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How to Protect Your Cryptocurrency in 2023?

Ashesh Anand
Jan 12, 2023

What exactly is a Cryptocurrency Wallet?

An app, service, or physical wallet like a USB stick that contains public keys and private keys is referred to as a cryptocurrency wallet or digital wallet. This keeps your bitcoin safe and secure. When conducting cryptographic transactions, you can encrypt and decode using these keys, which are strings of complex letters and numbers.

No central controlling body, such as the federal government, the central bank, or an insurance company, issues or insures cryptocurrency wallets. A public key is comparable to a username for a bank account, and a private key is comparable to a PIN or password. You must protect these secret keys or your entire wallet risk being stolen in a matter of seconds.

In general, the majority of bitcoin wallets provide a variety of security features, including complex passwords and secret phrases. Any wallet cannot be easily compromised. But cryptocurrency users should start adopting additional security measures due to an increase in attempts to hack bitcoin wallets and exchanges.

Also Read | Advantages and Disadvantages of Cryptocurrency

How do Hackers Steal Crypto?

Hackers mostly utilize one of two techniques to steal cryptocurrency: either they steal it outright or they deceive victims into handing it to them. When people or companies wish to invest in cryptocurrencies, they frequently use a blockchain exchange. This procedure entails opening an account and funding it with money that has been converted into the chosen digital currency. The exchange is the sole party with access to the private keys that are used to control and store the cryptocurrency in a custodial wallet, where it is typically kept.

Like traditional banks, blockchain exchange networks will only keep a certain amount of cryptocurrency in "hot" wallets to support consumer transactions. While cold wallets hold the private keys that are required to access bitcoin offline, hot wallets are made to store cryptocurrency online.

Governments now lack the financial processes necessary to protect cryptocurrency deposits in the event that an exchange is closed, unlike centralized banks. Crypto customers are typically out of luck if their digital money is lost or stolen when cyberattacks target an exchange.

It is practically impossible to find the hacker or group of hackers that stole the money due to the nature of blockchain networks. It's a good idea to look at how hackers get into cryptocurrency wallets before discussing how to defend yourself from such attacks. You can find a list of their strategies below.

Phishing attacks:

Phishing attacks are a frequent way for hackers to steal information. Attackers use cloned websites that eerily resemble genuine cryptocurrency exchanges to trick their victims. Additionally, the schemes' domain names are chosen specifically to be misleading. For instance, use Binance.co rather than Binance.com.

Targets are readily duped into visiting the cloned websites and entering their crypto account details because the websites are frequently identical. Data is sent to the hackers after this information is entered. Once they get this data, they utilize it to log into the victim's actual account on a reputable cryptocurrency website.

Also Read | Bitcoin and its revolution in the crypto market

Fake hardware wallets:

You should be wary of another type of hacking called fake hardware wallets. Hackers typically target people who already own a hardware wallet and persuade them into using a tampered replacement that is intended to steal cryptographic keys.

The target receives a package containing the modified hardware wallet in the first phase of the hoax. A message informing the target that their present device is weak and needs to be replaced with the provided wallet is typically included in the bundle.

The new part is typically provided with instructions requesting the user to connect the device to a computer and enter the recovery key for their crypto wallet. Once the keys have been entered, they are recorded and sent to the hackers, who can then use them to open the blockchain wallet. By getting access to the wallet, they can steal money.

It's crucial to remember that hardware wallet vendors never request their clients' recovery keys. Additionally, they never provide replacements unless you specifically request them.

Exploits through SMS 2FA Verification:

SMS-based two-factor authentication (2FA) is one of the most widely utilized verification methods available today. However, social engineering and endpoint exploits can abuse it.

Malicious actors may occasionally use SIM swapping to intercept SMS verification messages. SIM-swap schemes entail pretending to be a target in order to fool telecom workers into giving up ownership of a SIM card number. Hackers can eavesdrop on 2FA messages related to a user's cryptocurrency accounts when ownership is transferred.

More sophisticated 2FA interception techniques make use of SS7 (Signaling System 7) characteristics. Communication across various phone networks is handled via the telecommunications protocol known as SS7. In addition, it is crucial to the 2FA SMS procedure.

Malware:

Hackers are attacking well-known operating systems like Windows and macOS with a variety of malware variants. Some of the infections are designed to recognize copied bitcoin addresses and replace them with hacker-owned wallet addresses. Successful exchanges typically result in the delivery of cryptocurrency to unanticipated addresses under the control of hackers.

The primary method used by earlier iterations of the malware to infect computers was to deceive victims into installing dangerous software. Targets are now, however, occasionally steered to websites that contain malware. The worms look for device exploits and infect crucial clipboard modules as soon as they enter the page.

In other cases, workers at cryptocurrency exchanges are the target. Having access to their computers frequently aids in jeopardizing crucial exchange infrastructure.

Also Read | What is Malware? What are the signs of Malware Infection?

How Can Crypto Be kept Safe From Hackers?

Consider some security best practices for handling and investing in cryptocurrencies.

