What is token safety?
The world of crypto and NFTs is vast and exciting, but we mustn’t forget to exercise good common sense when it comes to token safety.
Cryptocurrency tokens are the foundation of many great projects, and in this article we will explore the security and safety risks we can encounter while holding a token, and the possible countermeasures we can take to mitigate such risks.
The world of crypto is tech-based and requires a high level of technical awareness from its users to guarantee a seamless experience. Human/user error is the most common problem that can jeopardise the safety of your tokens. Once a transaction is finalised on the blockchain, there is no going back. The tokens are lost forever if they are sent to the wrong address or if the user loses his private keys.
The good news is, human/user errors are the easiest to counter, providing we take the right safety measures. Always double and triple-check the address you are sending the tokens to, and ensure that you have your private keys written on a physical piece of paper or other mediums that cannot be accessed online.
Centralised Exchanges are a large part of the crypto ecosystem, they facilitate various trades and provide much-needed liquidity. Still, they also require that you hand over the custody of your crypto assets to them, which poses a security risk. The exchange might freeze your assets without warning, temporarily suspend trading if there is a higher volume of trade overloading their servers, or they might get hacked and lose your funds, as we saw happen to Binance Smart Chain.
Some of the ways to work around these issues are:
- Never keep tokens or other assets on exchanges unless you intend to trade
- Always perform due diligence to verify if the exchange you want to trade on is legitimate
- After you are done, keep your tokens on your own wallets, remember your keys, your tokens.
- Keep it secret, keep it safe! You are far less likely to become a target of malicious actors (Hackers) if you use a hardware wallet for your valuable assets and use a passphrase as well. In trezor it is called a hidden wallet, and in ledger simply a passphrase wallet. This adds an extra layer of security because the hacker cannot control your funds even if they get access to your seed phrase if they do not have access to your passphrase. That being said, the most common hacks are phishing attacks, where hackers make websites that look like the site you are trying to reach (i.e. OpenSea) and then have you connect your wallet, sign a permission and then they drain your wallet.
- Do not click on the ad links, use the top hits, and always check the URL before connecting wallets.
- Hackers also airdrop NFTs or tokens to your wallet, and if you interact with them you could be giving hackers access giving them the ability to drain your wallet. Please leave those alone. .
- When it comes to your assets, it pays to D.Y.O.R! (Do your own research!).
These are just a few examples that will hopefully inspire you into upgrading your security and knowledge of token safety so you can keep your crypto assets safe!
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