Secure Crypto Wallet Management for Beginners Course 2.2

Cryptocurrency is an incredibly lucrative investment opportunity for both beginner and expert investors! With crypto becoming more popular by the day, its appeal for both trading and daily practical use is apparent. To keep your crypto assets safe, you need a strong crypto wallet and risk management strategies. 

While rare, hacking and theft of crypto funds isn’t impossible. It’s always better to stay safe, and understanding your different types of wallet choices is a key aspect. Let’s explore how you can manage your wallet and make more secure transactions together.

Did you miss a lesson? No worries.   Check out Walbi Academy Course 2.1: Intro to Crypto Security and Wallets HERE

Building Your Crypto Bunker: Choosing and Setting Up Your First Wallet

Hot vs. Cold Wallets: Understanding the Security Spectrum

There are two main types of crypto wallets: hot and cold. Hot crypto wallets are connected to the Internet and are usually hosted online. Cold wallets are kept on an external device, such as a USB drive. These devices also contain software that allows users to make transactions and securely hold their funds. Users can connect their cold wallets to the Internet on a select device when they want to move crypto in or out. 

Picking the Right Lock: Features and Functionality to Consider

There are multiple benefits of a hot wallet. Using a hot wallet is much more convenient if you make frequent transactions or trades. It’s always connected to the Internet, which you can connect to your crypto exchange account. 

However, having a cold wallet offers higher security for your funds. With a cold wallet, your crypto is safe from hackers and other malicious actors. You can also use one dedicated device to connect it to the Internet when you need to make transactions. This does mean that moving funds is slightly more tedious, but also safer. When you choose which type of wallet to use, consider which one will most suit your financial goals. 

Crypto wallets have both public and private keys, which are a long series of numbers and letters. The public key is like your bank account number. You can give it to other people to make transactions with them. Your private key is like your password. You have to keep it safe because if other people discover it, they can access your wallet. Let’s look into the various methods you can use to more effectively ‘lock’ your wallet.

Setting Up Your Sentinel: Essential Steps for Secure Configuration

Creating a crypto wallet isn’t difficult! Anyone can do it, as long as they have access to a device with a reliable Internet connection. First, find the crypto wallet you’re interested in using. Make sure that you research it thoroughly and read reviews from other users. 

Download the crypto wallet software onto your device. If you’re using a cold wallet, you can download it onto that hardware (like a USB stick), and disconnect it after setting up the account. Next, create your account by adding your name, contact information, and a secure password. 

Generate a strong password to the account, and store it using similar methods as your wallet’s public key. Make sure that it’s unique from any other passwords you use. Some wallets will also ask you to verify your identity with a selfie or by submitting a government-issued ID.

Lastly, transfer funds into your crypto wallet. You can do this by depositing fiat currency from your bank account and then buying cryptocurrency. You could also use your credit card, or ask another crypto user to send you funds. To do this, you need your wallet’s public key. Once you’re done using your crypto wallet, check that you’ve safely logged out of your account and have hidden your public key once again.

Keys to the Kingdom: Backing Up Your Private Keys (Don't Lose Them!)

The Seed Phrase: Your Most Valuable Password

When creating a new password for your crypto wallet, you have to think of backup methods you can rely on in emergencies. This is why the Seed Phrase method is so popular. A seed phrase is a string of random words that contains the data to unlock your account. You can use your seed phrase to recover your private key, or as an alternative to log into your account. 

Secure Storage Solutions: Offline, Online, and Beyond

There are multiple ways you can both generate and store your seed phrase! Your method of storage is crucial since you can’t recover your seed phrase if it's lost. You can use password apps, or use your crypto account’s features to create and store the phrase. However, a more secure method is using offline tools. 

For example, you can generate your seed phrase using a pair of dice, paper, pen, and a BIP39 word list. Keeping it written down and locked in a secure location, such as your safe, will ensure that online hackers can’t gain access. Another method is to voice record the seed phrase and then encrypt the audio file. 

Disaster Recovery Plan: Ensuring You Can Access Your Crypto in Any Situation

Seed phrases can ensure you can still gain access to your crypto wallet, even if you lose your password or your account is hacked. Before the need arises for you to use your seed phrase, though, it’s wise to regularly back up your crypto wallet. This is so that, even in the event your wallet is damaged or hacked, you’ll still have up-to-date information. You can store your backups on cloud-based software, so it’s automatically saved.

Double Down on Security: Implementing Two-Factor Authentication (2FA)

Adding an Extra Layer of Defense: How 2FA Works

Two-factor authentication is a security system that ensures anyone logging into an account must provide two different forms of identification. You’ve probably seen this type of security measure when your account requests you input a code sent through a text or email. It uses a combination of something you know (like a password), something you receive (like a text code), and something you are (like your biometrics). It requires the user to actively input a code, their biometrics, or another password, ensuring the right individual is accessing the account. 

