Novice cryptocurrency users and those just entering the crypto market may be uneasy about the security and safety of new crypto applications and opportunities in general. Thus, understanding blockchain risk management https://www.apostro.xyz/product/blockchain-risk-management is the first step in entering this new and constantly expanding industry. Today, we’d like to talk about some risk management techniques that might help with management and asset protection.
What is risk management in crypto?
There is no question that you will have ups and downs in your crypto endeavours, be it during trading, using DeFi applications or participating in airdrops and bounty campaigns. As in traditional finance, the blockchain ecosystem also has risks involved, and you may lose your funds if you do not use appropriate risk management strategies.
The risk management methods you use will define how you intend to control the threats you might face in your daily crypto activities. They shield you from hacks, rug pulls and black swan events while keeping you in control of your gains and losses. With effective risk management, you may limit the likelihood of losing money and have an additional tool for effective due diligence of new projects.
Secure storage solutions
Let’s start with the wallets and how can using them help in keeping your money safe. As your portfolio grows in size and/or you begin to use additional chains and DeFi apps and exchanges, you should consider creating multiple wallets, both hot and cold, to store your assets. Because blockchain transactions are irreversible, it is important to prevent potential exposure to attacks caused by misplacing private keys or granting access to malevolent smart contracts.
The best risk management advice when it comes to wallets is to use a range of different cryptocurrency wallets. For the portfolio and savings, it is recommended to use a cold wallet, e.g. Ledger. It is an offline wallet with superior protection and less susceptibility to online risks – one you would use rarely for operations. It is advised that you set up numerous hot wallets, such as Metamask, TrustWallet, and others, for day-to-day operations, and store little amounts that you are comfortable spending or losing in the case of an exploit. Again, when it comes to hot wallets, the best practice is to use a wallet dedicated to a specific DeFi application or use case, such as one for using decentralized exchange, one for each application you use, and so on.
Security fundamentals
To keep your crypto assets safe, regardless of whatever wallet you use, there are a few common security standards to follow offered by several cryptocurrency books. Here are a few examples:
- To begin, never give someone your private keys or account passwords. Even if it was an accident and just lasted a few seconds (e.g. you sent them as a message to someone), assume your wallet has been hacked and move money to another wallet as quickly as possible.
- Use different passwords for each account – and make them strong! Use password managers, such as 1Password, to help you remember them all or generate new ones.
- Back up your gadgets on a frequent basis! Regular program and operating system updates are also a must; they often contain bug fixes as well as new security patches, so schedule them at least once a month.
- Use multi-signature setups (Gnosis Safe or custom ones) to offer an extra degree of protection to your funds. With multisig, numerous wallets serve as guardians to the main vault; even if one of your addresses is hacked, your vault will remain safe and you will be able to move your assets elsewhere.
- Be cautious about phishing and fraud! Check the addresses, contracts, and websites you visit and use, and don’t let malicious actors fool you into revealing personal information or private keys by using a promise of high returns, giveaways or fake websites.
- Keep an eye on the platforms and smart contracts you use on a regular basis to lower your chances of becoming a victim of an assault or rug pull. Apostro, a risk management tool, may be used to monitor activity across protocols and make quick security choices to safeguard your assets.