Cryptocurrency security: best practices and challenges
Following a series of hacks in August, cryptocurrency hackers stole over $1.2 billion, intensifying concerns surrounding the broader adoption of crypto.
In 2024 alone, the industry lost $1.21 billion in digital assets to hacks and rug pulls across 154 different exploits. This marks a 15.5% rise from the same period in 2023 when losses surpassed $1 billion.
As a result, the importance of crypto security has become more urgent, emphasizing the need for best practices to keep funds secure.
When using a crypto exchange for your transactions
For many investors, the first step into cryptocurrency begins with a crypto exchange, where they can buy digital assets using traditional currencies like USD or GBP. These exchanges use crypto wallets controlled by the platform to store your crypto, typically secured with a password.
Challenges
However, if someone gains access to your exchange account, they could transfer your crypto elsewhere. Moreover, if a payment method is linked, they could purchase more crypto with your funds and send it to another wallet that is out of your control.
Security measures to protect your funds
Here are some key strategies to enhance your crypto exchange security.
Select a reliable exchange
First, ensure you’re using a reliable and reputable exchange. There are over 600 crypto exchanges worldwide, but not all are trustworthy.
Some well-known platforms like Coinbase and Kraken offer enhanced security features, including offline cold storage for assets and proof of reserves.
Others, like LetsExchange, refrain from storing users’ funds. By offering non-custodial security, they protect users’ funds.
Enable two-factor authentication (2FA)
Two-factor authentication (2FA) is another essential security measure that most exchanges now support. This feature requires you to approve any new login attempt from a device in your possession, preventing unauthorized access even if someone has your password.
Along with this, using a secure and unique password for your account is critical. If login credentials from one site get compromised, hackers can use that information to access other accounts if the same password is reused.
Do not fall for phishing scams
It’s also essential to remain vigilant against phishing attempts. These scams trick people into revealing sensitive information, often through fake emails, websites, or messages that appear legitimate. Scammers might even impersonate customer support to get you to hand over critical details like your seed phrase or private keys. Always double-check the authenticity of any communication related to your crypto accounts.
Use cold wallets for long-term holding
Moving your crypto to a self-custody wallet—especially a cold wallet—offers more robust protection for long-term storage.
Cold or hardware wallets store your private keys offline, making them immune to online hacks. Devices like the Ledger Nano S Plus are popular choices for this purpose. Unlike hot wallets, which are always connected to the internet, cold wallets only connect when you need to authorize a transaction, significantly reducing the risk of theft.
Double-check wallet address before sending funds
When making crypto transactions, it's essential to double-check wallet addresses to avoid mistakes. A single error in entering a recipient's address can lead to irreversible loss of your funds.
Scams like address poisoning, where attackers create a similar-looking wallet address, are designed to exploit this mistake. Always compare the entire address before sending funds.
Maintain a secure internet connection
Maintaining secure internet connections while trading is another important factor. Public Wi-Fi networks are prime targets for man-in-the-middle attacks, where bad actors intercept your data.
Using a private or virtual private network (VPN) can safeguard your internet traffic from being spied upon.
Avoid disclosing your crypto transactions
It’s advisable not to publicize your crypto transactions. While blockchains like Bitcoin and Ethereum make transaction data visible, associating a wallet address with your identity could expose you to targeted phishing attacks or physical risks.
Bottom Line
In summary, protecting your cryptocurrency involves choosing trustworthy exchanges, safeguarding your wallet keys, and practicing cautious behavior when transacting. The decentralized nature of crypto means that security is ultimately in your hands.