Cryptocurrency is a fantastic solution for anonymous and secure online transactions. The freedom of cryptocurrency might even make it seem like the perfect payment solution, right? Unfortunately, nothing is perfect, and with cryptocurrency, the anonymity and independence you get also mean that you need to take care of security yourself. And security is paramount, especially since 2021 is expected to be the year with the most crypto wallet breaches ever. In this article, you’ll learn how crypto wallets work, what the main risks are, and how to mitigate those risks.
Cryptocurrency owners generally have two keys: a public key and a private key. The public key is used to receive cryptocurrency, and the private key is used to spend cryptocurrency. A crypto wallet is meant to store these two keys and help you track your balance and transactions. There are a couple of different types of crypto wallets:
- Hardware wallets (also called cold wallets). These are meant to store your crypto keys offline until you choose to physically connect them to your device.
- Software wallets. These can be adapted to mobile, desktop, or the web. Software wallets are slightly less secure than hardware wallets because they’re connected to a specific device, and devices can get hacked at any time.
In short – no, your crypto wallet is never safe from cyber attacks, especially if you mainly use software wallets. Since so many people are beginning to adopt crypto, hackers have been thinking of new ways to steal it.
Here are some ways that hackers might try to hack into your crypto wallet:
- Keylogger. This is a form of malware that allows hackers to record every keystroke you make.
- Clippers. Clipper malware can replace a user’s crypto recipient information with that of a hacker. This is done by replacing the data once a user copies it to their clipboard.
- Phishing. Hackers might create fake emails, pages, or entire websites that look real, and crypto users can accidentally give away their information to hackers through these scams.
How can you protect your crypto wallet from hackers?
Although the dangers to the security of your crypto wallet are very real, you can minimize them by following these tips:
1. Set a bulletproof password (and remember it!)
The password to your crypto wallet is the only thing that’s keeping you and your funds away from outsiders. Simple passwords that are easy to remember are no longer enough here. Use a long password containing all types of symbols to ensure that nobody is able to guess it. Don’t use this password for any other of your accounts, and maybe even change it occasionally. Consider using special tools to generate passwords.
Just please remember the password once you create or generate it! 40% of crypto users have reported having lost their passwords in the past. Once this happens, your funds are gone. The anonymity of cryptocurrency means that you can’t use your name or social security number to retrieve your wallet. So be sure to keep your password either in a secure online vault or create a password that you know you’ll never forget.
2. Use two-factor authentication
Two-factor authentication is an absolute must for your crypto wallet. If your password ends up getting leaked (yes, even the strongest of passwords sometimes get hacked), two-factor authentication will be the only thing keeping your funds away from hackers. Because of how sensitive your crypto wallet information is, consider using three- or even four-factor authentication to truly secure your assets.
3. Use a hardware (cold) wallet
You already learned about software vs hardware (cold) crypto wallets. Software wallets are convenient because they can be used immediately for transactions and don’t need to be connected physically to any of your devices. Hardware wallets, however, are much more secure than software wallets. Since they aren’t linked to any device or wifi beforehand, they store your public and private keys in a secure and offline location. Therefore, consider moving some of your cryptocurrency to a cold wallet.
To answer the question of whether your crypto wallet is safe from hackers – it’s not. Even if your wallet has the strongest encryption possible and you’re extremely careful not to give anyone your private key, stubborn hackers might still be able to rob you. A good start in protecting your funds would be reviewing your password, enabling two- or multi-factor authentication, and transferring some of your funds to a cold wallet.