Since the birth of cryptocurrency in 2009, the world of digital finance has gone further than many people expected. It’s estimated that over 300 million people own some form of cryptocurrency worldwide. As the industry continues to grow, so does the threat of cyberattacks.
Not only has cryptocurrency and blockchain technology transformed our world in more ways than we ever could have imagined, but it has also proved to be an unrivaled investment for millions. Just take Bitcoin, for example. In under a decade, its value surged by over 540,000%. In fact, if you’d invested a mere $22 into BTC back in 2012, you’d be a millionaire now!
As crypto grows at a seemingly unstoppable rate, despite the ups and downs, it’s expected that the global blockchain will be worth well over $23 billion by the year 2023. But whilst the future looks bright, there is always a downside that comes with such success.
Wherever there is money, there are often unscrupulous people out there who are seeking to get hold of it through corrupt means. As cryptocurrency is still a new concept for many people, it’s the prime place for cybercriminals to take advantage of. Here are some sobering statistics:
- In 2020, cyberattacks targeting cryptocurrencies surged by nearly 30% and over $82 million was lost as a result.
- In 2021, global crypto thefts of various forms amounted to more than $680 million in losses.
- Statistically, crypto traders aged between 20 and 49 were five times more likely to be the target of cyberattacks than other ages.
If poorly managed, investing in cryptocurrency can be a perilous journey. But it doesn’t have to be. Our ultimate guide to security measures aims to inform you on how to store cryptocurrency safely and keep your crypto secure from cybercriminals seeking to steal your hard-earned digital assets.
Drawing upon years of security experience, we cover everything from safely buying and selling crypto to storing it in a variety of wallets in a straightforward, fun-to-read, and easy-to-follow method.
Now, without further ado, let’s begin!
Top Cyberattacks Aimed at Online Wallets
Table of Contents
- Top Cyberattacks Aimed at Online Wallets
- Malware Tactics
- Phishing Cyberattacks
- Man-in-the-Middle (MitM) Techniques
- Denial-of-Service (DOS) And Distributed Denial-of-Service (DDoS) Cyberattacks
- SQL Injections
- Zero-day Exploit
- Password or Private Key Cyberattacks
- Internet of Things (IoT) Cyberattacks
- Buying Digital Currency Safely
- 1. Which Is Better: A Brokerage or a Crypto Exchange?
- 2. Create an Account Once You Choose Your Brokerage or Exchange
- 3. Make an Initial Deposit to Start Trading
- 4. Place Your Cryptocurrency Order
- Storing Your Digital Assets in Cryptocurrency Wallets
- How Does a Cryptocurrency Wallet Work?
- Types Of Cryptocurrency Wallets
- How to Keep Your Crypto Safe From Cyberattacks?
- In Summary, Crypto Investing Doesn’t Have to be Scary
When it comes to an ultimate guide on keeping your crypto safe, where better to begin than breaking down eight of the most common forms of cyberthreats to your cryptocurrency services and malicious mobile apps across the cryptocurrency market that you are likely to encounter?
A cyberattack can be defined as when a person or organization launches a malicious attempt to penetrate the information system of another person or organization. The goal? Usually to steal money and valuable personal information. When it comes to cryptocurrency, the largely unregulated nature of digital finance makes it a prime target for hackers and cybercriminals.
Before sharing our unmissable security industry secrets on keeping your crypto safe, let’s briefly explore eight of the most common and most dangerous cyberthreats you will likely face in cryptocurrency investing.
Malware is used to describe a number of specific types of cyberattacks with similar aims. Put simply; malware aims to persuade an online user to click on a modified link or attachment that is inherently dangerous. Once clicked or opened, the malware starts installing an often severely malicious form of software onto the user’s device.
Once inside, malware can then deny the user access to the most vital areas of the network’s software, steal personal information from the device’s memory, and disrupt or destroy the operating system. Malware is one of the most common and most effective forms of cyberthreats.
Next up is another prevalent form of cyberattack: Phishing. Usually, these will be in the form of a fake email designed to look legit. They will often contain a malicious link or attachment with the recipient encouraged to click or download it. Once they do, the sender will then be able to infiltrate the user’s device, pull out sensitive info, gain access to financial accounts, and more.
Phishing tactics are not just limited to emails. They can be sent over voice phone calls and text messages too. Plus, they increasingly appear in comments and direct messages on popular social media networks such as Facebook and Instagram. With many users displaying personal information on their profiles, hackers using phishing tactics have the upper hand. Let’s look at three of the most common forms of phishing tactics:
- Spear Phishing: There’s no harpoon involved here! Spear phishing is a highly targeted attack that aims at specific people or organizations that criminals have chosen in advance.
