter a code from your phone every time you want to log into your account. This way, even if a hacker gets hold of your password, they will not be able to get into your account. Not all crypto exchanges offer two-factor authentication. You can check the list below to see which ones do. If your exchange doesn’t offer it, you can always use a third-party app such as Google Authenticator, Authy, or Securly.
Use a hardware wallet
If you want to keep your funds safe, you should store them in a hardware wallet. This is a device that connects to the internet but keeps your funds offline. This makes it much harder for hackers to get into your account. The best hardware wallets are the Ledger Nano S and the Trezor. You can also use the Cool Wallet S if you want a wallet that doesn’t need to be charged. If you are storing large amounts of funds on a hardware wallet, you should move your funds to cold storage. This is when you put your funds on a device that is not connected to the internet. Doing so will make it harder for hackers to get into your account.
If you keep all your funds in one place, such as on an exchange, then if something bad happens to that place, your funds will be lost. This is why you should diversify your investments. This means that you should not keep all your money in one place. Doing so would mean that if something bad happens to that one place, not all your investments will be lost.