As cryptocurrencies, especially Bitcoin and Ethereum, grew in popularity, fraudulent practices developed in the market at the same time. For many users, the risk of losing money during hacks of digital wallets, platforms, and exchanges increased. The record for the number of hacker attacks was 2022, when $3.7 billion was stolen, in 2023, the amount decreased to $1.7 billion, but the number of hacks increased from 219 to 231. One of the top questions for investors was – how to protect crypto wallets.
Digital wallets were created to allow users to save numerous cryptocurrencies, manage them, send them to other users, receive them back, and analyze transaction history. However, not all cryptocurrency wallets have the same degree of protection and security measures. Also, the safety of storing funds depends on the actions of the users themselves, their prudence, and their proactivity in not disclosing secret passwords and keys.
What can be called a crypto wallet?
A cryptocurrency wallet is either software or a separate device.
A software crypto wallet can be accessed from a mobile device or through a website.
Hardware digital wallets provide offline security and are designed to be operated from a PC once they are physically connected.
Cryptocurrencies utilize private and public keys that allow users to conduct secure transactions, view balances, and store funds.
The key aspect is – how to secure your crypto wallet in order to protect funds from unauthorized access theft of private keys and funds.
Measure to protect crypto wallet data
The basics of how to secure your cryptocurrency are crucial for any investor.
Basic measures to keep your cryptocurrency data safe from hacking include two-factor authentication, PIN codes, complex/encrypted passwords and their offline storage, recovery phrases, updating software, using multiple wallets, backing up data, avoiding public Wi-Fi, having anti-virus programs, etc.
Hackers are driven by financial gain; they are constantly improving methods of obtaining the necessary data, and for this purpose, they create malware to find weak passwords, imitate the software of real cryptocurrency wallets, use emailing/phishing and requests to obtain data or recovery phrases, etc.
For example, in 2023, hackers sent emails on behalf of cryptocurrency exchanges such as Coinbase, which contained a link that unknowingly gave the user access to their assets.
Each type of wallet (hot or cold storage) combines certain security measures and convenience in the management of funds, it all depends on the needs of users.
What to consider when choosing a wallet
The main aspect of the safety of funds is choosing a secure crypto wallet. There are so many different digital devices on the market it is difficult for beginners to orientate which one to choose. A wrong decision may cause a loss of funds.
Particularly worth paying attention to the security features underlying the operation of the digital wallet and the presence of open-source code that allows users to control private keys. Also, brands with a good reputation in the market have positive reviews and provide third-party audits that confirm the reliability of encryption methods, timely detection, and prevention of cyber threats.
Fraudsters can mimic the software, thus gaining access to funds, so the lack of positive reviews and any information about the wallet should be especially alarming.
Strong password prevents data security breaches
A strong, encrypted password is a barrier to hackers. Many experts say that it is weak/simple passwords with memorable phrases that cause hacks for most cryptocurrencies.
Random password generators using numbers and special characters help create complex, encrypted access codes to reduce the risk of hacks. In addition, passwords need to be updated periodically to prevent potential data breaches.
Many digital wallets offer already integrated generators that make it much easier for users to use them and keep crypto wallets safe.
Another consideration is the key storage process. Hardware wallets allow information to be stored offline without hackers gaining access via the Internet.
Additional two-factor protection
You can increase security by enabling two-factor authentication. 2FA – when a user receives an additional short-term code or is required to undergo a biometric scan, use USB keys, or confirm a request via email to log in.
Digital wallet services have already implemented 2FA, which makes it much more difficult for attackers to access funds. In addition, if someone wants to use and log in, they will be notified immediately. But still, many users neglect this feature because of the inconvenience (going through several steps to get access to the record), thereby putting their funds at risk.
Secure storage of private keys.
For users, it is especially important to ensure the protection and secure storage of private keys. Whoever has the private keys will have full access to the assets. Such confidential information should be stored completely offline. For this purpose, you can use a USB flash drive, cold storage wallets, or a paper version.
Updating crypto wallet software
Hackers are constantly scanning platforms to identify vulnerabilities and exploit them. Therefore, with the emergence of new threats, crypto wallet software is constantly being improved, and updates are released on a regular basis. Although digital wallet services notify about upcoming system updates, users may miss out, so it is better to enable automatic downloads. On the users’ side, it is necessary to verify the release of updates and their implementation in the system.
Creating a copy of all transaction data
Backup protects against accidental deletion of data, theft, and system failure. Copies can be stored encrypted, on USB drives, or in hard copy. It is important that copies are created periodically and all information about transactions and changes is stored in a safe place with the user.
VPN encrypts traffic
Public Wi-Fi, an unencrypted network, is one method for hackers to freely access your keys. A VPN can mitigate the risk by encrypting traffic, hiding your IP address, and making it easy to access.
Alerts about suspicious activities
Some cryptocurrency wallets offer built-in alerts about suspicious activities. This helps you take quick action and respond to unauthorized transactions immediately.
Use a range of crypto wallets
Diversification of risks is possible by using multiple digital wallets. If even one is compromised, the assets stored in the other wallets will remain safe.
Summary
Crypto-finance is a large and very dynamic industry that provides opportunities for anyone from anywhere in the world to earn money. Minimizing the risks associated with cybercrime and obtaining data on savings has become a priority for most crypto investors and traders. Many prefer to store their funds using trusted digital wallet software providers with 2FA and password generators enabled, keep private keys offline, and update the system regularly.