- Whaling attacks: This form of phishing goes solely for individuals who are seen as big financial targets or ‘’whales’. Shareholders, high-ranking figures within large companies, and similar are the main target of such attacks.
- Pharming: This is a tactic that often lures unassuming users to an illegitimate login page. Once their personal details are put in, phishers will take advantage of DNS cache poisoning tactics to intercept the sensitive info of users.
Man-in-the-Middle (MitM) Techniques
Picture handing legitimately handing over money to somebody in the street, and a thief snatches it from both of you and disappears. Nightmare, right? Well, this form of cyberattack is exactly as it sounds.
With a Man-in-the-Middle (MitM) attack, cybercriminals insert themselves in the middle of a transaction of a cryptocurrency exchange and attempt to steal crypto. The most commonplace for this to happen is over public wifi networks.
A Man-in-the-Middle attacker will identify weaknesses in an unsecured WiFi network and place themselves between the user’s device and the WiFi network. As well as being increasingly common, they are becoming harder to discover unless you have reliable antivirus software.
Denial-of-Service (DOS) And Distributed Denial-of-Service (DDoS) Cyberattacks
Denial-of-Service (DOS) attacks are one of the most simple forms of cyberattack to explain. But they’re also one of the most formidable. The way a DoS attack works is by targetting servers, software, or networks with a flood of malicious traffic to overwhelm both resources and bandwidth.
The goal of this form of attack is to force the target to shut down due to being unable to cope with the flood. Overall, there are two different types of this attack. distributed denial-of-service (DDoS) and denial-of-service (DoS).
- Denial-of-service (DoS) attacks: The most common form of attack that aims to overwhelm the resources of a site, network, or software to stop the response to legitimate requests, effectively forcing a shutdown.
- Distributed denial-of-service (DDoS) attacks: A multi-pronged attack that is often launched from various points. Although it has the same aim as a DoS attack, it is much more effective a taking a network, software, or system down and then achieving a finishing blow with a secondary attack that will enter the target and take it over.
An SQL attack relies on malicious code and targets servers. It works by submitting said code to servers in order to retrieve sensitive information such as admin login details, passwords, and seed phrases. They’re often implemented through search bars and comment sections on websites and apps.
To stay on top of cyberattacks, one needs to constantly be up to speed with the latest antivirus practices. A Zero-day Exploit attack is a prime proof of that. This type of cyberthreat takes advantage of network weaknesses before they can be dealt with by the right people. This is a very time-sensitive form of attack. But using sufficient anti-virus monitoring software can overcome it.
Password or Private Key Cyberattacks
Passwords or private keys is usually the foundation for accessing any source of sensitive information, finances, or personal details online, especially a cryptocurrency wallet. So it’s only natural that they’re a prime target for online criminals. Once a password is successfully cracked, attackers can be rewarded with a wealth of stolen money, crypto, and private information.
This may seem like the most basic form of attack, and it is, but hackers will use a variety of methods to gain access to your finances and details through compromised passwords or private keys. Such as:
- Brute-force attack: This form of password attack uses software or malicious program to attempt to gain an accurate picture of multiple password variants and allow them to guess their way into the user’s account.
- Dictionary attack: This variant sees a cybercriminal attempt to break into a user’s account by using a list of commonly-used passwords and private keys.
To overcome such password-guessing attacks, users can implement software that automatically locks IP addresses out or freeze accounts when they fail a certain number of password guesses. Two-factor authentication, which requires a user to confirm their login on a trusted second device, is also a tried and tested security practice that can prevent password attacks.
When managing your passwords to an online service provider specializing in cryptocurrency, it can be easy to lose access through forgetting passwords and a private key or losing pin codes. So as well as maintaining a strong password, use a password manager to keep track of your passwords and your public and private keys.
Internet of Things (IoT) Cyberattacks
It’s no secret that we cannot survive without the internet. With the advantages it brings, however, it also leaves us open to security breaches by providing hackers with countless access points to our device’s weak spots. Once inside, they can spread themselves into various other areas connected to the internet and cause serious damage to our lives.
So naturally, the Internet of Things (IoT) attacks are booming. These take advantage of people who disregard the need to update the security software in their day-to-day devices and operating system.
The best way to stop IoT attacks is by regularly updating and maintaining a difficult-to-guess password for all internet-accessible devices on your network, and keeping your operating system, and anti-virus software up to date.
