How To Protect Your Cryptocurrency From Theft

CompareHero.my Team

CompareHero.my Team

Last updated 02 March, 2022

From October 2020, nearly 7,000 people have reported losses of more than $80 million to scams. In comparison to the previous year, the cases reported were twelve times higher, while the total losses were nearly 1,000% higher. 

It’s become so common to hear stories of people being duped into visiting websites that appear to provide possibilities to invest in or mine cryptocurrencies, but are actually scams. 

Unfortunately, it isn't easy to track an attacker, as they often disappear into the abyss of the anonymous network. With that said, it doesn’t mean you need to say goodbye to a good night’s sleep if you plan to own any cryptocurrencies. Rather, your best protection comes from understanding the nature of cryptocurrencies. Here are a few ways to help you with that. 

A hybrid approach in managing digital wallets

Online wallets, also known as hot wallets, are the most common method for crypto investors to store their currencies. However, keeping all cryptocurrencies online is dangerous, as pro hackers have the power to attack your account if they want to. 

Adopt an offline wallet (or a “cold wallet”).

This, of course, will depend on how you’re utilising your cryptocurrencies — whether you’re an active trader or a long-term investor. Keep what you don’t usually need in a cold wallet. A cold wallet is a hardware (looks like a thumb drive) that can be unplugged from the Internet. 

Better safe than sorry! 

Passwords

Besides storing cryptocurrencies in different wallets, passwords deserve an equal amount of spotlight. For example, using the same password across all your wallets and accounts puts you at a higher risk for hackers to access your accounts. 

To avoid data breaches, create solid passwords, different passwords for other accounts with two-factor authentication, and never forget to change the passwords regularly.

On top of the importance of increasing your password’s strength, don’t forget them. Note it down physically or look for a trustworthy password manager to help reduce the risk of losing the entire crypto wallet. 

Stefan Thomas, one of the few early investors of Bitcoin, has admitted that he has lost his fortune by forgetting the password of his hard drive (IronKey). A mistake that cost him £100 billion (estimated amount). 

Cautious with internet connection 

Hackers have been known to set up bogus Wi-Fi hotspots or utilize public Wi-Fi to entice unwary web browsers. 

A hacker’s goal is to deceive users to log on to their server, which allows them to take the victim’s account names and passwords and send them to phishing or malware sites. On top of that, everything on the victim’s devices, including files, will be exposed. 

For example, a proof-of-concept project called CoffeeMiner has shown the threats of connecting to public Wi-Fi. The hacker created a dangerous virus that seeks to invisibly utilise all devices connected to that Wi-Fi for its own benefit. 

They can also get access to your social media, documents, or even financial accounts without you even realizing that something has gone wrong. What’s more, is that you can lose all of it in seconds. 

Put simply, don’t connect to an unknown connection. If the internet is a must for you while travelling, bring your own Wi-Fi with you - a mobile hotspot or separate device. However, if you can’t attempt any options above, install a software firewall, or turn on a VPN when you connect. 

Be aware of internet traffic

Log-in pages that look almost similar to the real thing? It could be a phishing scam. 

Many who have a cryptocurrency wallet have been using a mobile app to keep track of their funds. But, malicious hackers are driven to target investors with mobile phishing attacks to steal your login credentials.

One of the best ways to prevent cyberattacks, viruses, or scams is by installing high-quality security software. For instance, a Web Application Firewall analyzes websites and apps to monitor and safeguard the system from cyberattacks.

Avoid sharing the secret key

A secret key is used to verify that the person sending or receiving the digital currencies is the wallet's owner. Therefore, consider adopting a paper wallet. The process simply involves printing the secret key and corresponding address on a paper sheet. It is one of the safest techniques to keep your secret key away from any possible digital threats.

Before entering your secret key, double-check that you can trust the downloaded software or website that asked for it. Never give up your Secret Key to anybody online, regardless of how trustworthy they appear to be. Likewise, be wary of anyone who claims to require your Secret Key immediately for any supposed urgent reason, financial or otherwise.

Avoid trusting any unreliable cryptocurrency exchange, wallets, brokerages, or mobile apps

Before deciding which platform to use, investors should carefully review the security aspects of each platform to understand how their data is managed. When it comes to keeping your crypto safe, even entities that can be trusted need to have multi-factor authentication, SSL/TLS encryption, and air-gapped devices kept offline. 

For two main reasons, cryptocurrency security experts advise against keeping any digital currency assets on an exchange. First, if the exchange is hacked, you could lose all your assets. Second, if the exchange maintains your cryptocurrencies on an IOU basis, it means that if the exchange goes bankrupt, you may not be able to retrieve your funds.

It is an extremely crucial step when it comes to selecting any third parties between you and your cryptocurrencies. The top priority is definitely safety — security standards, the safety of funds, security team, user-protection security program, transparency, and user data protection.

The CompareHero.my team is comprised of many talented individuals, sharing their knowledge, experiences and research to help others make better financial decisions.