Wallets: Security

Security

Why is wallet security so important?

Without the centralised structure of fiat currency, or the benefits of physically being able to store it, cryptocurrency security is a unique scenario levelling responsibility squarely on the owner. This is why the motto among cryptocurrency owners and traders emphasises the importance of planning for the worst – prevention is better than cure. But if a cryptocurrency owner chooses not to secure their wallet, there leaves very little hope for restoring its connected funds.

Since the advent of cryptocurrency, it has generally been the case that lost keys mean irretrievable assets – no password, no cryptocurrency. Because cryptocurrency is decentralised, there is no point of authority offering services helping to retrieve lost passwords.

While this may seem inconvenient, it also serves a purpose of security. If a cryptocurrency wallet is easy to access, the value of the cryptocurrency within it would lose much of its value.

The first and most important element of effective cryptocurrency security is understanding that the details and location of a wallet’s private key should not be divulged to anyone.

Wallet holders often bend the rules regarding this when relying on an online or third-party wallet provider, who must know private key details to function. It leaves wallet holders at risk of losing their cryptocurrency because there is nothing stopping these third parties from choosing to shutdown or clean out their account’s holdings.

It means extra care needs to be taken in verifying if a third-party wallet holder is trustworthy, and that only small amounts of cryptocurrency are held in these types of accounts.

How do I best secure an online wallet?

These online wallets will require users to choose a password to access their wallets. It is important to be rigid with password selection, as this is sometimes the only barrier to someone else gaining access to an online wallet.

It is recommended to choose passwords as random as possible with at least eight characters, and to never reuse old or current passwords. If producing and remembering passwords is a pet peeve, a password manager can be used to help generate and remember effective passwords.

2FA

Much like email addresses, bank accounts and even social media accounts, two-factor authentication (2FA) is also in vogue with cryptocurrency online wallets adding an extra layer of security.

It usually involves a user inputting a password to gain access, before being required to input a second code or password. The user only knows this second code when they receive it from the third-party wallet service through a secured account held by the user, usually an email address or text message.

There are still risks remaining with using these alternative secure accounts in receiving these important access codes, so many use dedicated 2FA apps as an alternative.

Added security measures recommended when accessing online wallets also include being aware of the network being used.
Using a secured home network rather than public WIFI offers a more private internet source less susceptible to hacking.
If a WIFI network cannot be avoided, online wallet users should use a VPN when connecting so all their data and movements are encrypted and hidden from outside threats.

VPNVPNVirtual Private Network offers online privacy and anonymity by creating a private network from a public internet connection.
Wallets: Security

How will cryptocurrency most often be lost?

The greatest threat and common factor of cryptocurrency being stolen is the holder themselves. Cryptocurrency can be kept perfectly secure and safe from others with research and diligence, but those neglecting to take the necessary action to protect their digital assets often give rise to the false narrative that cryptocurrency is an insecure form of currency.

Hackers provide one of the greatest external threats to cryptocurrency theft, but almost always only as a result of holders neglecting the required security measures to protect their holdings. Hackers are most likely to take advantage of easy-access cryptocurrency, but security should also be considered for the threat of scams.

Phishing sites are clever schemes to lure cryptocurrency holders into divulging their wallet information, usually by using a site front looking remarkably like well-known and readily used online exchanges.

Users are often drawn to these sites through advertisements or email scams and can sometimes only differentiate the real site from the scam site by analysing slight differences in the domain site address and a secure SSL HTTPS connection.
Opening attachments or clicking on links from unknown senders must be avoided for online wallet users to secure their cryptocurrency. 

Which is the most secure wallet?

While online wallets and other forms of hot wallets provide all the convenience required of a regular cryptocurrency user, they also offer some of the largest security risks.
Cold wallets are always the answer for long-term and large-scale cryptocurrency holders, while hardware wallets provide a happy medium between security and convenience.

When all else fails, perhaps the most consistent and safest way to store your cryptocurrency wallet keys and its attached information is with a paper copy. This simply means accessing your wallet information and printing, though as an extra measure of security, it is a good idea to make sure any connections to the internet are disconnected before doing so.
Again, this physical copy should be hidden in a safe and secure location, and the digital version deleted.

FAQ

What do I do if I lose my private key?
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Since the advent of cryptocurrency, it has generally been the case that lost keys mean irretrievable assets – no password, no cryptocurrency. Because cryptocurrency is decentralised, there is no point of authority offering services helping to retrieve lost passwords. While this may seem inconvenient, it also serves a purpose of security. If a cryptocurrency wallet is easy to access, the value of the cryptocurrency within it would lose much of its value.

What is the greatest threat to cryptocurrency security?
arrow arrow

The greatest threat and common factor of cryptocurrency being stolen is the holder themselves. Cryptocurrency can be kept perfectly secure and safe from others with research and diligence, but those neglecting to take the necessary action to protect their digital assets often give rise to the false narrative that cryptocurrency is an insecure form of currency.

How does cryptocurrency get stolen?
arrow arrow

Hackers provide one of the greatest external threats to cryptocurrency theft, but almost always only as a result of holders neglecting the required security measures to protect their holdings. There are also phishing sites are clever schemes to lure cryptocurrency holders into divulging their wallet information, usually by using a site front looking remarkably like well-known and readily used online exchanges.

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