Enabling 2FA Everywhere: Protecting All Your Accounts

You can enable 2FA on all your crypto-related accounts, including your crypto wallet. Having this extra security in place can prevent anyone who isn’t authorized from hacking your accounts since getting past one layer of protection (like your password) is much easier.

Choosing the Right Method: Apps, SMS, and Hardware Keys

Crypto users have invented many creative methods to keep their crypto keys safe! These unique methods of storing your public and private keys can keep them safe from malicious online actors. One method is using a password manager app to keep track of your crypto wallet’s keys.

Some examples of these applications are Bitkey and PolyPass, specifically developed for keeping your crypto-related information safe. The upside to using an app is convenience - you don’t have to manually check your password to log in. It’s also accessible from your smartphone or other devices, meaning you can log in from anywhere worldwide. 

Another method is connecting your crypto wallet to your phone number and enabling 2FA. This will ensure that every time you log in, you’ll have to input an SMS code that is delivered to your phone. Most people keep their smartphones on their person at all times, making it a more secure login strategy. 

Alternatively, you can use a hardware key, which is typically associated with cold wallets. You can install specialized software on them to add another level of security in recording your account information. You can also encrypt your information with a personalized decryption key. 

Beware of the Hackers: Avoiding Common Crypto Mistakes and Phishing Scams

Red Flags to Watch: Recognizing Phishing Attempts and Social Engineering

Malicious actors are constantly thinking of new ways to target and lower the defenses of potential victims. With so much of our crucial financial information and accounts now existing online, phishing attempts have only become more common. Crypto users must stay aware of the many methods that scammers use to take advantage and control of their accounts. 

One common phishing scam is posing as an official agency and sending you an email or message, luring you into clicking a link, downloading a file, or visiting a fake website. They will ask users to input their account details under the guise of verifying their identity, completing an important app update, or something similar. They may also install spyware on your device through these links. 

Social engineering scams are also common, and incredibly insidious. These scammers seek to manipulate the victim, either by gaining their trust or by instilling fear or panic. They may spread misinformation on social media to influence your decisions or pose as an expert authority figure in the crypto industry. They may build a relationship with an audience, telling them to invest in certain cryptocurrencies. They may even ask you to let them manage your crypto wallet as a custodian. 

Sharing is Not Caring: Never Give Out Your Private Keys

No matter what, never give out your private keys or your recovery seed phrase, unless you are allowing an officially recognized and regulated entity to manage your crypto wallet. Your private key is your strongest line of defense, keeping your funds safe. If anyone asks you to input your private key in an email or third-party website, they’re likely part of a scam. 

Slow and Steady Wins the Race: Double-Check Transactions Before Hitting Send

One of the biggest benefits of using crypto is convenience. Crypto transactions are incredibly fast and secure and aren’t limited by geographical distance. With how easy it is to make crypto transactions, many users might forget to ensure they’re being safe. Always double-check your transactions to ensure you’re sending them to the right wallet account, and that your private information is safe from anyone else’s view.

Transacting Safely: Best Practices for Sending and Receiving Crypto

Sending with Confidence: Verifying Addresses and Amounts

Despite cryptocurrency being a decentralized, mostly anonymous system, it’s still possible to verify crypto wallet accounts! Your public key is public information and is safely stored on a ledger for other crypto users to see. When you’re sending crypto to a new wallet, you can verify the address using a trusted blockchain ledger. Transactions are irreversible, so it’s essential to confirm you’re sending the right amount of crypto to the right wallet before completing the trade.

Receiving Like a Pro: Understanding Confirmations and Transaction Fees

When you transfer funds through bank accounts, you receive a digital or physical receipt as proof of the transaction. With blockchain technology, this works a little differently. Transactions are instead processed, verified, and then added to the blockchain’s public ledger. To confirm the transaction, you can instead check the blockchain. 

It may take anywhere between ten to ninety minutes for the transaction to appear on the blockchain. You may also receive fees for your transactions. While fees depend on the crypto wallet or exchange you’re using, some users will opt to pay higher fees for faster transactions. 

Staying Vigilant: Monitoring Your Transactions and Staying Updated on Security Threats

Ensure that your transactions, whether you’re transferring crypto out or receiving crypto, are from valid and verified accounts. Keep on top of protecting your crypto wallet by regularly backing it up and reviewing your storage methods. Lastly, ensure that you’re always cautious in communicating with others in the crypto space. 

Verify all emails, notifications, and messages from crypto-related organizations, and keep your private key close by! To learn even more advanced security measures for your crypto wallet and other accounts, check out our comprehensive blog courses!

Have you created a crypto wallet, or been targeted by a malicious scammer? We want to know! Share your own experiences or advice with us on social media!