Even while many users are becoming more aware of the techniques used to steal assets and the technology is getting more solid and safe, there are still ways for thieves to extract your cryptocurrency if you’re not vigilant.
Keep your seed phrase and password off of the cloud.
Utilizing an exchange or cryptocurrency wallet is, for many, the most practical and best way to obtain cryptocurrency. Wallets for cryptocurrencies hold users’ private and public keys and offer a user-friendly interface for managing balances.
While wallets offer an additional layer of security by utilizing a seed phrase, these exchanges need you to register an account with a password. On blockchains or cryptocurrency wallets, seed phrases—random word sequences—store the information needed to retrieve or access cryptocurrency.These are frequently targeted by hackers who want to access your cryptocurrency and take it.
These passcodes and phrases must not be kept on a device that could be compromised by hackers or in the cloud. Rather, record these or have them inscribed on a metal card (to guard against fire or water damage) and keep them safely within your home.
Switch to a hardware wallet rather than an exchange
A hard wallet is your best option if you want to be sure your cryptocurrency is totally safe. This is a device, similar to a USB thumb drive, that safely stores a crypto user’s private cryptographic keys in offline, or “cold,” storage so that they can be utilized online anytime you’re ready to finish a crypto transaction.
These are far safer than storing cryptocurrency on an exchange, where customers have lost billions of dollars’ worth of cryptocurrency that was kept in their wallets during the FTX collapse. With hardware wallets, you can protect your cryptocurrency from both exchange failures and hackers.
Advantages: Prevents cryptocurrency loss from collapsing exchanges, is entirely safe from online threats, and cannot be viewed by anyone.
Cons: The cryptocurrency may be physically lost or damaged, making it worthless (although some now have backup systems).
Do your own research
A rug pull is a scam in which an NFT developer or cryptocurrency promotes a project to investors in order to raise capital, only to abruptly stop operations or vanish, taking investor funds with them. These scams can be quite hard to identify because they are frequently very well-dressed. A lot of them might be promoted on social media and lure investors in with the prospect of huge profits. Because of this, it’s crucial that you conduct independent research before investing in any cryptocurrency or NFT.
When considering making an investment in a new or unidentified cryptocurrency, keep the following in mind:
– Developers
Investors ought to take the project’s team’s credibility into account. Are they well-known in the cryptocurrency world, and what is their past performance like? Make sure to verify the authenticity of accounts on social media. Do they have a documented history proving they are who they claim to be, or were they merely made? Any project that has anonymous developers is cause for concern, and it is handled carefully. Any project that has anonymous developers is cause for concern, and it is handled carefully.
Whitepaper
Verifying the white paper’s quality is crucial because it serves as an explanation of the project’s goals and methodology. A cryptocurrency’s whitepaper serves as a manual for its features, technology, and objectives. It can be a dangerous investment if the whitepaper is unclear or fails to provide tokenomics or a good use case.
Nothing locked in terms of liquidity
A simple method of differentiating a phony cryptocurrency from a real one is to see if it is liquidity-locked. Nothing prevents the project creators from taking all of the liquidity since there is no liquidity lock on the token supply.
It is advisable for investors to verify the proportion of the liquidity pool that has been restricted. A lock’s usefulness is limited by the percentage of the liquidity pool it protects. Total value locked, or TVL, is the percentage that should be between 80% and 100%.
No external audit
New cryptocurrencies are now required to go through a rigorous code audit procedure, which is carried out by a reliable third party. Tether is a well-known example of a centralized stable coin whose developers concealed the fact that it contained assets not backed by fiat money. An audit is particularly relevant to decentralized currencies, since default auditing is required for DeFi projects. Potential investors shouldn’t, however, merely believe a development team when they say that an audit has been conducted. The audit should demonstrate that no malicious code was discovered and be verifiable by a third party.
Verify fake apps and fake crypto exchanges
These are a common kind of scam that target a lot of investors; however, since they might not know what to download, novice investors are more likely to fall victim to them. It is possible to steal cryptocurrency, cash, seed phrases, and passwords with these phony apps. Here’s how to steer clear of these scams:
Never search for crypto apps directly from an app store. Always find the direct download link or redirect link to the app store from the company’s official website or whitepaper. Check for the number of app downloads and number of reviews – if these are low, this is a red flag Check the developer of the app, this should be verifiable and come from the official company. Check for spelling mistakes and also other apps made by the developer.
Take extra security measures
Finally, there are some basics that should be adhered to, which can protect your day-to-day date and accounts as well as your crypto. Never click links on emails you are unsure of where they originate from. Set up Two Factor Authentication (2FA), this means hackers would need your phone to hack you even if they have all your other account details. Don’t click popups or links that come up on the internet or social media