Buying Digital Currency Safely
Worldwide, it’s estimated that over 18,000 businesses accept payments in cryptocurrency. With countries like El Salvador adopting BTC as its official currency, this is only expected to grow. Many believe there’s never been a better time to own crypto. But for others, there’s a persistent problem with such a new concept like cryptocurrencies: Where on earth do you buy it?
It’s no secret that, for newcomers, discovering the best place to buy a cryptocurrency can be a steep, and often confusing learning curve. After all, there are just so many options out there. Luckily for you, we simplify everything by breaking the cryptocurrency buying process down into four, straightforward steps.
1. Which Is Better: A Brokerage or a Crypto Exchange?
Brokerage or exchange? When you first try to buy cryptocurrency, this will likely be one of your first forks on the road. The short and sweet answer is that you can purchase crypto through both. But there are some essential differences between each that you must consider.
How Does a Crypto Exchange Work?
You may have heard of cryptocurrency exchanges long before you decided to invest. Many, such as Binance and Coinbase, are inherently mainstream and often advertised on Youtube, Spotify, etc. Basically, a crypto exchange is an online platform that provides a trading environment for people to buy, sell, and trade crypto.
Cryptocurrency exchanges vary wildly, but they often boast low fees for the services they offer. However, most are not known for being beginner-friendly. Exchanges are generally reserved for the most experienced investor. One who has at least a basic knowledge of the different trading variants, advanced trading charts, and various other crypto data. For complete newcomers, this can be a daunting learning curve.
But if you’re merely looking to buy cryptocurrency without getting too deep into the advanced trading aspects, many exchanges offer this as an option too. The downside? The beginner-friendly variants often come with substantially higher fees than a regular account.
What’s a Brokerage?
Now that exchanges are covered, let’s look at how a brokerage differs. Where crypto exchanges are known for being better suited to more experienced investors, brokerages are widely seen as a far more beginner-friendly option that simplifies the overall crypto buying process.
Many brokerages ensure a straightforward user interface and an array of trading tools to allow you to advance your crypto investing journey and gain the necessary trading skills needed in a safe trading environment.
The downside for many is that some brokerages do not allow traders to move their cryptocurrency off the broker platform, whereas the majority of exchanges do. This can pose an issue for many people as it takes away their ability to securely store their digital assets in offline hardware wallets.
Top Tip When Choosing a Brokerage or Exchange: If it’s your first time buying crypto, always do your own research to find out if your chosen exchange or brokerage is well-regulated and trustworthy. After all, not all exchanges and brokers are equal in quality or reliability. In addition, always ensure your platform of choice allows you to directly buy crypto through your chosen fiat currency. Some platforms only allow crypto-to-crypto purchases. This means you’ll have to find another platform to buy crypto before proceeding to buy them on your chosen platform. This is an unnecessary headache that should be avoided.
2. Create an Account Once You Choose Your Brokerage or Exchange
Once you’ve done your research and found a brokerage or exchange that’s right for you, it’s time to sign up. This certainly isn’t the most fun part of crypto trading, but it’s a necessary task. The registration process for different platforms varies. But in general, expect to be asked to provide basic personal information and verify your identity to match global financial regulations.
Once your basic details and personal ID have been verified, you just have to wait for the platform to approve you. Usually, this doesn’t take too long. Once approved, it’s time to make your first deposit. This is where things start to get exciting!
3. Make an Initial Deposit to Start Trading
As with almost any investment, you need to make an initial fiat currency deposit to fund your account on your chosen exchange or brokerage to start buying cryptocurrency. In general, most platforms offer three main methods you can use to put funds into your account.
- Link an accepted bank account to your brokerage or exchange account.
- Deposit funds via a wire transfer.
- Make a payment to your account through a debit or credit card.
In order to comply with anti-money laundering regulations, you may need to wait a day or two before you can use the funds from your first deposit. This is standard practice and nothing to worry about.
Top Tip for Depositing Money to a Broker or Exchange: Whilst it may seem like the most convenient, using a credit card to fund your account isn’t the most ideal. For a large number of credit card companies worldwide, crypto purchases are subjected to higher interest rates and additional fees. In some extreme cases, you may end up paying 5-10% of your purchase value in fees alone. My advice? Use a bank transfer or a debit card.
4. Place Your Cryptocurrency Order
Has your initial deposit cleared? Nice job! Now, you’re ready to join hundreds of millions of others worldwide who have discovered the rewarding world of crypto trading. Whether you’ve chosen an exchange or a beginner-friendly brokerage, you now have access to the exciting world of digital assets!
