The growing acceptance of digital money has increased the need for strong security measures for its storage.
Crypto wallet security is essential for keeping transactions safe and private and ensuring they are carried out correctly. Users want to know their transactions are their own business, and for the system to function smoothly, each transaction must be reliable and trustworthy. Therefore, protecting the crypto wallet is more than just protecting your investment.
This article will explore the key threats to virtual storage and provide some crypto wallet security tips on how to store crypto safely.
What Can Threaten Your Crypto Wallet?
Crypto wallets are a popular form of digital storage, but they are vulnerable to various security threats. Between 2011 and 2019, global crypto exchange and wallet hacks caused $2.71 billion loss, increasing to $3.8 billion in 2022.
Common issues include deanonymisation, DoS attacks, and authentication problems. Deanonymisation allows third parties to identify the owner of a wallet through tracing transactions, while DoS attacks cause the wallet to become overloaded and fail to function properly. User authentication problems can allow unauthorised access to an account and fund theft.
Crypto wallets are also susceptible to phishing attacks, malware, SIM swapping, wallet software flaws, and physical theft or loss.
Phishing attacks steal sensitive information by masquerading as trustworthy entities in electronic communications, while malware infects devices, allowing attackers to log keystrokes, steal data, or take control of the computer. SIM swapping allows attackers to bypass two-factor authentication and access crypto money accounts. Wallet software flaws can also be a risk, as vulnerabilities can be exploited to access funds. Physical theft or loss, especially for a hardware wallet, is another threat that can lead to unauthorised access.
Signs Your Crypto Wallet Was Hacked
Detecting a hacked crypto wallet involves observing specific indicators. These include unrecognised transactions, balance discrepancies, and login anomalies. Unexpected transfers or withdrawals without corresponding outgoing transactions may indicate unauthorised access.
Balance discrepancies without corresponding outgoing transactions may indicate theft. Login anomalies, repeated failed attempts, or successful logins from unrecognised devices or IP addresses may indicate security breaches. Unexplained wallet settings changes or wallet provider alerts can also indicate unauthorised access.
If a wallet is compromised, it is crucial to disconnect the device from the internet, change all associated passwords, notify the wallet provider or support team, and consider freezing or locking the account temporarily until the issue is resolved. Acting promptly is crucial to protect your digital holdings from potential losses.
Crypto Wallet Security Best Practices
Follow these expert tips to establish a secure wallet and protect your digital assets.
Choose a Reliable Wallet Provider
To store digital assets securely, use wallets from a reliable and secure provider. Read reviews and research the crypto security protocols the provider uses before trusting the wallet. Prioritise reputable wallet providers, avoiding unfamiliar or suspicious options, as entrusting digital assets to reliable providers is crucial for asset integrity.
Secure crypto wallets from established, open-source providers like Ledger and Trezor offer secure offline storage, and software wallets like Exodus and Jaxx offer reduced vulnerabilities.
Use Strong Password and 2FA
To protect your account, use a unique password that consists of letters, numbers, and special characters rather than guessable common words like "password" or your date of birth. A password manager can help generate and store secure passwords. Also, avoid reusing the password across platforms.
Enabling two factor authentication (2FA) adds a second layer of security. It generates temporary codes for login, preventing unauthorised access to the account. Safely store backup 2FA codes in case of device loss.
Backup Your Wallet
Back up your digital wallet to prevent loss of funds in case of device damage. Create a backup schedule and stick to it to ensure a recent backup, protecting your accounts even if your password is compromised. Regularly backing up crypto wallet data and choosing a secure location for backup is crucial for safeguarding your storage.
Use Hardware Wallets
To ensure the safeness of your crypto, it is advised to store most of your holdings in a cold wallet, keeping them stand-alone and isolated, to avoid malware, phishing, and crypto exchange attacks. These can be USB-shaped devices or paper wallets. Only allocate an amount to exchanges and hot wallets that you are comfortable with potentially losing.
Hardware wallets, such as the Ledger Nano S and Trezor, offer a secure solution for storing private keys offline, ensuring their safety even in the event of a computer hack.
To protect your digital footprint, consider covering your microphone and camera and removing electronic devices from areas where you work with sensitive web3 blockchain assets. This will help minimise potential security risks and protect your crypto assets.
Update Your Wallet Software Regularly
Maintaining up-to-date blockchain software and hardware wallets is essential to protect devices from security susceptibilities and prevent unprecedented damage, as hackers often target these vulnerabilities to compromise crypto assets. Avoid wallets with long-abandoned systems.
Keeping your wallet software and apps updated helps maintain the latest security patches, protect your assets from known threats, and fix bugs regularly.
Secure Your Recovery Phrase and Private Key
Keep your private keys and recovery phrases secure, and avoid sharing them with anyone. Memorisation of your recovery phrase is risky, so store physical copies to ensure access in case of memory failure. Avoid taking photos of recovery phrases, as they can be easily hacked. Instead, print and reference the phrase in a way only you can understand.
Use Multi-Signature Wallet
Obtaining a multisig wallet is crucial for ensuring the security of your virtual currency, especially when dealing with significant holdings. These wallets offer enhanced security by requiring multiple private key signatures for transactions, reducing the risk of unauthorised access or fraudulent activity. Implemented using 2-of-3 or 3-of-5 combinations, these wallets are beneficial for businesses or individuals seeking to share control of their funds while maintaining security.
Using a multisig wallet eliminates reliance on a single person and prevents hacking. They support escrow transactions and decentralised fund management, reducing single points of failure. They offer flexibility in signature numbers.
Beware of Phishing Attempts
Phishing targets crypto owners via fake sites and emails to steal sensitive information. It's crucial to verify email URLs and the authenticity of sender addresses before interacting with links or attachments. Be sceptical of urgent requests for personal details and stick to trusted websites and contacts. Browser extensions that detect phishing sites can also enhance security.
Stay informed about scams and phishing techniques, as cybercriminals often create urgency or pressure to prompt immediate action. Familiarise yourself with warning signs and red flags to identify potential threats. If you encounter a suspected scam or phishing attempt, report it to the relevant authorities.
Verify software downloads, especially for blockchain wallets, to ensure their source and legitimacy. Purchase hardware crypto wallets directly from the manufacturer and avoid resellers. Be aware of potential threats and take extra precautions when interacting with wallet infrastructure.
Avoid Using Public Wi-Fi for Transactions
Ensure secure, private internet access when managing or transacting with your crypto wallet. Avoid using public WiFi when accessing your digital wallet, as it can be a target for hackers. Use a reliable VPN for digital wallets to encrypt traffic and make it harder for hackers to steal private keys.
Online crypto trades should be conducted on a secure wifi network, as public Wi-Fi is not encrypted and can lead to data leakage.
Bottom Line
As the digital money landscape evolves constantly, it is crucial to stay observant and proactive to protect your investments from potential threats.
Whether you use a hot wallet or a cold wallet, the obligation of creating secure crypto storage lies not only on wallet providers but also on users. By implementing proper security measures like avoiding public Wi-Fi and using cold wallets, crypto users can become the first line of defence against potential attacks. Prioritising security, staying informed, and taking proactive steps can help users enjoy the benefits of virtual assets while safeguarding their financial future. It is essential to know how to secure a crypto wallet and continuously learn and adapt to new practices as the crypto industry evolves.
