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? Â
The blockchain can be attacked despite built-in security measures, just as we have seen with hacks of cryptocurrency exchanges in the past. Blockchain and cryptocurrencies are integrated. Blockchain technology, which is essential to the success of cryptocurrencies, enables the operation of digital assets like Bitcoin. Data is stored on a series of digital building blocks. Financial transactions are secured by the blockchain network, and once data is recorded, it cannot be changed. Every time a new transaction takes place, a new block is made. If a miner tampers with a block, the chain is rendered invalid immediately. Blockchain lowers the risk of information tampering since it is a distributed ledger (DLT) without a central authority. Despite this, cryptocurrency exchanges have previously been hacked. Users can defend themselves against
Read:Â Lets Understand Crypto In A Laymans Language
How To Safely Store Cryptocurrency Â
The best way to handle one’s digital assets is to use bitcoin wallets because it is not recommended to retain all of your cryptocurrency coins on a third-party exchange. Software known as wallets is used to generate and store both private and public keys, which are required to access digital currency kept in an online wallet. Such keys are essential since losing them would prevent a person from accessing their digital possessions. Someone needs to have access to one’s public key in order to transmit another person bitcoin. Crypto users are accountable for keeping their private key passwords secure. The private key is his password for their email. If one loses it, it must be recorded and stored securely.
Cold Wallets vs. Hot Wallets Â
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 Â
The possibility of hacks is one of the hazards associated with managing one’s digital investments in a custodial account or hot wallet. Users running the danger of not being able to withdraw money or transact in cryptocurrency. The investor typically keeps his password in a secure location. You still need to write it down today, but we’ll use iCloud or Google Cloud to empower users to save data securely. In order to understand how big the exchange is and how many people are trading from it, investors must read the reviews of the exchange. One must make sure they are using two-factor authentication when they create an account. It serves as security.
Read:Â Cybersecurity Timeline and Trends You Should Know Before Planning for 2023
[To share your insights with us, please write to sghosh@martechseries.com]
