Security is a top priority for any assets, and crypto assets are no exception. From the wallets used to how transactions are signed off, every step must be taken with care. A smart contract auditor can tell you how small security gaps can cost you a lot of money. Regardless of where you are in the crypto game–novice, casual investor, or deeply involved–setting up security measures is crucial.
Why Crypto Security Matters
The rise of blockchain-based trading has opened many doors to investors like you, allowing you to put your eggs in a different kind of basket. Along with these opportunities come opportunistic hackers and scammers just waiting to pounce. There’s no built-in safety net with crypto, however, and recovering your losses is almost impossible.
Why are security measures essential?
- Any transaction done on the blockchain is immutable and irreversible, including crypto transactions
- One mistake could mean zero investment
- Hackers and scammers are evolving with blockchain technology
- Newcomers are especially vulnerable to the growing number of bad actors
While crypto isn’t 100% impenetrable, there are smart security practices you can build and follow to protect against vulnerabilities.
Crypto Security Fundamentals
Crypto Wallets
Your crypto lives in one of two types of wallets.
- Hot wallets are connected to the internet, making them easier to use but just as easy to hack
- Cold wallets or cold storage a physical device that stores crypto offline, offering better security but are more expensive and inconvenient to use
- If you choose the second option, you’ll need a recovery phrase that you must back up and hide away securely.
Multi-Signature Wallets
Multi-sig wallets will require two or more private keys to approve a transaction before it’s processed.
- Best for businesses, large crypto investments, or when using the same wallet for a team
- Adds another security layer, preventing internal fraud
- A deterrent for any attempts of unauthorized withdrawals
Securing Private Keys
Unlike a regular password, a private key also serves as proof of ownership. If anyone gets hold of it, they can easily pose as you and steal your investments without anyone knowing.
- This is the only time when sharing is criminal
- Use encryptions
- Backing up a private key doesn’t mean writing it on paper or saving it on your phone or computer
- If you do write it down, store it in a vault (no kidding), offline, and in different locations
Recognizing and Avoiding Scams
Bad actors have become more creative in their criminal ways.
- Phishing attacks fool you into giving away your private key via a fake website or app.
- Social engineering makes you think you’re sharing confidential info with a support staff, friend, etc.
- Pig Butchering scams reel you into a fake relationship where you trust the other party enough to put your money in bogus investments.
- Dusting attacks can feel like a blessing since small deposits are made into your wallet. But the true goal is to know your identity and track transactions.
- Rug pulls and exit scams are when you’re encouraged to invest in a super-hyped project only for the founders to up and disappear once they’ve collected enough funds.
Secure Transaction Practices
Say your wallet is as tight as Fort Knox; your transaction habits might provide hackers the security vulnerability they’re looking for.
- Never send crypto funds unless you’ve run essential pre-checks:
- Correct wallet address? Copy-paste to prevent errors because there’s no turning back once a transaction is complete.
- Use two-factor authentication
- Choose the correct blockchain network
- Send small, test transactions first for large transfers
- Enable address whitelisting and transaction alerts
- Set apps and wallets to update automatically
- Only transact on reputable sites
Investing in crypto assets is one way to build and sustain financial security. This is why it’s important to use the right wallet, keep private keys secure, use multi-sig for added safety, stay informed and avoid all scams, and follow best practices for secure transactions. If your investment involves using a smart contract, have Hashlock run an audit to prevent any disputes and issues.
