When you deposit $100,000 to your bank account, your money is insured by the government’s registered Deposit Insurance Corporation (e.g. FDIC or Federal Deposit Insurance Corporation for the U.S.) This is a form of assurance to the depositors that when everything goes south, whether the bank becomes a victim of cybertheft or it is not able to recuperate from its liabilities, a percentage or chunk of the amount from their bank accounts are safe and will be returned to them.
However, this form of assurance does not apply to cryptocurrencies. Well-known cryptocurrency exchanges like Coinbase and Binance have been subject to hacking for the past years. So, if cryptocurrency exchanges and wallets are not safe, should this be a sign for you to quit in crypto? Definitely NO, as there are methods to safeguard our assets and avoid it from the eyes and wallets of intruders.
Tips to keep your crypto wallet safe
Cybercriminals use highly-advanced tools and techniques to hack crypto exchanges and wallets. Here are tips on how you can secure your crypto wallets and reduce the chances of getting compromised:
1. Use a cold wallet
There are two types of crypto wallets that you need to understand:
- Hot wallets are wallets connected to the internet such as Exodus and MetaMask.
- Cold wallets are offline wallets, not connected to the internet, such as a USB device.
Hot wallets can be logged into from anywhere at any time, but come at a greater risk of data theft and breaches, while cold wallets require some technical knowledge to set up and are considered safer as they are usually stored in external devices. The only drawback to offline wallets is that you lose all your data and information once you lose the device — no data recovery option unlike in hot wallets.
Ledger is one of the best examples of cold wallets or hardware wallets. The company uses the highest level of security as cryptocurrency private keys are stored under several layers of security, in a USB stick that comes with sophisticated security measures.
2. Use a 2-Factor Authentication (2FA)
2FA provides an additional layer of security to your account. When someone tries to log in to your account from an unknown device (devices you have not authorized and/or have not used ever), you will receive a message or an email with a verification code before successfully logging in. This additional step makes it challenging for hackers to access your account. They would need this verification code, for which they may call and try to convince you to hand it over to them.
The rule of thumb is, you should never share your 2FA code, your One Time Password (OTP), or any other secret verification code with anyone, even if they claim to be from the technical support team. No one, even banks, will ever call you to ask for your credentials, passwords, or PIN.
3. Keep seed phrase in a safe place
A seed phrase is a collection of 12 to 24 random words generated by a wallet service such as MetaMask. This seed phrase has to be entered in the exact same sequence you get when signing up.
Unfortunately, there is no “forgot your password” option you can rely on. Hence, if you lose your seed phrase, you also lose access to your wallet, with no exceptions. It is recommended to keep this seed phrase in a safe place offline. Simply write it on a piece of paper and put it away where no one can see it except you. Better yet memorize the entire seed phrase as no one could ever steal something that’s already in your memory.
4. Use a strong password and change it frequently
According to a study, in the U.S. alone, 75% of millennials use the same password across multiple devices. One ridiculous fact is that there are still people who use 123456 and the word ‘password‘ as their passwords.
Now, imagine putting your hard-earned cryptocurrency in a wallet with these passwords. Will you be surprised that someone has gained access to your wallet?
On the contrary, completely random passwords are the best passwords that will really challenge hackers. You need to write them down somewhere in a safer location if you can’t remember them though.
Here are top tips to creating a strong password:
- Use a combination of alphabets, numbers, and special characters
- Use lowercase and uppercase
- Minimum 8 characters
- Randomly generated
- Never use names and birthdays of your family members.
5. Keep your investment in multiple wallets
As the saying goes, “Never put all your eggs in one basket.” Which sounds safer, putting two dozen eggs in one basket or dividing them equally into four baskets?
If that one basket with all two dozen eggs in it breaks, you’re left with nothing. Now if you divide it into 4 separate baskets, and one breaks, you still have 3 baskets full of eggs.
The same logic applies in the world of finance, whether it is banking, stocks, or even cryptocurrency.
Instead of putting all your NFTs and cryptocurrencies in one wallet, divide them in at least 2. Use one “hot” wallet for day-to-day transactions, and a “cold” wallet for HODLing.
6. Be wary of scams on social media platforms
In one social media post about cryptocurrencies or NFTs, you will surely find one user who leaves a comment stating that they have doubled their crypto investment in just 24 hours by signing up in the certain link. More often than not, if you fall for these comments, you will surely be in the long list of crypto scam victims.
This is happening at such an alarming rate that crypto influencers with millions of followers or subscribers are pushing social media networks to take serious actions.
Regardless if social media sites do their part in battling misinformation and scamming, people should keep in mind that there is no such thing as easy money, even in the world of crypto. Crypto experts never fail to remind us to keep an eye on these obvious red flags, yet some people still fall for it.
7. Be wary of phishing attacks
A phishing attack happens when hackers deceive you into entering your credentials into a legitimate-looking website.
This usually starts as an email from the crypto exchange or wallet you have an account with, stating you must immediately reset your username and password because your account was compromised. They will provide you the link where you must reset your account. When you click on the link, you will be redirected to the homepage of the website. The website looks legit and nothing sketchy to make suspicions of, except that it’s not the actual link from the exchange or wallet.
To avoid being a victim of phishing attacks, always ensure that the link to the website you’re accessing starts with HTTPS and is the correct URL of the site.
In February 2022, cryptocurrency trading platform Wormhole was attacked, resulting in the loss of more than $320 million. This goes on to show that regardless of the level of security, you can never rely on storing cryptos in any online exchange. It’s still best to store your digital coins in offline and online wallets to mitigate risks.
8. Only use your wallet in a secure internet connection
Nowadays, working from home is a blessing. You can now work remotely for companies while enjoying your favorite cup of coffee at a beach hotel.
However, public areas with WiFi are not secure and definitely should not be an option when making online transactions from banks or crypto wallets. If it can’t be avoided to use public networks, make sure you use a reliable virtual private network or VPN.
9. Always double-check the recipient’s wallet address
Sending and receiving cryptocurrency is done through the use of a wallet address. It is a string of alphanumeric characters typically 26 to 35 characters long. Before sending the cryptocurrency to another wallet, always double-check the recipient ID. Manually typing a wallet address is not recommended. Instead, users must apply the copy-paste method.
Malicious software can edit and paste the wrong wallet address belonging to a hacker. Once the transaction is made, it can never be reversed on the blockchain network. Hence, it’s better to be safe than sorry.
10. Use updated antivirus programs
Many antivirus programs today provide amazing protection features against crypto hacking and phishing attempts. These programs scan all incoming email and flag potential phishing attacks to safeguard your wallets.
Always buy licensed versions of antivirus software and keep them updated with the latest database.
The importance of security
As you’ve read, there are multiple ways hackers and scammers can try to get a hold of your hard-earned cryptocurrency. You could lose some of your crypto to scams or cyberattacks if not careful enough.
But the best ways to hold your cryptocurrency and keep it safe is by following the simple tips provided above. Our investments are safe if we keep vigilant of the things we see on the internet. When in doubt, seek the advice of experienced crypto traders/ influencers.
