With the continuous evolution of the crypto ecosystem, concerns about cryptocurrency security are also increasing. Let’s check out what’re the common threats to cryptocurrency and how to handle them.
Cryptocurrency emerged from the shadows of doubt and uncertainty to the top ranks of mainstream popularity in recent times. Every discussion on innovation and developments in finance and technology focuses on cryptocurrencies. As compared to a dozen cryptocurrencies in the initial years, there are more than 7500 cryptocurrencies today.
However, the buzz around the evolving crypto ecosystem has also created concerns regarding cryptocurrency security and ways to resolve the same. The growing popularity of cryptocurrencies has also fostered opportunities for malicious agents to compromise crypto assets in your possession.
Cybercriminals are launching phishing attacks and identity theft attacks to tap into the vulnerabilities associated with them. Therefore, it is important to identify the prominent cryptocurrency security issues and best practices for dealing with them. The following discussion offers you an overview of security issues pertaining to cryptocurrency and ways to resolve them.
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Why Are Cryptocurrencies Popular?
Cryptocurrency, as the name implies, is just digital currency safeguarded with cryptography, and the majority of cryptocurrencies have their foundations in blockchain technology. It enables online secure payments with digital representation in the form of tokens and offers faster transactions with lower costs. In addition, the support of decentralized networks for cryptocurrency helps in running operations without the intervention of any central authority.
You can access cryptocurrencies easily through online crypto exchanges for purchasing, trading, and investing in crypto. However, you need to wonder about the implications associated with cryptocurrency security concerns, especially with the economic potential associated with them. You need to identify the basic issues with cryptocurrencies that lead to security concerns.
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Does Cryptocurrency Offer Security?
The most crucial question regarding the use of cryptocurrencies is “How secure is cryptocurrency?” which draws attention to whether the “crypto” in cryptocurrency really matters. You can find the answers by reflecting on the underlying technology for cryptocurrencies, i.e., blockchain.
The backend process associated with crypto transactions involves documentation of transactions into different blocks along with time-stamping. Blockchain offers comprehensive security mechanisms in the form of hashing, digital signatures, and public-key cryptography for safeguarding cryptocurrencies. However, one should try to understand that blockchain is also vulnerable. How does this affect cryptocurrency security?
You will have to understand the use of public keys and private keys along with crypto wallets to identify best practices for the security of cryptocurrencies. Private keys are unique to each crypto holder, and they help them in unlocking their cryptocurrency on a blockchain. The public key is the code that people can use to identify a specific crypto holder before transferring assets to them. On the other hand, the address is actually the bank account where you can store your crypto assets on the blockchain. Crypto wallets help you access different types of cryptocurrencies by managing your private keys.
The possible cryptocurrency security issues primarily arise from security breaches in crypto wallets or compromised private keys. Furthermore, users have to take responsibility for the security of their own crypto assets. The discussions about crypto security are quite serious as there is no centralized authority for resolving any security concerns.
Why Is Crypto Security Essential?
The search for best cryptocurrency security practices has escalated profoundly in recent times with the increasing frequency of cyber-attacks. With the growing popularity of cryptocurrencies, crypto exchanges have become soft spots for malicious attention. In the year 2018, a Japanese crypto exchange had to face the brunt of a major hacking attack. Therefore, crypto exchanges have to implement considerably sophisticated measures for resolving the risks.
Cyber-attacks are slowly evolving, and hackers are trying new tricks for attacking crypto exchanges. In addition, cryptocurrency security concerns are serious as the amount of crypto theft from exchanges has been growing every year. Another striking fact is almost 5 million Bitcoins just sit idle as some of their owners have lost their private keys and could not access them. On top of it, reports indicate that crypto investors have lost more than $225 million in different types of phishing scams.
All these numbers clearly point out the necessity for reflecting on the best cryptocurrency security measures. If you own crypto, you need to be really serious about safeguarding them from all possible threats.
Potential Threats for Crypto Security
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Cryptocurrency is a virtual asset, and its security depends on its safe possession in your hands. However, you can lose your crypto due to various reasons, which are basically threats to crypto security. A clear overview of all these issues can help you enhance your preparedness for crypto security. Here are some of the most prominent cryptocurrency security issues you should be aware of.
Well, private keys are not a security risk considering their role in enabling access to cryptocurrencies. However, the way you manage the private keys is a massive security concern in the domain of crypto. If you lose your private keys, you are basically losing access to your funds. On the other hand, passing your private keys to another individual basically means transferring control of the crypto assets.
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Disregard for Security
Many people assume that cryptocurrency security is a myth, especially as cryptocurrency is a secure form of virtual currency. However, many users do not have the slightest idea about the responsibility of the safety of their cryptocurrencies. Generally, people used to deal with centralized financial institutions, thereby implying evident disregard for security. Crypto owners use simple passwords and outdated antivirus software alongside skipping important security mechanisms like two-factor authentication.
Above every other threat to crypto security, the possibilities of criminal activity come at the top. Cybercriminals are evolving in terms of their strategies and tactics by implementing advanced tech solutions. Here are some of the notable methods hackers use for compromising the crypto assets of users.
- Ransomware attacks involve encryption of files on your system, followed by demands of ransom for the decryption key.