Security Tips for Protecting your Wallet

Use a Few Different Wallets:

Don't store all of your cryptocurrencies in one wallet; for example, you should have separate wallets for your primary portfolio, airdrops, and daily transactions. This is one of the greatest strategies to safeguard your cryptocurrency wallet when it comes to minimizing the effects of any hacker activity on your wallet. To avoid catastrophic losses, you should spread out your cryptocurrency investments among several wallets.

Make Sure Your Internet Connection Is Secure:

Using public Wi-Fi or unprotected internet is one of the ways you might allow a hacker access to your device when wondering things like "can your crypto wallet be hacked? Use a secure internet connection and a VPN for the highest level of protection whether trading online or using your crypto wallet.

A VPN's job is to protect your surfing activities from hackers and to assist in changing your IP address and location. By encrypting a user's online traffic, a virtual private network (VPN) can change their IP address and location. VPNs are a simple way to protect users' internet data and browsing activities from outsiders, like hackers.

Consistently Change Your Passwords:

Hackers may find it quite simple to guess your password and gain access to your cryptocurrency wallet if you are known to use a specific password across a number of different locations or websites. One of the solutions to "how to safeguard your crypto wallet" is to routinely change your password and use unique/complex passwords.

Utilize two-factor authentication (2FA) if it's an option on your device or wallet to further increase security against hackers. You might use an online password manager, which can always create really strong passwords, to prevent password repetition.

Also Read | What is Public Key Encryption?

Watch out for phishing:

Another method hackers use to access people's cryptocurrency wallets and take their coins is phishing. To steal cryptocurrency from unsuspecting people, hackers often employ fraudulent emails and advertising that you click on. Hackers spoof the original crypto company's email or advertisement to trick people into entering their security keys and other sensitive information.

Protect your local device:

When your computer or mobile device, depending on what it is, is not secured, someone can easily access your cryptocurrency wallet and move your coins to another one. Additionally, install firewalls and antivirus software on your device to fend off viruses and online attacks. Enable the fingerprint or face detection features on your smartphone if they exist for optimal security.

Also Read | Difference between On-Chain and Off-Chain Transactions

Making use of an Authenticator app:

Your exchange account might be even more secure if you use an authenticator tool like Google Authenticator for 2FA. Since withdrawal codes from authenticator apps are not sent via SMS text messages, an attacker cannot obtain your withdrawal code even if they take over your phone service or mirror your messages.

The hacker would need access to your phone if you utilize an authenticator app in order to obtain the 2FA code. That is a much more effective layer of protection than SMS.

An attacker could be able to get through the exchange's security even if you have 2FA enabled. In this situation, you can unintentionally lose your cryptocurrency. You can also be subject to withdrawal holds or other rules that prevent you from accessing your cryptocurrency if the exchange is compromised. This is where taking your cryptocurrency out can be helpful.

Utilize a cold wallet:

A hot wallet and a cold wallet are the two storage options available to you for cryptocurrencies. Cold wallets use real hardware resembling a USB drive to safely store cryptocurrency offline. These wallets are connected to a private, encrypted key, which is a numeric code that enables the owner to unlock the wallet and gain access to the digital assets it contains.

These physical wallets are less vulnerable to cyberattacks and a safer alternative to hot wallets. Naturally, cold wallets have a disadvantage as well. Users risk losing access to their cryptocurrency if they forget their wallet password. Users of hot wallets can instantly access and use their money online. The fact that these online wallets are vulnerable to assaults, however, is a serious drawback.

For instance, if a hacker gains access to a user's investment account, they can then use this online storage mechanism to steal all of the user's money. One of these instances is the massive assault in 2019 on the Japanese exchange known as BITpoint. This exchange revealed that a hack impacting more than 50,000 customers resulted in the unlawful withdrawal of $32 million from many hot wallets. Users who had cold wallets and cash on hand were unaffected, according to BITpoint.

When you utilize a cold wallet, the likelihood of a hacker accessing your portfolio is virtually nonexistent. Even exchanges, like the Japanese exchange BITpoint, claimed in 2019 that their cold wallet was unaffected when they had a cyberattack. Cryptocurrency cold wallets are encrypted, which preserves your secret keys and prevents anybody else from accessing them except for you.

Also Read | Hot Wallet Vs Cold Wallet - How are they Different?

Conclusion:

As more people download wallets and sign up for networks for the first time, the cryptocurrency market keeps reaching new highs, but this surge in activity also attracts more crooks who want to take advantage of the new users.

Utilizing 2FA, withdrawing from an exchange, backing up your seed words, avoiding open public Wi-Fi, and using a VPN is just a few of the techniques we've discussed to secure your cryptocurrency from this new breed of criminal.

Scammers will probably find new ways to steal cryptocurrency in the future, and we'll update this page when they do. These are some of the best strategies to safeguard your cryptocurrency in the interim.

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How to Protect Your Cryptocurrency in 2023?

What exactly is a Cryptocurrency Wallet?

How do Hackers Steal Crypto?

Phishing attacks:

Fake hardware wallets:

Exploits through SMS 2FA Verification:

Malware:

How Can Crypto Be kept Safe From Hackers?

Use a Few Different Wallets:

Make Sure Your Internet Connection Is Secure:

Consistently Change Your Passwords:

Watch out for phishing:

Protect your local device:

Making use of an Authenticator app:

Utilize a cold wallet: