Episode 9 — A conversation with Alison Burger, Co-Founder of Women of Crypto, and Calley Nye, Founder of Syren.io, about security best practices in crypto investing.


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Host:
Chitra Ragavan
Chief Strategy Officer
Gem

Guest:
Alison Burger
Co-Founder
Women of Crypto

Calley Nye
CEO and Founder
Syren.io

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If you believe in the classic investing edict to “buy low, sell high,” then the current seemingly unending crypto bear market is a great time to start investing in digital assets and then holding on to your investments for dear life or HODL-ing, as they say in crypto parlance, until the next bull run begins.

But when it comes to cryptocurrency, protecting your investments is easier said than done. Unlike in traditional investing, crypto investors don’t have the comfort of a bank or other lending institution assuring you that they’ll hold your funds safe, even offering you plenty of insurance as a guarantee of security. There’s no Federal Deposit Insurance Corporation (FDIC) watching your back. And unlike the millionaires and billionaires who have the wherewithal to hold their crypto funds under the protection of 24/7 armed guards inside this so-called military grade Swiss vault buried in an impenetrable bunker in some mountain at an undisclosed location (if only we could all be so lucky), most average investors have to rely either on the security and goodwill and trust of the exchanges on which they typically hold their assets (despite all advice to do the contrary) or count on their own often shaky discipline and Internet street-smarts to not get hacked and lose their shirt. Truth be told, many investors have the level of crypto security hygiene that’s equivalent to say, storing your cash under your mattress and then giving complete strangers the key to your apartment, with an “X marks the spot,” hand-drawn map to your hard-earned wealth.

The philosophy behind cryptocurrency is to give individuals complete control over their wealth, but with the security risks this entails, that sometimes feels like doing somersaults while holding on to a live grenade.

There are two related areas of vulnerability: one tied to the security that exchanges and online “cold wallets,” provide you, and then there’s the security practices that you implement yourself, first in how and where you store your assets and then how you protect them.

As far as the first exchange provided security goes, the simple message from experts is, “don’t hold your breath,” and for good reason. Consider these simple facts: 2018 was a “record-breaking year” for exchange hacks, said hardware wallet Ledger CEO, Eric Larcheveque, in a CoinDesk article in December, 2019. This was achieved thanks in part to the largest ever crypto heist of the Japanese exchange, Coincheck, to the tune of $530 million worth of stolen NEM tokens. Each day, roughly $2.7 million in crypto assets ($1,860/minute) are stolen from exchanges, Ledger CEO, Larcheveque said.

According to this 2018 Anti-Money Laundering report by CipherTrace, there were also a “steadily growing number of cryptocurrency thefts,” totaling $166 million in the second quarter of last year. “This data indicates a pattern of smaller robberies on a regular basis and sophisticated professional cyber thieves,” the report concluded, “Who carry out hacks at both the exchange and platform levels by capitalizing on exposed vulnerabilities, as well as by socially engineering employees who work at these companies.”

Crypto miner and security enthusiast Armin Davis wrote last October in BlockExplorer News that since its creation, five million bitcoins have been lost or stolen,” quite a staggering number.

So what can crypto investors do to protect their assets? Panama Crypto summed it up best in this excellent security primer last June on Medium, when he said, simply, “. . . paranoia can go at lengths to keep you safe from any harm that may come your way.”

Indeed most of the security vulnerabilities that expose your digital assets to criminal elements are directly tied to decisions you as an investor have made in how you practice security hygiene. According to this best practices article by CanYa in Medium, “It’s estimated that just as much cryptocurrency is lost each year due to individual negligence as due to hacking.” To sum up, as Nicolas de Bontin put it in this April 2018 Hackernoon article, when it comes to crypto security, “Your greatest vulnerability may be you.”

A recent New York Times piece by Nathaniel Popper spelled out, in nerve-wracking detail, the many creative ways in which hackers can access your funds.One of their favorite tactics is these so-called phone hijackings which rely on your failure to secure your phone number and email address tied to your assets.