Will you opt for the blockchain powerhouse of Ethereum, the original cryptocurrency of Bitcoin, or the popular meme coin of Dogecoin? Whatever you decide on, get to grips with what’s known as the ticker symbol first. This is the shortened version of how a cryptocurrency is referred to on the crypto market. For example, Ethereum is ETH, Dogecoin is DOGE, and Binance Coin is BNB.
Top Tip for Buying Cryptocurrency: Major digital assets like Ethereum and Bitcoin can cost thousands if not tens of thousands of dollars. For many, this is outside of their budget. But don’t worry, the majority of crypto exchanges and brokerages allow you to purchase fractions of each cryptocurrency. So you can own as little or as much of premium coins as you like!
Storing Your Digital Assets in Cryptocurrency Wallets
Now you’ve overcome the exchange or brokerage dilemma and finally invested in your cryptocurrency of choice, you may now be facing another hurdle: Where do I store cryptocurrency in a safe, secure place? Don’t worry. In this section, we help you overcome that hurdle flawlessly.
As with exchanges and brokerages, choosing a secure option for safely storing cryptocurrency may seem overwhelming due to the number of different options out there but it’s actually a lot easier than it looks.
In one of the most important sections of this guide, we explain foolproof methods to safely store your digital assets, how the different types of crypto wallets work and how you can use them effectively.
How Does a Cryptocurrency Wallet Work?
In layman’s terms, a crypto wallet is a piece of software that is created for crypto owners to manage their investment in a secure method rather than the physical wallet you may be used to. From storing your keys and keeping track of your crypto balance to sending and receiving cryptocurrencies, a reliable crypto wallet can provide a range of uses and is like a safety deposit box in some ways.
When it comes to choosing a wallet that is right for you, there’s a lot to choose from. But firstly, the most crucial difference we need to explain is the difference between hot and cold wallets:
- Hot wallet – An online device connected to the internet with the ability to be accessed at any given time. The most common types of hot wallets are those that exist on exchanges, online cloud wallets, desktop wallets, and the majority of crypto wallets compatible with a mobile device.
- Cold wallet – An offline storage wallet without an internet connection. Cryptocurrency holders use this to store digital funds offline securely. Whilst you can still receive digital coins and make cryptocurrency transactions at all times via a public address, only you can export your funds out via a secure private key system. A cold wallet is most commonly a physical data storage device in the form of USB hardware wallets or paper wallets protected by login credentials.
Generally, savvy crypto traders will distribute their investments across a mix of cold and hot wallets. The latter is useful for instant access to assets used for active trading, whereas the former is ideal for safely holding long-term cryptocurrency investments. This mix of custodial wallets is a reliable way to secure your cryptocurrency safely.
Types Of Cryptocurrency Wallets
In the last section, we briefly touched on the different variants of cryptocurrency wallets and the security tools they offer. From paper and hardware devices to cloud and online wallets, let’s dive deeper into each of these secure location options to decide which one of these digital wallets is best suited to your investment needs.
Let’s start with one of the most popular forms of cold wallets: A paper wallet. This is a form of crypto storage that very much does what it says on the tin, so to speak. It’s generally a paper copy of your wallet’s private and public keys. Often considered one of the most secure forms of cryptocurrency storage, it’s also very straightforward to use.
Many of the most popular paper wallets are part of reliable cryptocurrency projects and can be generated online. One of the leading providers of paper wallets is MyEtherWallet which is used for both Ethereum and almost every other form of an ERC-20 token. Basically, if it’s a relatively well-known digital asset, there’ll likely be a paper wallet project that exists for it.
But whilst this form of cold wallets has a range of benefits, it also has some downsides. They’re susceptible to being damaged and unscrupulous people can copy or photograph them to gain access to your investments. When it comes to damage, there is a way around this from creating more than one copy and hiding them in different places to storing them on more hardy materials from laminated paper to engraving them on steel.
Top Tip for Using a Paper Wallet: This is one of the various cold wallets. It should always be kept offline. So never keep electronic documentation of a paper wallet on any device with an internet connection. If your paper wallet is saved online, it is no safer than hot wallets.
Next up, is hardware wallets. A largely secure form of a cold wallet, they boast some of the convenient aspects of a cloud wallet in the sense that they can make crypto payments and have handy interfaces where you can keep up to date with your balance. The added bonus? They securely hold your private keys externally, usually on a USB device.
A hardware wallet is very simple to get to grips with and there are often handy Youtube tutorials teaching you everything you need to know to get set up and started with using them. Usually, you just need to plug a hardware wallet into a device with an internet connection. After unlocking your wallet with an intricate pin, you have the ability to manage your investments, send and receive crypto, and keep up to speed with how your digital assets are doing in terms of value.
Reliable hardware wallets aren’t free, but they are very much an investment. Trezor and Ledger are some of the most trusted names when it comes to hardware wallets. They support a wide range of cryptocurrencies, including all of the major names like Ethereum and Bitcoin.
When you get hold of your hardware wallet, you need to note down your recovery seed phrase and keep it in a safe, private place where it won’t be damaged. As with paper wallets, never put your recovery seed phrase online and never tell to anybody. When storing cryptocurrency offline, always remember, not your keys, not your crypto!
Top Tip for Buying Hardware Wallets: It is of paramount importance that a hardware wallet should only be purchased directly from the official manufacturer and arrive in a securely sealed package. Do not be lured in by cheaper offers of cold storage solutions from intermediaries. If you do, you may end up buying a device whose recovery seed phrase or private key has been compromised. In this case, you can say goodbye to your cryptocurrency stored on the device.
Cloud Wallets: One of The Most Convenient Hot Wallets
Now we move from cold to hot, at least in terms of wallets! Introducing cloud wallets. Known for their incredible levels of convenience, cloud wallets provide you with quick access to your crypto investments from a variety of devices and locations as they’re a device connected for crypto transactions to the internet. But with this convenience of hot wallets comes a price. The private keys to cloud wallets are stored online and often by third parties. As a result, a hot wallet can face a high risk of cyberattacks.
And last but not least, are software wallets. A form of a hot wallet, they can be downloaded on a smartphone or on a desktop. Although this type of hot wallet is very secure, not to mention convenient, it can be compromised by hackers and online viruses. So always ensure you carry out good online security practices if using such a digital wallet for holding digital currencies.
How to Keep Your Crypto Safe From Cyberattacks?
So you decided to take control of your crypto assets and hold everything in a private wallet. Well done! However, with great power comes great responsibility, and now it all rests on your ability to remain secure and keep your private keys private.
But how do you do it? In this section, we’re going to cover everything you need to know about total online security in a completely beginner-friendly way.
Phishing sites are some of the most common methods used to steal cryptocurrency. In order to steal your login details, criminals will attempt to impersonate an exchange, online wallet, or another place you are holding your crypto assets. When you are logging into such places, always check that you’re on the correct website address and not an altered version. Plus, always make sure the site has a valid and up-to-date HTTPS certificate. If it doesn’t, something likely isn’t right. This is especially important when visiting the exchange via an email link or similar.
Avoid public WiFi at all costs when you are logging into any sensitive place where you hold your crypto savings. Public WiFi networks can easily be comprised by cybercriminals. As a result, only access your crypto wallet through a secure connection that, ideally, is encrypted through something like a WPA-2 protocol.
You’ve heard the term, don’t keep all of your eggs in one basket, right? The same concept applies to crypto. In the worst-case scenario that your savings are comprised, you can ride the storm by dispersing your savings through different forms of storage that aren’t connected to each other. Most crypto security experts suggest a mixture of cold storage and hot wallets for active trading.
One of the best secondary forms of security you can enable on your crypto wallets is two-factor authentication (2FA). This ensures that nobody can log into your account without a second approval through a separate app of your choice. Avoid SMS variants, as these can be comprised more easily. Instead, opt for trusted 2FA software.
Always use a trustworthy and reliable VPN to mask your IP address when accessing your crypto funds.
When making transactions, some cyber criminals will attempt to intercept the details of the transaction and provide an incorrect wallet address so that, instead of sending it to your desired address, it goes to a wallet of their choice instead. If this happens, you will likely never see the crypto you send again. So when making a transaction, repeatedly check that the addresses match and are correct. It’s worth the added time to make sure your funds go to the right place!
It’s not only cybercriminals who can cause huge losses. Some investors can be their own worst enemy by opting for too many advanced security techniques. If you forget or lose your passwords and seed phrases, you can lose your crypto funds. So always ensure a level of security that is easy for you to remember, but hard for criminals to crack.
In Summary, Crypto Investing Doesn’t Have to be Scary
The world of cryptocurrency trading is becoming an increasingly scary place in the wake of increasing cyber-attacks and scams. But it doesn’t have to be! Through the right security practices, you can keep your digital assets safe.
In this guide, we covered everything from choosing between a brokerage and an exchange, to the differences between various crypto wallets, the benefits they offer, and the safe trading of cryptocurrency.
As the world of crypto continues to grow in value, the tactics of online criminals become more intense. Always do your own research and stay up to speed with the latest threats posed to crypto investors by cybercriminals.