Beginners in the cryptocurrency industry are often afraid of the risks associated with it. Besides price volatility, the users often face the danger of their wallets being hacked, causing irreparable losses.
Despite cryptocurrency exchanges as well as wallet service providers offer enhanced security features, the can’t guarantee hackers won’t find breaches to get into the system and steal the users’ money. However, there are some additional means a user might take advantage of to protect one’s funds from being stolen or lost.
Security starts with the choice of a service provider. Presently, the number of hot cryptocurrency wallets is overwhelming, with a great many of them being fraudulent. That is why a user should be very careful before trusting one’s money to an online service.
To make sure an online wallet or a cryptocurrency exchange are legit, it is worth paying attention to their time of operation. Scams never last long, so if a provider operates for more than five years, it is most likely a reliable and legit provider. Additionally, it is worth checking other users’ feedback on the Internet. Nowadays, people tend to share their experiences online, so it won’t be difficult to find out others’ opinions.
Besides that, a user might check the company’s regulatory compliance and available registration data. A reliable company always discloses as much information as possible to prove its reliability and legitimacy.
Let’s take the example of a house. When one keeps on locking one’s house/office with a weak padlock, it would be the same as inviting thieves to come and force their way into the premises. So in order to stop uninvited guests, one needs to always lock it with strong locks. Similarly, a powerful private key is necessary to protect digital currency holdings.
Attackers tend to apply more advanced and sophisticated private key crackers to attack users’ accounts, and these tools utilize dictionaries, lists of common passwords, and brute force attacks as well. Therefore, if a password is long and strong, it will have more entropy and that means that the attackers will find it hard to crack an account.
2FA generates a secure 2 step verification code to access tokens on a device. It rescues user’s accounts from attackers and hijackers by adding an extra layer of security easily and effectively. 2FA private key alters every 30 seconds, hence leaving no void for attackers to force an entry into a cryptocurrency account.
Nevertheless, this doesn’t mean that using two-factor-authenticator is enough to keep assets 100% safe, for hackers keep on changing tactics, so one has to enable the 2FA on each and every online account (emails, file storage services, social media, etc.) that is linked to one’s token account(s).
Desktop or mobile cryptocurrency wallets work like any other app, therefore, they are updated from time to time to offer new functionality, combat new cybersecurity menaces and fix possible bugs to make user experience increasingly flawless.
When users don’t make updates, their wallets tend to stand high chances of being hacked or damaged – because the attackers find when the cybersecurity walls are very weak and unstable.
Albeit, a user should not rush to download and install the latest updates as soon as they arrive. In some cases, these new versions come with bugs that may affect wallet software and make it even more vulnerable. Besides, hackers might disguise their malware as an update and push it into a store. So if an auto-update function is on, a user can install malware that would steal funds instead of actual updates. Therefore, it is better to wait for 3-5 days and update the wallet only if there is no problem or bad comments about the new version.
Backing up data from your cryptocurrency wallet makes it easy to retrieve, restore, or access tokens as well as other sensitive information in case of a loss, damage, or any device failure.
A backup copy will let the user restore one’s wallet in case one’s computer or smartphone stolen or misplaced. However, the user needs to make sure one has created a backup in a reliable cloud service, as those data can be stolen and misused as well.
It is not good to always use public internet connections like WiFi hotspots when transacting with digital money. This makes a wallet exposed to criminals since they find it very easy to burgle into an account and serve themselves with lion shares. Using a public network makes a wallet visible to all participants of this network, thus making it easy to access a device.
The same concerns using public devices to access your wallet. All passwords remain in the memory of a device even after they are deleted. So a person possessing certain technical skills might easily retrieve and misuse them. That is why personal internet and personal computer/smartphone should be used to conduct any type of transaction.
No matter what kind of a cryptocurrency wallet is used, it must be strongly encrypted in order to keep savings safe and sound. The stronger it is, the less are chances that it would be hacked.
By encrypting the wallet or the entire device, a user is able to set up a private key or a kind of firewall against bad players trying to take out any money. Thus making sure the wallet is strongly and properly encrypted would allow a user to sleep tight without the fear of losing one’s funds.
As the African proverb goes “don’t keep all your eggs in one basket” - because once having fallen down, a person risks having all the eggs broken into pieces. That same principle can be employed in the cryptocurrency industry by all token users.
It is better to store savings in several cryptocurrencies and several wallets. Thus, even if one wallet is hacked, a person would manage to preserve most of one’s savings. Experienced investors always split their investments into several cryptocurrencies. Besides protecting savings from attacks, such an approach also allows for minimizing risks associated with price volatility.
Applying a detection tool on the public address of a cryptocurrency wallet might help to track any suspicious activity. It’s better to keep on getting notifications on transactions via SMS and emails. In this case, a user will receive a notification on a transaction before it is actually conducted. Therefore, even if someone gains access to the wallet and tries to get money out of it, it will be possible to prevent a transaction from actually happening.
For this reason, many cryptocurrency exchanges that also offer a wallet service have the feature of confirming transactions before actually sending them. Therefore, a user has a chance to double-check all information before sending money, for blockchain-based transactions are irreversible, so any mistake might lead to the loss of funds. Besides, if any third-party tries to make a transaction on a user’s behalf, it would be impossible to miss that with such a feature.
Cold storage has a significant advantage over hot storage, as it is not connected to the internet. Therefore, the only way funds can be stolen from it is the physical stealth of the wallet itself. But even then, a criminal would need significant technical skills to access funds.
Some cryptocurrency holders use both kinds of storages simultaneously. Online wallets are used for conducting transactions, and cold storages are applied for storing cryptocurrency. In such a way, they can secure the savings they are not going to spend.
Anyway, before creating a cryptocurrency wallet and trusting it with any money, it is better to do thorough research. This would help to understand how various kinds of wallets operate to make a perfect choice according to one’s needs.