How to secure cryptocurrency

Cold and hot wallets

The difference in the way tokens and coins are stored lies in the security level of cryptocurrency. Apps and desktop programs allow you to send and receive cryptocurrency like a digital bank account for fiat assets:

Online platforms are very popular because they are easy to set up and use. When an account is created on an exchange through a mobile app or on a computer, the user has a hot wallet. This type of storage is convenient for everyday transactions. Since hot wallets are connected to the internet, it is easy to make transactions. You just need to press a few buttons on your cell phone or computer.

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Hot wallets are easy to use, but they have one disadvantage – high vulnerability. For example, exchange accounts cannot be recommended for storing large amounts of cryptocurrency. This exposes the savings to potential security threats, hacker attacks.

For long-term investments, cold wallets are suitable. This method is considered as safe as possible, as they are not connected to the internet, and the risk of hacking is reduced. Examples include paper with keys printed on it or hardware devices. Separate physical media (usually in the form of a USB stick) are also actively used to store private keys, making them invulnerable to hackers and fraudsters.

Seed-phrase

The basic principle of cryptocurrency is the idea of decentralization. Users get an account without authenticating their identity. They don’t need to rely on a bank or other platform for secure storage. Digital currencies use the blockchain to do this. It protects them with a peer-to-peer network of computers in different locations that store copies of all the data. But decentralization has a drawback.

If the key is lost, the user cannot contact the help desk for a new code. For this purpose, a seed phrase (a list of words generated by the program that give access to digital money) is used. Its presence allows you to get control over your personal account even in case of wallet loss.

Reliable exchanges

Trading platforms store customer data in encrypted vaults.
The main attention in the choice is paid to:

• Reputation. Familiarize yourself with the history of the exchange, check cases of hacking.
• Duration of existence. Long work serves as an indicator of resistance to hacker attacks and fraud.
• Trading volume. High intensity of operations speaks of popularity.

Technical vulnerabilities

Blockchain technology is evolving, but digital currency is not immune to hacker attacks. There are cybersecurity risks that are important to be aware of. Some major companies have already been victimized by hackers and other attacks from malicious actors.

Viruses

Criminals often use malware that copies all the information that is typed in from the keyboard. It is then passed on to hackers to gain access to sites where crypto assets are stored.

Hacking a wallet or exchange

Since the existence of digital currency, many major companies have experienced fraud:

• BitGrail. An exchange platform that lost $146 million in 2018 due to a vulnerability in its servers.
• KuCoin. A crypto exchange that suffered an attack from hackers. The total damage amounted to more than $200 million.
• MtGOx. One of the first crypto platforms. Having lost $450 million, the platform ceased to exist.

Cases of hacking a program wallet are not registered at the moment. However, if hackers manage to get information from the user (secret phrase, wallet.dat file or password), it is not difficult for them to gain access to the personal account.

Fake apps

The problem of hidden miners is common in the official Google Play and App Store. These are malicious programs that stealthily mine blocks for the victim, transferring the reward to hackers. Cases when scammers tried to distribute fake applications are not isolated. The software completely copied the design and functionality of official platforms. All the data entered by the user could be stolen by attackers to seize control of the wallet.

Fraudulent platforms

One of the ways to seize the victim’s money is to imitate the work of a crypto exchange. Often on such fake services, clients are offered great functionality with very low commissions, the platform gets high popularity among the community. When a large amount appears on the accounts, hackers transfer the funds to their wallets and close the site. The same applies to cryptocurrency pyramids offering very high profits. In reality, no investment operations are carried out, the scammers steal customers’ money.

Phishing

This is a set of actions of hackers, the main purpose of which is to obtain confidential data. Attackers make copies of official large sites, such as Binance. Links to phishing resources are distributed by sending messages via email and social networks. Less frequently, SMS to a cell phone is used. The victim, without noticing the spoofing, transfers the name, password and private electronic key himself.

Fake social network accounts

With the development of technology, people’s communication has become available through messengers and services for communication. Hackers take advantage of this by creating fake pages.

Disguised as famous public personalities or company support services, fraudsters try to establish contact and get information. Their targets are bank card numbers, wallet addresses and passwords. Sometimes they ask to transfer an amount of money to their personal account under the cover of a fake account.

The human factor

Millions of bitcoins lie on wallets to which access will never be restored. And this has nothing to do with the actions of hackers.