- Phishing attacks are also common highlights in cryptocurrency security issues since they involve deceiving crypto owners through fake websites and links. Such types of attacks are primarily targeted at stealing data which they can use for compromising the crypto assets in your possession.
- Using a Wi-Fi hotspot in public places is actually a dangerous proposition that many crypto owners ignore. Hackers can find a way to tap into your sensitive information and compromise the information related to your cryptocurrencies.
- Cryptojacking has emerged as a new hacking technique for using the computing power of another PC to facilitate crypto mining.
Rug and Pull Scams
Furthermore, you should also take note of another prominent entry among cryptocurrency security concerns, which is probably the most disastrous of all. Rug and pull scams are long-drawn schemes for attracting the attention of gullible investors toward a new ICO. Developers and marketing teams of the crypto token entice investors with rewards for bringing in new clients and buying their tokens with Bitcoin. When the team sells a substantial share of their tokens for Bitcoin, they just disappear into thin air without a trace. The investors are left with tokens that do not have any utility and end up losing huge sums of money.
Is there any possible answer to all these security concerns associated with cryptocurrencies? Well, you can find a suitable reply by reflecting on cryptocurrency security standards. What are these standards in particular, and what role do they serve?
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Crypto Security Standards
Crypto security standards are a huge element in the answers for “How secure is cryptocurrency?” by providing a set of security precedents for systems underlying cryptocurrencies. Crypto security standards are applicable to crypto exchanges as well as mobile and web applications used for accessing cryptocurrencies. A comprehensive information system with crypto-security standards offers better prospects for improving the security of cryptocurrencies.
Cryptocurrency Security Standards or CCSS are important tools for enabling end-users to implement smart decisions and choices for investing in suitable services. The standards also help investors in identifying suitable credible platforms before establishing any association with them. The best thing about the standards is a guided approach to avoid cryptocurrency security issues with ten different steps. Modern crypto security systems in the majority of crypto exchanges employ the ten-step security approach in three distinct levels.
The ten different steps that cryptocurrency organizations should follow for crypto security are as follows.
- Creation of private key or seed phrase
- Creation of a crypto wallet
- Secure storage of keys
- Key usage
- Clearly outlined key compromise policies
- Grant/revoke policy privileges of key holders and relevant procedures
- Third-party audits
- Data scrutiny policies
- Proof of Reserve
- Documented audits of transaction logs
Best Practices for Resolving Concerns in Crypto Security
The gradually escalating interest in cryptocurrencies has been a vital element in drawing attention to the security of cryptocurrencies. Institutional investors, corporate treasures, and the role of crypto in NFTs and DeFi have a lot to draw attention to cryptocurrency security concerns. However, every problem has a solution, and the same applies to crypto security. You can ensure crypto security by ensuring due diligence on your part. However, you should take a look at some general practices for ensuring the security of your cryptocurrencies.
Avoid Keeping Custody of Private Keys
The private key you use for accessing a crypto wallet must not be in your custody only. In addition, you cannot have it on a system with inadequate security measures. For institutional investors, private keys should never be under the ownership of a company. Many vendors are offering appropriate firewalls alongside technical capabilities for mitigating the evident risks.
Research on Crypto Exchanges
One of the most crucial highlights in best cryptocurrency security practices would obviously refer to research on the crypto exchanges. There is no doubt that crypto exchanges are the first place people go to for accessing cryptocurrencies. So, you need to invest adequate efforts in research before investing your money and efforts in the crypto market.
Give some time to learn and understand more about crypto exchanges and their security features. Conduct a thorough investigation of the crypto exchange and, if possible, consult with some crypto advisors in communities. You can also go through reviews of cryptocurrency exchanges and observe the comments of experienced investors and crypto traders on the security of crypto exchanges.
Choose the Right Crypto Wallet
Another important addition among best practices for resolving cryptocurrency security issues is the choice of a suitable crypto wallet. The crypto wallet is an essential tool for the crypto holder to manage their private keys. Therefore, you need to select the ideal crypto wallet after reviewing features, technology, security standards, and value advantages. In some cases, users can choose a hybrid strategy by choosing offline storage with cold wallets to ensure better security. A better understanding of different types of crypto wallets could easily provide you with an advantage for securing your crypto assets.
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Trust the Basics
More often than not, people end up losing their cryptocurrency due to a lack of attention to basic security practices. A strong password is enough to safeguard you against prominent cryptocurrency security concerns. Just make sure that it is unique and opt for methods such as two-factor authentication in your crypto wallet for better security. You must also have the habit of changing your password at an interval of a few months for better security. Most important of all, never disclose your key to anyone or discuss your crypto assets in public.
The detailed cryptocurrency security guide offers in-depth insights into the existing situation of security in the crypto ecosystem. Cryptocurrencies are inherently secure by design in the fact that it is impossible to tamper with their ownership and transaction details. However, many other vulnerabilities in cryptocurrencies, alongside the evolving methods of cyber-attacks on crypto exchanges and individual crypto holders, affect crypto security.
Therefore, it is important to identify the best cryptocurrency security practices for safety against prominent threats to your crypto assets. The world of cryptocurrencies is expanding at a fast pace, and so is the frequency and variety of threats to the ecosystem and users. Apart from the basic due diligence measures, crypto security has a long way to go with standards and formidable systems. Explore the world of crypto security and discover new opportunities for the future of crypto.
*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!