Like the traditional bank and bank accounts, cryptocurrency exchanges and accounts have also run into security breaches. With the rising worth of the cryptocurrency market, both assets and the exchanges facilitating their sell and purchase, have become the popular target for hackers.
Remember, the $32 million worth hacking attack on the Japanese exchange BITpoint in 2019. Hackers breached the security of its hot wallet and got access to Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and Ripple crypto assets. More than 50,000 users were affected. After this incident, the exchange deferred its payments In and Out for a long time.
The South Korean cryptocurrency exchange Bithumb also became a victim to cyberattacks, where it incurred a loss to the tune of $31 million.
Cyberattack incidents dramatically impact the value of cryptocurrencies. The Bitcoin price tumbled down by nearly $200 within an hour of the news going viral.
Since digital currencies remain unregulated by a government entity or central bank in most of the geographies, investors have little or no means to get any legal recourse when an account is hacked.
Being an investor, you should exercise maximum safety to protect your crypto investment from the prying eyes. Here are 10 tips to make it happen.
1. Use a Cold Wallet
Interestingly, attackers can’t get access to the cold wallets, sometimes also called cold storage wallets or hardware wallets. Unlike hot wallets that are connected to the internet, cold wallets are not. The public and private keys of hot wallets are stored on the internet, which attackers can target. Contrastingly, cold wallets are not vulnerable to internet-based attacks. With your secret password, you can quickly regain access to all your keys, money, history, accounts and emails. Storing private keys in a cold wallet is a viable option. The price of cold storage wallets starts from $80 while the hot wallets come free of cost.
Popular cold wallets are as follows
Trezor – Stores BTC, BCH, BTG, ETH, ZCash, Dash (more coming soon)
Ledger Wallet – Stores BTC, BCH, BTG, ETH, ZCash, Ripple, Dash, ARK, Stellar, (hopefully Monero coming soon) and more
Cold wallets like Trezor do have security features like 2-Factor Authentication.
2. Use Multiple Wallets
Distribute your cryptocurrencies across multiple wallets – hot or cold, or both. It’s the same concept as keeping more leather wallets while going shopping to keep currency of different denominations or for different purposes.
There is no limit on the number of wallets. Do not load more value in the wallet that you use for frequent transactions. The multiple wallet concept reduces the risk factor if any of the wallets is compromised or becomes a victim.
3. Use Wallets from Trusted Sources Only
Considering the absence of regulators in the cryptocurrency ecosystem, many non trusted entities are trying their luck in wallet making and marketing. Sometimes, this crowd makes it difficult for beginners to identify what’s best. Choose hierarchical deterministic (HD) wallets that facilitate more than one private key. The private key is hashed to generate the public address, which is visible. It’s easy to generate a public address using a private key, but the reverse is practically impossible as of today. If you are accepting funds or doing fundraising, you can disclose the public address on the Internet or anywhere without any worry. No one can get access to the fund sent through it without knowing the private key. It’s the same safety that you enjoy with your bank account number. You can make it public, but none can get access to the fund, until they get access to your Internet banking password or OTP.
Read reviews of wallets and examine their pros and cons along with the security features. Here is a list of popular hot and cold wallets for your reference.
Exodus, Electrum, and Mycelium
Trezor Model T, Ledger Nano X, Ledger Nano S
3. Distribute Your Crypto Assets
Do not keep all your eggs in one basket, this popular saying when it comes to asset management, stands true when it comes to the safety of cryptocurrency assets. Consider investing across multiple crypto trading platforms. It minimizes the risk in case of any unfortunate cyber-attacks or data loss incident. It may demand some extra time to review the best options, but it’s worth doing if you have a considerable volume.
4. Store Physical Coins
Physical manifestation of cryptocurrencies has emerged as a popular safety measure. To purchase the physical coin, which comes with a tamper-proof sticker, you need to pay a bit more over the value of the regular cryptocurrency to pay for the manufacturing and shipment cost.
5. Take Regular Backup of Wallets
Analogous to the computer backup, the backup of the cryptocurrency wallet helps you recover from any unpleasant situations like theft or technical failure. Make it a practice to back up all the wallet.dat files and then store the backup at multiple secure locations (like on a USB, on the hard drive, and on CDs). Create a strong password for the backup and maintain its privacy.
6. Adopt Multi-Signature
Multiple-signature is a crypto asset security concept where multiple users are involved in approving a transaction of sending or withdrawal. It minimizes the risks. It’s hard for intruders to gain access to the servers controlling the wallets of different users at the same time.
7. Perform Software Updates
Regularly update your trading software and wallet (while using a hot one). Keeping them on auto-update could be the best option if you have a bad memory. The latest security fixes and protocols elevate the safety standards while outdated trading or wallet increases its vulnerabilities. Also, update your mobile device or computer operating systems.