Password loss

Every year, the number of “forgotten” digital coins grows. The first place among the reasons for this is the loss of a password. Since cryptocurrency works on the blockchain, and the private key file is encrypted with the SHA-256 algorithm, the probability of restoring access is close to zero. There are special services that can pick up the password. This method is suitable for those users who remember at least some part of it, but you will have to pay a large sum for the work. If the client forgot the whole password and did not save the seed-phrase, the money will be lost.

Incorrect recipient address

Transactions with digital currencies are irreversible. This means that it is impossible to return sent tokens and coins. An incorrect address or the wrong recipient network will result in a complete loss of funds. Different blockchains are usually incompatible with each other. Therefore, cryptoassets should only be sent to an address suitable for the type of money.

Many wallets already have an address verification feature. They can warn the owner about an error, but such applications do not verify the recipient’s name. If money is sent to someone else’s wallet, it will be lost.

Basic tips for cryptocurrency security

As the decentralized system grows, users far removed from the digital world are gaining access to the crypto market. In some parts of the world, bitcoin is already used as a means of payment similar to paper money. You should keep in mind the recommendations that will allow the owner to retain access to the wallet.

Use only trusted services

Many companies have been working in the crypto market for more than one year and have a good reputation. When connecting to well-known platforms, the risk of being hacked is minimized. You should carefully check the links on which the user goes to the site. If they differ even one sign from the official address of the resource, you should immediately leave the page.

Storing cryptocurrency on different wallets

Breaking the capital into additional parts is not only a matter of convenience, but also the safety of digital coins. Distributing the entire amount to several vaults allows you to save most of the money in case of loss of control over one. Hot wallets are used if the user makes many transactions, but it is not safe to use them for large sums. Cold ones are less convenient, but they are more resistant to hackers’ attacks.

QR codes when sending cryptocurrency

Transmission of details is a complicated part of the process of payment with tokens and coins. An address is a record of letters and numbers (27 to 34 characters). The recipient of the payment must provide this long set to the person who makes the transaction. To reduce errors and improve usability, you can convert the address to QR code format.

Two-Factor Authentication

2FA is an additional layer of cryptocurrency security. It allows you to make sure that the client himself is trying to access the account. First, the owner has to enter his name and password. Then the user receives a unique password on their cell phone or email. Google Authenticator application becomes a popular method of 2FA on large cryptocurrency trading platforms. The service automatically generates authorization codes and transmits them to the user’s smartphone.

Strong passwords

To protect against hacking, random (not related to the owner’s personal data) combinations of symbols, letters and numbers in different registers should be used. They allow you to ensure the security of cryptocurrency. It is recommended to set unique passwords for different resources.

Decentralized exchanges

These are platforms where participants exchange digital money without intermediaries using direct transfer (P2P). The main advantage is that tokens are held directly by the owner until the transaction is completed. This is achieved by using smart contracts. High anonymity on DEX-exchanges is due to the lack of identity verification procedure. The main disadvantage – it is usually impossible to buy or sell cryptocurrency in exchange for fiat money.

Public Wi-Fi

Many cell phones have an option to automatically connect to public networks. Attackers can steal data (name, passwords, private keys) or download malware. A good solution is to stop searching for Wi-Fi after leaving work or home. If you need to get your device online in a hurry, it’s best to avoid public hotspots and never send sensitive information over someone else’s internet connection.

Browser search bar

To check if your connection to a website is secure, you should check the address of the page. To confirm the authenticity and security of the data transmission channel, special SSL certificates are used. If they are not installed, or the expiration date has expired, the browser can notify the user about this and block the transition to the link. It is not safe to send information and go to such a site.

Free cryptocurrency giveaways

Such promotions are called AirDrop. They are organized by public startups or large exchanges when launching a new line of business. You can get free coins for performing easy tasks:

• Publish a social media post on your behalf.
• Become a new user of the platform.
• Conduct a few transactions on it.

But under the guise of airdrops, fraudulent schemes are often used. If such an action is initiated by an unknown organizer, and it asks you to transfer money, most likely it is malicious.

Summary

Cryptocurrency is a safe asset with a high level of resistance to hacking. Hacker attacks are most often directed at wallet holders rather than system vulnerabilities. Digital money holders need to take precautions to keep cryptocurrency safe:

• Enable two-factor authentication in account settings on exchanges.
• When clicking on links, check the page address to avoid phishing.
• Do not share passwords and other confidential information with third parties.
• Keep backup copies of keys on media that are not connected to the Internet.
• Use cold wallets to accumulate large amounts of digital money.

Despite the fact that exchanges and exchangers are fighting fraudsters, the security of cryptocurrency depends more on the owners of tokens and koins. Following simple rules by users increases the security of their data.

Frequently Asked Questions