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How to Protect your Crypto
Index
How to Protect your Crypto?
What are the main security risks of cryptocurrencies?
Of course, we all know that cryptocurrencies are volatile (sometimes a little too volatile on the downside).
But what are the main security risks? In other words, how could your cryptocurrencies be stolen or hacked?
Being scammed
Scams are ubiquitous and popular in cryptocurrency. There are various scams such as Telegram scams, giveaway scams, Uniswap scams, and others. There are also pump-and-dump schemes and shitcoins, although these do not really fall under scams (but you can still lose money).
Keep cryptocurrencies on centralized exchanges
Centralized exchanges are great and sometimes make sense for storing cryptocurrencies for the long term. But you can also lose your cryptocurrencies if they are hacked. For this reason, most cryptocurrency security experts recommend keeping all funds you intend to HODL in self-deposit.
Loss of private keys or the phrase
Old favorite. You may simply be forgetful and not careful enough, or you may lose your seed phrase in a phishing attack. Your phone may also guess your seed phrase, so be very careful.
Malware & Fake Apps or Spoofing & Protocol Hacks
Malware
Malware as a security risk is related to the loss of the initial sentence, since the sentence could be stolen without your realizing it before it is too late. If you store your seed phrase in the cloud or in a place particularly exposed to attackers, you may regret it. Best practices recommend using a hardware wallet.
Fake applications or spoofing
Fake cryptographic applications or websites pretending to be legitimate, real cryptographic applications are a type of phishing attack that can gain access to your private keys and empty your wallet of funds. It is always important to double check the URL you are accessing and make sure it matches that of the real website.
Protocol hacking
DeFi protocols are prone to hacks, especially if they have not been around very long and have not passed several audits. As we have seen over the past year, DeFi bridges are a favorite target of hackers.
Sending cryptocurrency to the wrong address
A transaction sent in a hurry, an address copied incorrectly, and your cryptocurrency ends up on a network it should not have gone to. This is an annoying and entirely avoidable way to lose cryptocurrency, so we will explain how not to send it to the wrong address (and whether it can be recovered).
How to Protect your Crypto Connection Internet
A public Internet connection makes it easier for any potential attacker to access your cryptocurrency. However, by avoiding public WiFi and using a virtual private network (VPN), cryptocurrency holders can further prevent online attacks. A VPN hides your IP address and location to allow users to browse privately. To this end, it routes your Internet connection through several servers to make it almost impossible to detect your real location.
How to keep cryptocurrencies safe.
This section discusses several important aspects of cryptocurrency security.
How to protect the private key and phrase
There are three main aspects to secure storage of the seed phrase:
Never share it with anyone;
Never store it in the cloud (or anywhere else on the computer);
Back it up and store it offline.
First, you should not share your seed phrase with anyone. You can make an exception with trusted people, such as family members or close friends, as long as you are certain that you want these people to know your seed phrase just in case. But under no circumstances share it with strangers, either online or offline.
Second, when storing your seed phrase, preferably do so offline. There are ways to engrave seed sentences if you do not want to use pen and paper. You can also use a computer to store your seed phrase; however, it should be a separate computer from the one you use for transactions and should not be used to access the Internet.
Hacking of exchanges – Cryptocurrency exchanges are a major target of hackers, who can often access funds from multiple accounts with a single breach. Even the most trusted exchanges are susceptible to malicious attacks. However, some exchanges cover up to a certain amount of funds lost due to theft.
Rug Pull – Rug pulls are one of the most prominent variants of exit scams in decentralized finance (DeFi). It involves the development of a fraudulent token and a “pump and dump” by the development team. Once the price of the asset is high, the team sells, extracting as much value as possible before the price of the token drops to zero.
How to store cryptocurrencies safely
Next, you need to make sure that your cryptocurrencies are safe wherever you store them.
How to store cryptocurrencies safely
Next, you need to make sure that your cryptocurrencies are safe wherever you keep them.
First, you should use different wallets for different purposes. For example, you might keep some cryptocurrencies in a centralized exchange, but these are usually not cryptocurrencies that you intend to keep for a long time. The rules of thumb should be:
Use a hardware wallet for long-term investments;
Use a software wallet for smaller investments and interactions with protocols;
Use a centralized exchange if you trade, exchange or buy cryptocurrencies.
Second, you need to pay attention to the protocols with which you interact. You need to periodically check which protocols have access to your wallet.
Finally, pay attention to the transactions you sign. Remember that a fake transaction can drain your wallet, so sign only those transactions that you are certain are legitimate.
How to protect devices and Internet connection
Another important aspect of cryptocurrency security is the protection of the devices used to access and connect to the Internet. Ideally, you should have a device dedicated only to cryptocurrency transactions.
You should not sign smart contract transactions from the same computer with which you access certain websites. It is also mandatory to use two-factor authentication. It is advisable to use a dedicated 2FA application, such as Google Authenticator, instead of 2FA with SMS, because of the prevalence of SIM-swap attacks. Also, the password should be at least 12 characters long.
Finally, consider using a VPN to cover your tracks. It will be more difficult for an attacker to track you down if you do not use your real IP address.
First, you should always double- and triple-check the addresses and networks to which you send encryption. Also check the links you click on, especially when it comes to decentralized applications. You may also want to make test transfers with small amounts, in case you are not sure that you are interacting with a legal protocol.
Second, DMs on Telegram, Twitter or Discord are almost always spam or scams. Do not respond and never click on a link unless you know the sender.
How to avoid cryptocurrencies being sent to the wrong address
It can happen to the best of us: you need to send cryptocurrencies, but you copy-paste the wrong address or click on the wrong network. Or even worse: you fall victim to a phishing attack and your funds are stolen.
Here’s how to avoid sending cryptocurrencies to the wrong address:
Copy and paste the recipient’s address or use a QR code.
Always double-check. You can check the first and last characters of the address to make sure it is correct.
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