As the world seems to be embarking on a massive adoption of cryptocurrency, the issue of security may deter many. The blockchain technology underlying these digital assets is inherently secure. A priori, cryptos should be too. But are they really? What to do to secure your cryptocurrencies? Here are some answers.
Are cryptocurrencies secure?
Cryptocurrency is probably the best-known application of blockchain. This technology has created a secure digital ledger for all digital asset transactions (crypto, NFT, smart contract). Logic dictates that cryptocurrencies are 100% secure. But is this really the case?
Understanding Cryptocurrencies
To put it simply, cryptocurrency is defined as virtual currency secured by cryptography. This is built on the blockchain which enables secure online payments with digital tokens.
The term cryptocurrency refers to one of the thousands of digital currencies that currently exist in the ecosystem. Bitcoin (BTC), Ethereum (ETH) and Solana (SOL) are among the most common (and certainly the most valuable).
Cryptocurrency also falls under a peer-to-peer payment system. It does not depend on banks to process transactions or on central governments to create currencies.
Cryptos operate on decentralized networks, which allows them to operate independently without any central authority. Everything is based on complex calculations where arbitrariness does not intervene.
What about security?
Speed, low cost, security and accessibility are probably some of the main advantages of cryptocurrency. Nevertheless, many remain skeptical about the security aspect of crypto.
How can it be secure if it is not governed by a central authority? What would prevent malicious actors from creating fake tokens or making fraudulent cryptocurrency payments?
For transaction security, cryptocurrency uses cryptography. It is a technology for encrypting, securing and protecting information in computer systems.
An advanced network of powerful computers operates to keep records (information) of all cryptocurrency transactions. Thousands of individual records are kept and checked against each other, helping to prevent fraud. It also reduces the chances of fake tokens.
Blockchain, the technology behind cryptocurrency, is particularly complex. Because of this complexity, it is difficult for hackers to compromise it. What makes cryptocurrencies secure. Cryptocurrencies will be all the more secure if the systems involved in the transactions apply ad hoc standards.
Security standards for cryptocurrencies
Systems involved in transactions, including exchanges and mobile apps, must adhere to CCSS (cryptocurrency security standards) to protect user assets.
CCSS refers to a series of steps to follow when configuring a system’s security protocol. These include the establishment of:
- Key generation
- Portfolio creation
- Key storage
- The use of the key
- The Anti-Key Compromise Policy
- Key holder grant/revocation policy and procedures
- Third-party audits
- Data sanitization policy
- Reserve evidence
- Log audits
By choosing an exchange, a crypto company or a blockchain organization, users and investors have every interest in opting for services that meet these standards.
The risks associated with cryptocurrency
Despite the intrinsic security linked to the blockchain, cryptocurrencies present risks, especially when the human factor comes into play. It is the human who commits imprudence by losing his key. It is still the human being who steals and cheats. Beyond volatility, a risk that comes with digital assets, crypto is linked to many other issues.
The loss of keys
The public and private keys secure the cryptocurrency. By losing the private key, the user loses access to their assets.
Phishing
Phishing is one of the earliest forms of cyberattacks and existed long before the emergence of blockchain and cryptocurrencies. In the cryptosphere, the attacker attempts to obtain the target’s private key and other sensitive information.
Email containing a malicious link remains the primary vector for phishing attacks. Nevertheless, cybercriminals are increasingly using social media or SMS (and even voice calls) to reach victims. Hackers can target a personal crypto wallet, an ICO (Initial Coin Offering) or cryptocurrency exchange.
Regardless of the channel chosen, the attacker most often impersonates an official organization, a reliable source or a legitimate person to gain the trust of the target. Once the victim shares their personal data, the information is used to steal or transfer crypto funds.
Ice phishing
Ice phishing is a sophisticated cyberattack that requires Web3 users to manually sign and approve permissions for hackers to spend their tokens.
In a report published on its blog, the blockchain security company Certik explains: “The hacker just needs to trick a user into believing that the malicious address they are granting their approval to is legitimate. Once a user approves permissions allowing the scammer to spend tokens, the assets are likely to be depleted.”
The many scams
Cryptocurrency users are also exposed to many scams, the most common of which are:
- The investment scam. Scammers attract targets with this type of catchphrase: “get rich quick” or “risk-free investment”. Here, the invested crypto goes directly to the scammer’s wallet.
- The love scam. In this scheme, the attacker initially gains the trust of the target. Once a report is made, the victim is solicited to send cryptos to the scammer.
- Identity theft scam. The hacker can impersonate a celebrity, a brand, a company, a government organization to deceive the victim.
- The rug pull. Here, the scammer offers a new crypto or NFT opportunity that requires funding. Once the project initiators receive payment, they disappear, leaving their investors with no way to recover the funds.
- The upgrade scam. The target receives a fraudulent upgrade that allows the attacker to extort their private keys.
- SIM swapping scams. This happens when an attacker obtains a copy of the victim’s phone’s SIM card. The malicious actor can thus access the phone’s data, including the 2FA codes.
- Fake crypto exchanges or fake NFT marketplaces. Inexperienced investors may be tricked into investing in fraudulent exchanges/marketplaces.
- Doxxing. In this case, the scammer sends emails or text messages claiming to have sensitive/compromising information about the target. The latter must pay a ransom in crypto otherwise his information will be published online.
How to secure your cryptocurrencies?
The simple fact of being aware of all the risks associated with cryptocurrencies already allows you to protect yourself. This allows users to take the necessary steps to secure their assets and avoid scams. These few good practices and cyber-hygiene reinforce the security of cryptocurrencies.
Do research on exchanges
Before investing, it is imperative to take the time to check the chosen exchange by consulting, for example, the opinions on the platform. By browsing the web and cross-checking the information, it is quite easy to get an idea of the reputation of an exchange and thus make an informed decision.
According to security experts, one should only use exchanges and wallets that meet cryptocurrency security standards. This includes, among other things, multi-factor authentication or SSL/TLS encryption.
Focus on secure storage
Storing cryptocurrencies in a wallet is one thing, but keeping them safe is another. Each digital wallet has its own characteristics, security standards, technology and advantages. For the user, it is important to consider all these factors before choosing the most suitable wallet for security needs.
Use a hybrid strategy
Hackers mainly target online wallets. Using offline wallets for cryptocurrency storage and keeping only a small amount online can be a good idea. Offline storage requires the use of a hardware wallet. These are devices that most often look like small USB sticks.
Keep the private key secret
The user needs a private key to process a transaction. He must imperatively keep it secret, stored in a safe place.
Use a strong password
It is important to set a strong password to access the wallet and/or exchange account. Experts recommend a long, strong and unique passphrase or password combined with 2FA authentication.
Apply two-factor authentication
Two-factor authentication adds an extra layer of password security. This reinforces access to the wallet or exchange account.
Securing the Internet
It sounds obvious, but you should never connect to public Wi-Fi to access a crypto wallet or exchange. In addition to this good practice, the performance of the firewall should be regularly checked. The crypto expander should also set a strong password for the router and avoid using the default password provided by the ISP.
Avoid clicking on dubious links
Instead of clicking on a link in an email or an SMS, it is better to enter the address of the site to be visited. The fraudulent link is sometimes very similar to a legitimate link with only a few imperceptible difference characters. Entering (and checking the redirecting site) is still the best way to protect yourself.
Securing cryptocurrency can seem like a daunting and time-consuming task. But taking a proactive approach to cybersecurity pays off in the long run. Putting all these tips into practice helps to minimize the risk of cyberattacks.
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