Ways to Keep Your Cryptocurrency Safe
The digital world of cryptocurrency is one of its distinguishing features. Cryptocurrency, unlike most other types of money, does not have a physical form. It is not available in the form of paper, coin, or gold bar. There is no need to store the token in a bank vault.
However, cryptocurrency, like any other valuable asset, must be safeguarded. It operates as a fully digital entity that requires an internet connection to conduct any transaction, making it vulnerable to hacking. In fact, it’s just as vulnerable to theft as cash or gold, despite its ethereal nature. And, with cryptocurrencies, these crimes are more likely to occur via the internet.
Cryptocurrency Account Hacking Is on the Rise
While the crypto industry continues to expand every day, larger volumes of crypto require greater responsibility and, as a result, improved security for both users and bitcoin exchanges will benefit. If bitcoin security does not improve, new users will be afraid to use cryptocurrencies, which will prevent its mainstream adoption. Almost every week, there is news about a data breach or a bitcoin exchange hack.
In 2021, the number of cases of bitcoin hacking and fraud broke records. According to 2021 surveys, the market’s value has risen to more than $2 trillion, matching the market’s expansion.
Wallet and exchange breaches are the most common sort of assault, accounting for 126 in the previous ten years, outnumbering attacks and fraud involving DeFi, or decentralized finance, which account for 41 each. However, as this new technology becomes more vulnerable to potential flaws, the number of DeFi breaches is on the rise.
Breach and fraud have resulted in the theft of $19.2 billion in the last ten years. Bitcoin is the most commonly hacked and fraudulent cryptocurrency, accounting for 33.3% of all occurrences. Following a selloff, bitcoin, the world’s most traded digital asset, was re-approached $1 trillion.
According to CoinMarketCap.com, Bitcoin accounts for around 43% of the cryptocurrency industry, which grew in value to $2.1 trillion in 2021.
Ethereum is the second-most-targeted cryptocurrency, with 36 breaches (12.8%) over the last decade.
Fraud cases, however, are the most attractive for thieves, according to Crypto Head, since they have taken an average of $365 million, or more than 14 times as much as breaches.
With 17 hacks and fraud instances, the United States is the most frequently attacked country, followed by the United Kingdom and South Korea, with 12 and 9 incidents, respectively.
Although 2021 established a new peak for the number of violations, hackers made the most money in 2017, stealing an average of $223.5 million and a total of $4.7 billion.
According to Crypto Head, Mt. Gox had the largest hack to date, with $615 million taken over the years, resulting in the platform’s insolvency in 2014.
How to Keep Your Cryptocurrency Safe
Kinds of Cryptocurrency Wallets
Hot Wallets
The term “hot wallet” refers to an online wallet that can be accessed from any internet-connected device, such as a smartphone or a computer. This method is a highly easy way to store cryptocurrencies, especially if users conduct all of their transactions online. These wallets, on the other hand, are designed to store or use a small amount of cryptocurrency. Web, desktop, and mobile wallets are examples of hot wallets.
Although it is simple and convenient to use, there is a risk associated with it. Because it is an online approach, there is a risk that users will lose their currency. This can occur throughout exchanges. You can also use exchange wallets, which are a type of custodial account provided by the exchange. Because this wallet does not store private keys, users should never keep their cryptocurrencies on an exchange. It is best to avoid it because it is a third-party wallet.
Cold Wallets
A cold wallet, often known as an offline wallet, is another type of cryptocurrency wallet. This is probably the safest option to keep cryptocurrency because it is not connected to the internet through any device. As a result, there are far fewer chances of getting robbed. Because the private key and the address aren’t connected to the internet, this is the case. This usually features specifically created software that lets users access and alter their information without putting their private key at risk.
Cryptocurrency can be stored in a variety of ways and with a variety of possibilities. It is up to you to choose the type of tool you want to use based on your preferences and security requirements.
Basics of Keeping Cryptocurrencies Safe
Two-Factor Authentication
Because of security concerns, two-factor authentication is essential. Some exchanges employ three or more criteria, rather than just two. Until they’re cracked, passwords are impenetrable. It could be due to a user’s inexperience in creating a weak password or using the same password on many accounts. Hackers frequently utilize tactics like keylogging or sending out malware that installs malicious code on computers because they have access to users’ passwords. When a password is stolen or discovered, the attacker waits for the right opportunity to exploit it.
When logging in or withdrawing funds, multi-factor authentication adds an extra degree of security to the password. A text message to a phone device or an e-mail can be used for two-factor authentication.
Accounts Linked to Several IP Addresses
It’s significantly more difficult to bypass a crypto exchange account after it’s tied to one or more IP addresses.
The major exchanges monitor IP addresses to see if the user is logged into the exchange, but merely for informational purposes to learn about the user’s previous activities. However, this is given upon the user regardless of whether they control their activities and see any fluctuations or suspicious events.
However, some exchanges have begun to send users notifications in the event of any questionable access to their accounts, such as from an unknown geographic region or from a computer or browser other than the one used to access the exchange.
Notifications When Funds Are Withdrawn
Another crucial security measure is notifying a user when funds are being withdrawn.
This move can alert the account holder at precisely the correct time – when the hacker is attempting to move cryptocurrencies to an address under their control.
Not only do major exchanges send notifications for cryptocurrency withdrawals, but they also send notifications for cryptocurrency deposits. It teaches customers to be cautious in the event of any inappropriate behavior.
Some exchanges go far beyond sending out withdrawal notification emails. They offer to let you click on the active button straight in the email body, which can result in the transaction being canceled or possibly an account suspension if there is suspicious activity on the user account.
Blocking Withdrawals After Changing Account Data
A hacker’s commonly used strategy is to change account data such as connected email addresses or phone numbers. After gaining access to the account, the attacker must ensure that he can approve any potential withdrawals via their controlled phone or email.
By preventing withdrawals for several days or even a week or two after modifying specific account settings, the cryptocurrency avoids the malicious activity that is typically perpetrated by hackers. If the assault is to be successful, the hacked person must be unaware of it at least until the withdrawal is confirmed.
Customer Insurance Funds
There are two ways to insure money deposited on the exchange. The first is that they are backed by an external insurance provider, and the second is that they are backed by an internal policy or regulation. Because when assets are stolen or lost, exchanges must compensate their clients’ losses; otherwise, the consequences could lead to the company’s collapse.
Crypto Exchange Security Audits
Periodic cryptocurrency exchange security audits serve two important functions for the exchange company, similar to client insurance funds. Not only may an audit expose some flaws in a cryptocurrency exchange’s security, but it also improves investor trust and legal certainty. Many jurisdictions rely heavily on audits to ensure compliance with regulatory frameworks. To gain more credibility, the space for money laundering and fraud of any kind should be reduced.
There are many multiple kinds of audits, but the System and Organization Control audits (SOC) are the most significant for crypto exchange-related businesses because they are used to independently identify potential exchange risks and inform clients that your company has effective and internal controls in place.
Bottom Line
The cryptocurrency exchange business may be incredibly profitable, but security must always come first. Otherwise, the dangers outweigh the potential profits. A single targeted hacking attack on cryptocurrency exchange funds can turn everything upside down.
Hackers and scammers continue to create new tools and ways for gaining access to exchange servers and user apps. Starting a cryptocurrency business without a solid cybersecurity program in place is a huge risk because it’s just a matter of time before something unexpected occurs.
SCAND blockchain development company has built several large cryptocurrency projects from the ground up and has amassed enough experience to walk you through the whole cryptocurrency app development process, making it simple and straightforward.
