How to Protect Your Crypto Investment From Hacks  

As enthusiastic investors jump into the domain of cryptocurrency so as to partake in wealth creation they generally avoid missing out on learning about how to protect their digital assets. As we are aware, cryptos form decentralized digital currency, and they operate on a peer-to-peer (P2P) exchange network, it is not free from vulnerabilities. For example, Badger DAO, a decentralized finance app, was hacked and its users lost $120 million in funds from its platform which was a result of a phishing incident where the front end of the platform was compromised, thereby, resulting in malicious transactions. In this article we shall be highlighting a few key items which one needs to know in order to be a safe crypto investor:

• Can the blockchain be hacked?

• How to safely store crypto.

• Cold versus hot wallets.

• Tips to prevent cryptocurrency theft.

Can The Blockchain Be Hacked?  

As we have experienced before about the crypto exchanges being hacked before, so the blockchain can be vulnerable to attack, despite security features inherent in it. Cryptocurrency and blockchain work together. Blockchain technology allows digital assets such as Bitcoin to operate, which is fundamental to crypto’s success. It is a chain of digital blocks that host data. The blockchain network secures financial transactions and if data is recorded, it’s impossible to edit it. Whenever a new transaction occurs, a new block is created. Suppose a miner tampers a block, the chain automatically becomes invalid. Since blockchain is a distributed ledger (DLT) without any central authority, it reduces the possibility of information tampering. Despite this, crypto exchanges have been hacked before. Users can protect themselves from a blockchain hack by properly securing their cryptocurrency. This starts with safely storing their digital assets in crypto wallets.

Read: Lets Understand Crypto In A Laymans Language

How To Safely Store Cryptocurrency  

It is not advisable to keep all of your crypto coins on a third-party exchange, so the best solution is to use cryptocurrency wallets to manage one’s digital assets. Wallets are software that creates and stores both private and public keys which are used to access digital money stored in the online wallet. Such keys are critical, the reason being, if one loses them, he can lose access to their digital assets. If one wants to send Bitcoin to someone, he shares his public key with them. The private key is his password to their email.” Crypto users own the responsibility to keep their private key passwords safe. One has to write it down and put it in a safe place because if he loses it or forgets, it could pose a challenge in accessing crypto funds.

Cold Wallets vs. Hot Wallets  

Crypto investors who prefer not to use a wallet can opt for hot wallets which are integrated with services like Coinbase Global Inc. PayPal Holdings Inc. (PYPL) or Venmo. In this case, the client entrusts the ownership of their assets with that of Coinbase, and he does not control the security of their digital assets. Hot wallets are online wallets that allow the users to transfer their crypto assets in no time. But as we know, each coin has two sides, such hot wallets are also vulnerable to cyberattacks that could lead to losing the cryptocurrencies. On the other hand, cold wallets are not connected to the internet and thereby offer greater security and are far less susceptible to hacking. Cold wallets require the user to have a hardware device that is similar to a USB drive, along with passwords to access the wallet. If one is furious to deal with storage and security issues but still wishes to invest in cryptocurrency, in that case, he can choose Bitcoin ETFs. In the U.S., there are only two directly invested crypto ETFs so far: Proshares Bitcoin Strategy ETF (BITO), the first Bitcoin-linked ETF, and VanEck Bitcoin Strategy ETF (XBTF). These Bitcoin ETFs trade in Bitcoin futures contracts.

Tips To Prevent Cryptocurrency Theft  

One of the risks to manage one’s digital investments in a custodial account or hot wallet is the potential for hacks. If the users are unable to transact crypto or log in to withdraw their money, this could pose a big risk. Typically the investor puts his password in a safe place. We’re going to leverage the power of iCloud or Google Cloud to help consumers save this safely, but today, you still have to write it down. Investors must look at the exchange’s reviews so as to be aware of how big the exchange is and how many people are trading from it. When one creates an account, he must make sure he is going through a two-factor authentication process. This is a security feature that verifies that one is trying to access the account. Text messages is one of the most common methods for verification. But depending on the account, it might offer a few additional security features. If it’s a platform that is well-known and has a good reputation, one typically can’t go wrong, and the biggest one today is going to be a company like Coinbase. For companies that may have had security issues in the past but claim to have corrected them, this could be a red flag requiring some more research.

Read: Cybersecurity Timeline and Trends You Should Know Before Planning for 2023