Security vulnerabilities resulting from personal carelessness can arise in a number of other ways. Resetting your passwords or “private keys” when intoxicated and waking up and forgetting what you selected is one bizarre but not unrealistic end of the spectrum, and has happened to more than one sodden investor. Then there’s this 2017 Wired UK story of the British investor James Howells, who accidentally trashed the hard drive containing 7,500 bitcoin estimated at the time to be worth more than $75 million dollars. It’s now under 200,000 tonnes of garbage, the article said with no quick hope of recovery, but thanks to bitcoin’s underlying distributed ledger technology, at least Howells is able to track his lost coins to see if they have moved (no one has found them yet, he reports). Indeed, it’s safe to assume that there have been many tearful requests to landfill managers around the world from other investors who made similar costly mistakes and live to regret it daily, especially during bull runs of the kind 2017 was, the year Howells quite literally threw away a fortune. There are also the “My Crypto Got Hacked,” horror stories of folks who have lost their funds to cyber crooks and some even saw it happening live but were helpless to stop it. Hardware wallets such as Ledger obviously have a vested interest in documenting and publicizing the vulnerabilities of these exchanges and soft wallets, but everyone should heed the the point in that article.

These Halloween worthy cautionary tales are enough to scare off even the most die-hard crypto true believers.

But that’s exactly the wrong take away from these examples, says Calley Nye, CEO of Syren.io and one of my guests on this excellent primer on crypto security best practices. When asked for the best advice she’d give beginner investors, Nye said that it’s overcoming the fear factor and having fear that’s proportionate to the amount of funds invested. In other words someone who has a few hundred dollars doesn’t need to worry about lacking that Swiss vault. “I’d say don’t be crippled by fear. It’s good to have a healthy amount of fear when you’re going into these things,” Nye says. “But acknowledge it and own it, it is part of the process.”

Sometimes, the best way to get started, says Alison Burger, Co-Founder of Women of Crypto, who joined in the discussion, is to “keep it simple and play it safe,” without letting fear overwhelm you. “I would say that the best advice I got when I first started was to invest slowly,” says Burger. “Go on to a main exchange, buy the main tokens, only invest like a hundred dollars at a time. Kind of play around with the market and see what’s happening before going all in on any one coin, or any one investment, and kind of get your feet wet slow.”

Alison and Calley had so much great practical advice on the art of safe crypto investing. It’s a terrific primer of do’s and don’ts and their tips will get you on the immediate path to crypto hygiene, including understanding the importance of protecting your phone number and email address.

Join me next week when I sit down with Henry Elder, Co-Founder of Digital Assets Advisors. You’re in for a really interesting conversation
about how the real estate market – one of the most paper-based and highly archaic industries that’s stubbornly rooted in the past – is being forced to leapfrog into the future, thanks to blockchain and cryptocurrency technology.

Topics Covered in This Episode

  • Most valuable advice they received when becoming new investors
  • On keeping it simple and playing it safe, but not too safe
  • Avoiding the fear factor and dipping your toes in the market
  • Different ways to store digital assets and security implications of each
  • On keeping your hot and cold wallets safe
  • Sobering moments they’ve had in tracking their crypto
  • The difference between public and private keys and why that’s important
  • The various points at which crypto security hygiene comes into play
  • On the importance of protecting your phone and email address
  • Call-to-action on things to do TODAY to keep your crypto safe
  • What to do when things go wrong despite your best efforts
  • How to build a community of advisors
  • You have to start somewhere sometime. Why not now?
  • One thing they wish they’d known when getting started
  • Their top three tips on safe crypto investing

About Your Host, Chitra Ragavan

A little background about me — I’m the Chief Strategy Officer at Gem, a Los Angeles-based crypto portfolio startup. Prior to Gem, I was Senior Counselor to the CEO of Palantir Technologies. Before entering the software startup world as advisor to CEOs, I was a long-time journalist at WTTW/Public Television in Chicago, National Public Radio (NPR) and U.S. News & World Report Magazine (U.S. News).

My goal is to provide independent and thoughtful analysis of the events and news shaping the industry.

By way of full disclosure, I am a crypto investor. If we ever mention a specific cryptocurrency in the context of a discussion, I will fully disclose my investments, if any, in that currency and expect the same from my guests. I’ll avoid any and all conflicts of interest in the course of these discussions.

You can learn more about me on LinkedIn, my website, or my Instagram.

Enjoy your crypto journey, unicorns!

Chitra Ragavan