The biggest promise of the blockchain technology is security. Through its distributed ledger that makes the chain, the blockchain makes it impractical for a hacker to enter into your cryptocurrency wallet and steal your coins.
While blockchain is the blueprint of internet security, the technology doesn’t offer a completely secure system for its users. Although crypto is a more secure way to transact, compared to traditional means of payment, it is not without risks. For instance, users may face crypto frauds, which are now more prevalent due to the current COVID-19 situation. This article tackles some of the risks arising from the use of cryptocurrencies and how you can protect your cryptocurrency wallet.
Current Security Risks Faced by Crypto Users
Cryptocurrencies face the same risks as e-money—like PayPal and WebMoney.
However, the working principles particular to cryptocurrencies sometimes intensify these problems, making it more disturbing. Also, the same laws are responsible for specific risks unique to cryptocurrencies. Let’s look at some of these risks
i) Destruction or Loss of Private Keys
Bitcoins and other cryptocurrencies are kept in a digital wallet, which is controlled only by the holder of both the private and public keys associated with the digital wallet that contains the bitcoins. In the event that the private key is destroyed, lost, or compromised in any way, the investor may not be able to access the coins stored in the linked digital wallet, which will eventually get lost. In case the private key lands in the hands of a third-party, the person may be able to access the bitcoins.
ii) Malware and Phishing Scams
Malware and phishing scams are rampart in the crypto world. Let’s say you want to transfer coins to a friend; so, you copy the correct wallet address, but malware replaces it with a fake one in the clipboard. Since the address is usually a long cluster of characters, you may not be vigilant enough to double-check the address after copying it. The money will be sent yes, but not to the intended recipient.
Crypto users may also lose their funds through a phishing scam where they are tricked into visiting a fake website and uploading their crypto wallets and entering a password.
iii) Hackable Cryptocurrency Exchanges
The number of attacks targeting crypto exchanges is mind-blowing. During the last few years, numerous exchanges including Coincheck, Bithumb, Coinrail, and BitGrail have made headlines for suffering massive security breaches.
The problem is that cryptocurrency has no governing body, meaning there is no prerequisite for security controls, assessments, and audits of their systems.
Ways to Protect your Cryptocurrency Wallet
1) Separate your Funds, and Use Cold Storage Cryptocurrency Wallets
As a crypto user, it’s good to have at least two wallets, or even more depending on how much you have. One wallet should be for transactional and trading purposes, while the other one should be for storing savings. The savings should be stored in a cold storage wallet (editor’s note: such as the TREZOR wallet we have on sale). Either way, ensure a substitute of the private keys is stored safely offline.
2) Be Careful with Public Wi-Fi
Be vigilant when using public Wi-Fi with the same device that contains your wallet on. Dangerous websites and insecure wi-fi networks can put your wallet at the risk of hacking. If you really have to use public wi-fi, make sure you have a VPN downloaded on your device. A VPN encrypts your data, ensuring that it cannot be read by anyone else.
3) Use Two-Factor Authentication
If your wallet has the option, it’s good to activate two-factor authentication. 2FA offers double protection to your wallet, and it can be done in various ways. For instance, you can use biometric identification such as your fingerprint. Also, Google Authentication app provides a 6-digit code that is unique to you and keeps changing every minute.
The world is under distress because of the current COVID-19 situation and hackers are taking advantage of people’s desperation to steal some more. For crypto users, it’s time to be more vigilant than ever and tighten the security measure on your wallets to protect them from prying eyes.
About the Contributor
Amy Cavendish is a content strategist at the TechFools, a tech blog aiming to inform readers about the potential dangers of technology and introduce them to the best ways to protect themselves online. As an outspoken advocate for digital freedom, Amy is dedicated to empowering her readers to take control of their digital lives with her thought-leadership articles.