“How do you self-custody in crypto and SAFU funds?” This is a question I believe any crypto trader should be able to answer. But it’s quite confusing why you have to take extra steps to secure your crypto funds since cryptocurrency is open and decentralised. Isn’t that what cryptocurrency is all about?
In argument, you can tell that cryptocurrency, despite being open and decentralised, has its own flaws. And one of the main flaws is its vulnerable risk to online hackers and thefts. There are too many instances of crypto thefts and it is very important you know how to keep your crypto funds safe. Remember, crypto thefts, or “scam” as many of us like to call it, has a hand in why the crypto market is so bad today. Let me give you some instances.
Why You Need To Self-Custody & SAFU Funds
In just 2022 alone, the year which is really one (if not the top) worst year we’ve had for the crypto market, there were so many crypto scams. Damaging events like the FTX collapse, Terra Luna scam, 3AC, and Celsius collapse happened. These collapses did have a hand in why the crypto market is as bad as it is today. Because such events trigger the demand for crypto to reduce, and when such happens, it is likely for HODLer to sell off their crypto. Because no one wants to lose their investment value.
Now, you see why it is paramount that as a crypto trader, you are able to self-custody in crypto and SAFU funds. As it is, I will provide some hints of crypto security, but before then, there are two words that need to be broken down for better understanding. “Self-Custody” and “SAFU”, I believe you may not know what these words mean in cryptocurrency. Well, that’s why I am here to educate you. LOL! I just sounded like a professor. I’m showboating (smiles).
Jokes aside, let’s dive in on what “Self-Custody” and “SAFU” means in cryptocurrency.
What Does Self-Custody In Crypto Mean?
In simple terms, Self-Custody in crypto means getting ownership and control management over your cryptocurrency or other digital assets like NFTs by keeping them in your own wallet as opposed to depending on a third-party custodian. A good example of a third party here is a crypto exchange like Binance.
This offers you complete control over your money and avoids the possibility of losing it to exchange hacks, confiscations by the government through crypto regulations, or other nefarious activities. Got it?
What Does SAFU Mean In Crypto?
“SAFU” is actually not a word. It is a crypto slang, just like we have other crypto slang like WAGMI, DYOR, HODL, and FUD… SAFU actually means “Secure Asset Fund for Users”. It is a crypto terminology that stresses the importance of storing your crypto securely. Many crypto dudes like myself like to use “SAFU” in place of “safe”. For example, I could say, “FTX is not SAFU, avoid it”.
I believe that explains it. Now, let’s go on to the main topic.
How to Take Control of Your Own Crypto & SAFU Funds
Before you can self-custody in crypto and SAFU funds, you will need to understand what type of crypto wallet you use. There are two major classifications of cryptocurrency wallets. Hot and Cold wallets. I still find it weird though why they had to be given those names of all words in existence, but anyways, that’s what they are called.
Difference Between Hot And Cold Wallets
Hot wallets are digital wallets. They allow for frequent transactions and rapid access. You will always need an internet connection to access these types of wallets. Although they frequently offer more use and convenience than cold wallets, they also face greater security threats.
I like to describe hot wallets as wallets or exchanges that can be downloaded on your mobile phone or wallets you have to log in to via the web. I believe this gives a better understanding.
Hot wallets are susceptible to hacking attacks and other types of cybercrime since they are connected to the internet. As a result, using a hot wallet requires extra security measures, such as creating a strong password and turning on two-factor authentication (2FA). An example of a hot wallet is Breet App.
Cold wallets, on the other hand, are offline devices that offer maximum security for your digital assets. They are typically more complicated to use than hot wallets, but they provide an added layer of protection against hacking attacks and other forms of cybercrime. Since cold wallets are not connected to the internet, they are much less vulnerable to attacks and are considered to be the most secure way to store your crypto assets.
To gain a better understanding of the different types of cryptocurrency wallets, check my article titled “Top 8 Best Cryptocurrency Wallets”. The article highlights the best cryptocurrency wallet you should use.
So, How Do You Choose The Right Crypto Wallet?
There are several answers to this question. But according to my colleague, she noted that “…choosing the right crypto trading platform is not as easy as it seems. You might be tempted to select a random one or one you randomly heard about from someone. But it is essential that you do your research and look out for specific criteria which make the trading process easy.” She also gave 9 Factors To Consider When Choosing The Best Crypto Trading App To Sell Bitcoin. You should check it out.
Securing Your Cryptocurrency Properly
Now that you have chosen the right crypto wallet for yourself, you will need to secure your crypto funds safely. Therefore, how do you SAFU funds?
Here are my 3 secret steps to safeguard my funds. Well, I’m telling you now so it will no longer be a secret.
1. Use a Strong Password
Please can you stop using your name, phone number, or date of birth as passwords? Lol, that’s so lazy. Remember, it’s a valuable asset you are saving here. So it’s ideal that you use a password that will not be so easy for hackers to predict. I repeat, don’t use your name, phone number, or date of birth as a password. Please!
Your passwords should be a combination of different uncommon characters like symbols, capitalised letters, small letters, and numbers. Make it difficult and sweaty for hackers to even predict.
2. Set Up 2FA (Two Factor Authentication)
I know I am not the only one who feels lazy about setting up an extra layer of security, but it is very important. You can’t stress it enough. Make sure you enable your 2FA. Also, complete the KYC (Know Your Customer) policy where necessary.
This way, even when a hacker is able to guess your password, they will need to do more verification processes to gain access, and as such, you will be alerted. 2FA is efficient and likely something you shouldn’t overlook.
3. Back-Up Your Seed Phrase
A phrase, commonly referred to as a seed or recovery phrase, entails an arrangement of words that serves as a protective mechanism for your wallet. If the unfortunate incident of misplacing or sabotaging access to it befalls you, utilising this same sequence will ultimately result in the restoration of your wallet and retrieval of your monetary resources. Ensuring that the seed phrase is stowed away in an infallible location is paramount to ensure its continued accessibility and reliability.
What is a Seed Phrase and Why is it Important?
A seed phrase is a series of words that can be used to recover your wallet if you lose access to it. It is generated by your wallet and is unique to your account. It is essential to write down your seed phrase and store it in a safe place. Without your seed phrase, you may lose access to your digital assets forever.
Tips for storing your seed phrase securely:
1. Write it down on a piece of paper and store it in a safe and secure location, such as a safety deposit box. Something like a wooden box.
2. Use a metal backup device, such as a Cryptosteel or Billfodl, which are designed to store seed phrases in a tamper-proof and fireproof container.
3. Consider using a passphrase in addition to your seed phrase. A passphrase adds an extra layer of security to your wallet and can make it more difficult for someone to gain unauthorised access.
Conclusion: How To Self-Custody In Crypto: A Hitchhiker’s Guide To SAFU Funds
Another way many crypto investors use to self-custody in crypto and SAFU funds is by diversifying crypto portfolios. I like to define diversifying a crypto portfolio as having investment in not just one or a few cryptocurrencies but many cryptocurrencies. This way, if one or two crypto fails, not all your investment will be lost but a few.
Overall, I encourage you to safeguard your crypto funds jealously. Take the necessary steps provided and again, do not use commonly predictable words as your password. With these measures in place, you can enjoy the benefits of crypto while keeping your funds safe and secure. Keep exploring the world of crypto and always stay curious.
Until next time, keep HODLing, and don’t forget to check back for more crypto updates.