Top 10 Ways to Avoid Losing Your Crypto

13 Jul 2023

One of the most important things to learn when entering the crypto space is how NOT to lose your crypto. Believe it or not, there are a lot of ways for this to happen, especially for newbies. But these top 10 strategies to avoid losing crypto assets actually apply to everyone, no matter your level of expertise in crypto investing. 

Why do people lose their cryptocurrencies?

From losing the private keys to your crypto, to getting “catfished” or having your assets locked on an exchange, losing your crypto holdings is a worst case scenario. Some people may lose their assets through SIM swap scams, or even through a general lack of understanding of the complexities of digital assets. 

We want you to avoid losing your precious crypto at all costs. The following strategies were designed to help you keep your crypto safe and secure. 

1 - Self-custody your crypto

Self-custody refers to a method of crypto storage where you maintain full control and ownership over the assets by storing and securing your private keys. The opposite would be to store crypto on a centralized exchange or platform, where the private keys are held and controlled by the centralized entity. 

Having a self-custodial wallet means you are in charge, but there are several ways to go about self-custody:

  • Purchase a hardware wallet so your private keys are stored offline.
  • Use a paper wallet and store the private keys physically on paper or engraved.
  • Use a wallet with distributed key generation like Gridlock Wallet.

Just remember to never use crypto exchanges for storage so you never have to worry about losing your crypto during an asset freeze!

A copy of a tweet regarding the SEC trying to freeze Binance US crypto assets

Source: @WatcherGuru on Twitter

2 - Double check your transactions

Generally, there are two important reasons to double check your crypto transactions:

  1. The first is when you are sending a large amount. If you’re worried or this is your first transaction, try a small transaction first. That way if a mistake is made, it’s a small one.
  2. When trading and transferring crypto assets, make sure you are selecting the correction blockchain. Many wallets now service multiple blockchain networks, and if you try to send an Ethereum-based asset directly to a BNB wallet, you’re going to have a problem. And chances are there will be no one to help you. 

A screenshot of MetaMask browser wallet

MetaMask Wallet - Choosing your network

3 - Understand gas fees

Many people fall right in love with crypto and want to try everything on every protocol. They soon learn that this can get expensive, as gas fees for transactions can vary. Gas fees are the transactional costs for using a blockchain like Ethereum, and they can vary. 

For instance, when there is high demand such as during a hyped up token generation event, gas fees can skyrocket. Fees also vary by the complexity of the transaction or even the time of day. 

  • When making an onchain transaction, you’ll often get several choices, with the cheapest option taking the longest to complete. 
  • Layer-2 blockchains that bundle transactions before going onchain are often much cheaper to use in terms of gas fees. 

A screen shot of Etherscan

Source: Etherscan Ethereum Gas Tracker

4 - Plan for the future

Although crypto is officially only 13 years old, it’s time to start thinking about your digital asset legacy. Whatever scheme you have to access your crypto assets should be shared with someone you trust. That way, if something were to happen to you, your next of kin or other trusted confidante would be able to access the assets. 

  • If you already have estate planning in place, be sure to include information about passing down your digital assets to your beneficiaries. 
  • In this early stage of crypto adoption, there’s a good chance that your beneficiary may not have your technical prowess. So, make the instructions clear and simple.
  • Include multisig wallets in your crypto estate planning

5 - Secure your private keys / seed phrase

Not your keys, not your coin. You’ve heard it over and over if you follow crypto social media. So, what are the best ways to safely store your crypto keys? Here are a few options:

  • Your brain - Some people remark on how the best way to store your seed phrase is via memorization. That way it’s never online, and there’s no way for anyone to steal it (yet!). This may be beneficial to some people, such as a family fleeing a hostile country or catastrophic event.
  • On paper - Paper wallets are still quite common. They require you to write down your seed phrase and then store it somewhere, such as a safe deposit box or a safe. 
  • On a device - A hardware wallet can work for storing private keys offline, as can any such device such as a flash drive. However, the assets do come online whenever you make a transaction and plug the hardware into your device. 
  • With trusted Guardians - Gridlock enables crypto hodlers to designate Guardians, each of whom holds a shard of your private keys on their device. No one has full access or can transact with your crypto - except you.

A picture of a padlock with the Bitcoin logo on it with coins to the side and a shield with a check mark to depict safe crypto storage with Gridlock

6 - Trade only if you’re a trader

With a gaping lack of regulation in global crypto markets, risky strategies like 100x leverage trading and derivative markets have given the average Joe a chance to profit alongside the big leagues. But if you don’t have big league knowledge on markets and risks, it’s more likely to result in big league losses. 

Follow your favorite technical analysts, chart your heart away, but be realistic about your trading ability. If you’re new to crypto markets:

  • Try dollar cost averaging or other simple crypto trade automations.
  • If you follow an analyst, make sure they are upfront about their trades and profits.
  • Only trade what you can lose.

7 - 2FA with Authenticator Apps

If you have wallet apps on your phone and the primary source of your private keys is that phone, you must take extra precautions. Two Factor Authentication (2FA) is one way to avoid losing your crypto to scams like SIM swaps.. 

SIM swap attacks are quite common in the crypto world. A scammer will scrape data looking for enough personal information on a victim to impersonate them. They contact the victim’s cell phone carrier claiming to be you and convince them to transfer your phone number to the scammer’s device. 

  • For online crypto accounts that you access by phone, be sure to download and use an authenticator app as opposed to using text messages as your 2FA.
  • Consider Gridlock Wallet, which splits the private keys into key shares across multiple devices, so one device cannot be a centralized point of failure.

8 - Be discreet

The crypto industry is a new and highly unregulated space. Talking about your crypto holdings online at this point is just asking for trouble. Don’t give attackers any information they can use to try and socially engineer the crypto right out of you. 

9 - Know the Software Risks

Be aware of the main risks you take when interacting with crypto industry software and applications, whether decentralized or centralized.

  • DYOR on DeFi protocols before participating in pools, lending, or other activities. How new is the protocol? Google them for hacks. Check the size of their deposits and, if possible, learn about the team behind it. DeFi platforms have historically been a gateway for code exploits, where a bad actor takes advantage of a code vulnerability; and rug pulls, where an insider engineers an exploit from within.
  • Beware of Phishing scams, which are a kind of social engineering that uses manipulation, commonly through private messages or texts. Scammers will “phish” for information, convincing you to give over wallet information or other financial data.
  • Catfishing is when impersonators duplicate a social media account of a well-known influencer and promptly start asking you to send ETH or other assets.

Always use common sense: triple-check any links before clicking, verify the correct URL of a website you are entering, and stay safe!!

10 - Use Gridlock Wallet

Most of the ways to lose crypto can be avoided altogether by using Gridlock Wallet. With distributed key generation, the private key is never in just one place, yet it’s totally controlled by you.

Gridlock lets you set up trusted Guardians using threshold signature technology. So instead of your private keys being generated onto your phone or another device, you now have a network of devices that you choose, each with a share of the private key. This creates a much higher level of security and removes many of the access points for even the most advanced scammers. 

If you never want to lose your crypto (ever again :), download Gridlock today and experience an unprecedented level of security for your digital assets. 

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Written by Reid Zedkongor

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Reid Zedkongor is peeling away layers of confusion around blockchain and cybersecurity. With a computer engineering background, he can dive into the details of crypto complexities to make crypto adoption easy for everyone. In his free time, he often reads fiction or enjoys a good laugh over a beer.

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