Cryptocurrency has seen an increase in institutional investment and many high value digital assets are coming into the market. One needs to be very careful about the production and security measures related to their crypto assets. There are multiple ways in which protection can be practised but the most critical manner remains keeping the private keys safe.
One has two understand the technology is in place and look at the vendors and how they interact with the customers. The forms pertaining to cryptocurrency have their own independent security and financial audits and custody architecture. An important factor to consider is that all digital assets have different safety requirements which is why the control and protection services would be different.
Private keys play the most important part in safeguarding all of the trip to assets. In this article, we will be talking about some of the most general steps that can make a big difference in keeping your crypto assets safe.
Spread Out the Assets
Anyone who has multiple digital assets should not have them stored in just one digital wallet. If it was a hedge fund you would not keep all of the money in just one wallet; the same principle applies to crypto wallets. Spreading out the belongings is important so that not everything is at risk if one source is breached by intruders.
The best scenario is obviously to keep all of the sources safe but in case an attack on one of the wallets occurs the rest of the places will still remain safe from malicious intent. Have a chat with your custodian and select how you want to divide all the assets based on risk management and personal preference. Experts and they will talk about diversey buying your investment portfolio. It can be extended to include cryptocurrencies as well.
This is simply because there is no physical place in which a financial asset is kept. Everything can be accessed through the internet and from a distance. Improper protection can lead to severe safety issues and consistent cyber attacks until an individual has lost everything.
Opt for Cold and Hot Wallets
Hot wallets are the accounts from where immediate trading is occurring and nothing stays behind on that particular day. If you are managing a hedge fund, for example, and want to trade everyday, you will be making good use of both hot and cold waters. For 100 million USD to be traded one will not trade the entire amount at once.
This means that only a certain percentage of the entire amount will be transferred to a hot wallet from where it is being traded everyday as per needs and requirements. The rest of the money stays in a cold wallet which will not be used for any kind of trading and the finances can be easily managed. The same principal appliance to cryptocurrency if one wants to trade everyday. The idea is to keep only as much amount in a hot wallet as is meant to be traded. The rest of the amount should be kept elsewhere.
Keep Private Keys Safe
Anyone who trades cryptocurrency knows the importance of private keys. A private key is an alphanumeric code which is issued only to the owner of a digital asset. This code is better kept private for owners of smaller assets. But for a bigger account, it is important that a single person is not in charge of the private key and is sharing custody with another person responsible.
Wheon sharing involves keeping the code safe in the interface of a company, it claims to keep the private data safe. But the company should have firewalls in place. Security measures are placed in order to offer seamless trading without any security concerns.
Vendors are opting for firewalls and are very careful about the resources being used to keep customer data safe. Technology is being extensively used to reduce the risk in transactions and during periods when no trade is happening.
Opt for Policies to Reduce Risk
Large amount of cryptocurrency is a lot of value which is why proper protection is extremely important. Management of the cryptocurrencies is just as important as securing them from any threats. Risk management should be very targeted to keep all of the assets safe in one place. Typically security policies will be related to how the transaction is processed at the end of the customer.
If a single person is in charge of generating the drawer request and taking care of all the factors from approving the transaction to receiving the currency there will be few complications but also an increased risk. If the data of that particular individual is stolen there is no way to prevent significant loss.
An important factor therefore becomes dual control procedures with at least two people involved. This is so that even if one is attacked, the other can control and stop the transaction from happening. Both of the individuals should be officially appointed as the authorities on giving access to vaults, signing approvals, and other auditing procedures.
If the cryptocurrency is managed for an institution proper background checks of all the individuals responsib§le for such transactions is a must. Depending on the authority given to an individual, proper screening needs to be done. There is always a risk of corruption between the people appointed in charge of crypto assets but by keeping multiple people on the team, a certain amount of risk is reduced.
The Takeaway
All of these tips can help in keeping large amounts of cryptocurrencies safe from any third party attacks. The attacks can happen through hackers and with the breach of firewalls. If a single individual is given authority to access and prove transactions, it can be a weak link. Proper risk management and mitigation procedures will require background checks and dual authentication. As long as the private key is safe there are fewer risks to bigger digital assets.