How to protect your crypto from hacks
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Worried about thieves stealing your bitcoin, ether and other digital coins? Here’s how to keep cryptocurrency safe from hackers and scammers.
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Sponsored By
CoinSmart
Worried about thieves stealing your bitcoin, ether and other digital coins? Here’s how to keep cryptocurrency safe from hackers and scammers.
2022 has been a tumultuous year for cryptocurrency markets. Significant and sustained price declines have shrunk the overall crypto market value below $1 trillion—a significant retreat from its all-time high of $3 trillion in November 2021. (All values in U.S. dollars.)
What has intensified investor pain further is the unabated cyber-theft that has drained billions of dollars from crypto holders’ accounts. Since crypto transactions are usually irreversible, stolen coins are nearly impossible to reclaim.
Cybercriminals pilfered roughly $4.5 billion worth of digital currency in 2021, more than twice the 2020 total. In the first half of this year alone, nearly $2 billion worth of crypto has been lost to hacking, clocking a 60% jump in such instances.
Crypto theft remains a growing problem. As more investors turn to digital assets for wealth creation or to diversify their portfolios, learning how to protect crypto holdings has become a crucial part of investing. Here’s your essential guide to keeping your crypto safe.
Cryptocurrencies live on the blockchain, a form of digital transaction ledger. Since crypto transactions are decentralized, there are no intermediaries to supervise them. Motivated hackers with sophisticated knowledge of blockchain technology can exploit that by finding weaknesses in the safety mechanisms of crypto exchanges and online crypto trading platforms, as well as investors’ often poor understanding and implementation of safety tactics.
“Crypto vulnerabilities could be caused due to lack of security awareness or failure to employ security standards such as multi-factor authentication,” says Joe McGill, an investigator at TRM Labs, a blockchain intelligence company that helps governments and financial institutions to fight fraud, money laundering and financial crime.
Malicious links and software can also make crypto vulnerable. If clicked or installed, they could compromise sensitive information, notes McGill, who is a former U.S. Secret Service and Postal Investigator.
Phishing is a leading cause of theft in the crypto industry, just as it is in the traditional finance world. “Scammers post fake websites posing as popular brands in an effort to trick users into connecting to malicious contracts or steal personal financial information,” say McGill.
More recently, account takeover, or ATO, attacks have grown increasingly popular. An ATO is an automated scam in which criminals gain access to online accounts via bot-driven hacking techniques, such as credential stuffing or credential cracking.
Over the last six months, “more than 100 NFT projects have been targeted, resulting in the loss of millions of dollars in crypto assets,” says McGill. “The goal of the ATO attack is to completely control accounts of popular brands and redirect users to fake websites to either drain crypto in wallets or steal seed phrases.”
A seed phrase, or recovery phrase, is a list of 12 to 24 words that can be used to access stored crypto—more about that later.
Crypto investors have a few options for storing their coins and private keys (the alphanumeric access keys to your wallet addresses, or accounts). These options include custodial wallets, cold wallets and hot wallets.
“With non-custodial wallets, users have full control over their crypto,” notes McGill. “There is no third party that has access to a user’s account information unless specifically granted by the user.”
Or if your account information has been misplaced and ended up in the wrong hands.
Offline crypto storage is widely regarded as they safest option, used both by individuals and exchange platforms to secure their crypto. Since your crypto is stored offline, it’s out of reach for hackers and thieves.
Whether your coins are held privately or on a crypto platform, the following measures are key to keeping crypto criminals at bay:
Now that you know more about crypto storage and security, choose a wallet not just for your investing and trading needs, but also one that will keep your assets safe. Unlike fiat currency, digital coins don’t have the traditional protection measures used by banks and other financial institutions—so crypto storage is your responsibility.
“Nothing is 100% theft-proof,” says McGill, “but users can take multiple steps to ensure their accounts are most secure.”
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