A few months ago, Hackers stole about $600 million from a blockchain network connected to the popular Axie Infinity online game in one of the biggest crypto attacks to date. It’s events like this that confirm the crypto isn’t safe, and that an investor must do everything they can protect their assets from hackers and criminals.
In this article, I’ll walk you through the three dangers you face while owning cryptocurrencies and six solutions to help you keep your assets safe.
Let’s start with the dangers. Since blockchain is supposed to be extremely secure and unalterable, many individuals have dubbed this technology as “unhackable”. However, recent incidents have unfortunately shown that hackers can access blockchains in certain situations. Here are the three most common dangers to be aware of!
The 51% attacks
During the verification process, individuals referred to as “miners” will review the transactions to ensure they are genuine. When one or more hackers gain control over half of the mining process, there can be extremely negative consequences. For example, the miners can create a second version of the blockchain, referred to as a fork, where certain transactions are not reflected. This allows the miners to create an entirely different set of transactions on the fork and designate it as the true version of the blockchain, even though it is fraudulent. This also allows the hackers to double spend cryptocurrency. These 51% attacks are more common on smaller scale blockchains because it is hard for miners to gain significant control over larger and more complex blockchains.
Sometimes, there may be security glitches or errors during creation of blockchain. This may be more common with larger, more intricate blockchains. When this occurs, hackers looking for a way in can identify the vulnerabilities and attempt an attack. This has transpired with smart contracts, which use a blockchain network to operate. Common functions of smart contracts include assisting with the financial aspect of contract dealings and automating tasks. Legal professionals may encounter smart contracts in their practice, whether using them internally or through exposure from cases and client issues. If a security flaw exists on the blockchain network where a smart contract operates, hackers may be able to steal money from users without being detected because the fraudulent activity is not reflected. Unfortunately, since blockchain transactions cannot be altered, the only way to get back stolen money is to make a fork that all users recognize as the authoritative blockchain.
Many blockchain hacks have happened on exchanges, which is where users can trade cryptocurrency. If the security practices surrounding the exchanges are weak, hackers will have easier access to data.
Next we’ll outline the six steps to protect your crypto. These steps are simple and effective and can be used by anyone. We start with the most important one!
1. Use a Cold Storage Hardware Wallet
Buy and use a cold wallet, also known as a hardware wallet. Cold wallets do not connect to the internet therefore, they are not prone to cyberattacks. Storing your crypto and private keys in a cold wallet, is the most viable option as these come encrypted, keeping your crypto and keys secure. There are many versions, and the industry standard and best choice at the moment is the Ledger Nano, as its a great option for everyone.
To confirm this strategy, in 2019, the Japanese exchange BITpoint discovered an unauthorized withdrawal of $32 million from its hot wallet in different cryptocurrencies targeting more than 50,000 users. The exchange held five cryptocurrencies in its hot wallet: Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and Ripple. However, BITpoint clarified that its cold wallet and cash holdings were not affected by the incident. That’s more than enough evidence to get a hardware wallet.
2. Use a Secure Internet Connection
While trading or making crypto transactions, use only a secure internet connection and avoid public Wi-Fi networks. Even when accessing your home network, use a VPN for additional security. A VPN changes your IP address and location, keeping your browsing activity safe and private from threat actors.
3. Maintain Multiple Online Wallets
Since there is no limitation for wallet creation, you can diversify your cryptocurrency investments in multiple wallets. Use one wallet for your daily transactions and keep the rest in a separate wallet. This will protect your portfolio and mitigate the loss of any breach to your online crypto account. The general rule of thumb is to keep 95% of your crypto in a hardware wallet, and 5% in an online wallet. Unless your staking your crypto. If staking, then its a calculated risk of keeping a portion of crypto on an exchange that is open to attacks by hackers.
4. Secure Your Personal Device
Make sure your personal device is up to date with the latest virus definitions to defend against newly discovered vulnerabilities. Use a strong anti-virus, firewall, and password to improve your device’s security to avoid hackers from taking advantage of the weakness by writing code to target the vulnerability.
5. Change Your Password Regularly
We cannot underrate the importance of a strong password while talking about security. According to a study, three-quarters of millennials in the US use the same password on more than 10 devices, apps, and other social media accounts. It also stated that most of them were using the same password in over 50 different places. Make sure you have a strong and complex password, which is difficult to guess, and change it on a regular basis. If you’re unsure how strong your password is, check out this matrix that shows how fast a hacker can find your password with the brute force method. Use separate passwords if you have multiple wallets. And Opt for two-factor authentication or multi-factor authentication for additional security across exchanges.
6. Don’t Get Phished
Phishing scams via malicious ads and emails are rampant in the cryptocurrency world. Be careful while making crypto transactions and avoid any suspicious and unknown links.
In a recent cryptocurrency heist, a hacking group “CryptoCore” targeted cryptocurrency exchanges via spear-phishing campaigns. Attackers stole cryptocurrency worth $200 million in two years, targeting companies in the US and Japan since 2018. ClearSky stated that CryptoCore initiated a reconnaissance phase to identify the email accounts of the cryptocurrency exchange’s employees and security executives before a spear-phishing attack. These attacks were performed using fake domains impersonating affiliated organizations and employees, and by embedding malicious links in documents via emails.
The average investor didn’t even stand a chance when it came to this sort of attack, so choose the crypto exchange you use wisely.
Well, there we have it, the three most common dangers, and six steps to keep your crypto investments safe.
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