How to protect your cryptocurrency from the reach of hackers in 2020
Insights for identifying the latest tools that cybercriminals often use to steal cryptocurrencies and how to reduce the odds of losing your coins
A couple of months ago, CipherTrace released its Q2 2019 Cryptocurrency Anti-Money Laundering Report. The report tracks major trends and developments around attacks on crypto companies. It also provides insight for driving advocacy on crypto regulations globally. According to the report, hackers, fraudsters, and thieves made away with about $4.26B worth of cryptocurrencies in the first two quarters of 2019.
The cryptocurrency market has always had to deal with Ponzi schemes, exit scams, and outright hacks that move user funds away from crypto exchanges. The worst part is that its practically impossible to reverse crypto transactions because of the immutability of the underlying blockchain technology. This piece provides insights for identifying the latest tools that cybercriminals often use to steal cryptocurrencies. You’ll also find useful tips on best practices to reduce the odds of losing your cryptocurrency to hackers.
The latest methods used by hackers to steal crypto
You’ve probably already known that hackers often try to hack their way into cryptocurrency exchanges in the hopes of stealing the private keys to crypto funds. For instance, in May 2019, Binance was compromised when hackers succeeded in breaking into its hot wallet to withdraw 7,074BTC valued at more than $40 million at the time of the attack. The hackers targeted Binance APIs to programmatically interact with the exchange to perfect the heist.
Apart from targeting crypto exchanges, hackers also often target individual crypto users in the hopes of scoring an easier heist. Some of the latest thieving methods targeted at crypto users include:
Malware refers to any malicious software designed to gain unauthorized access to a computer to disrupt its operation or steal data. Malware is probably as old as software engineering, but hackers never rest and a new type of malware is being targeted at the crypto market every day. The most common type of malware targeted at the crypto industry is ransomware, which as the name suggests is designed to hold the victim to ransom.
A successful ransom attack will block you from accessing your computer and or encrypt your data; thereby turning your computer into an expensive paperweight. The criminals will then ask you for a ransom payable in cryptocurrency for you to regain access to your computer and to decrypt your files.
Typosquatting is another emerging method that hackers use to trick unsuspecting crypto traders and investors. To pull off a typosquatting hack, fraudsters will purchase a domain similar in spelling to the domain name of the target audience. For instance, instead of https://www.binance.com/, they may buy a https://www.biinance.com/ domain and then design it to look very much like the original website. In some instances, the hackers could leverage linguistic elements such as diacritic to register an https://www.bìnance.com/ which looks very much like the real deal except for the diacritic on “I”.
Typosquatting attacks are often layered on phishing attacks. Hence, the unsuspecting victim might receive an email supposedly originating from the target site. The email will contain the link to the cloned website and clicking on the link will lead you to the wrong website where you’ll be tricked to provide valuable private information.
How to ensure the security of your cryptocurrencies
Use a licensed crypto custodial service
Custodial services are an excellent solution for long-term crypto investors who don’t want to be bothered with the hassles of cybersecurity. A licensed cryptocurrency custodial service authorized to hold and store crypto assets on behalf of clients. Crypto custodial services are typically insured and they are subject to regular audits and financial disclosures.
Using a crypto custodial service is a smart move if you want to buy and sell crypto without having to deal with private keys, spotting typosquatting domains, and avoiding phishing attempts. UK-based Skrill is one of the top crypto custodial services in the market. Skrill has been operating in the financial services industry since 2001 and it excels in developing global payment solutions that drive cross border financial transactions.
In 2018, Skrill joined the cryptocurrency revolution with a dedicated solution for buying and selling cryptocurrency on its platform. Skrill’s dedicated crypto tab allows you to choose a crypto token, decide on how much you want to spend, and buy it instantly. The best part is that Skill holds the cryptocurrencies in its custodianship at no extra charge and you don’t ever have to worry about losing your coins to hackers.
Coinbase is another well-known digital asset exchange company that offers a reliable cryptocurrency custodial service for crypto investors. Coinbase also allows you to purchase cryptocurrencies using traditional payment methods such as debit cards.
Unless you opt for the new Coinbase Wallet feature, the standard operation of Coinbase keeps the purchased coins on behalf of its users. Hence, the value of your portfolio rises and falls in relation to the value of the underlying cryptocurrency that you bought but you don’t have to worry about the security of your coins.
Own your crypto private keys
One of the most popular sayings among crypto geeks is “not your keys, not your coins”. A crypto custodial service is one of the best ways to store your coins but if you want to be an active cryptocurrency trader, a crypto custodial service might not be a practical choice,
If you want to trade cryptocurrencies actively, you’ll most likely purchase crypto from an exchange. When you buy cryptocurrency on a regular crypto exchange the coins will be deposited into an online wallet. An online wallet is essentially a hot wallet because it is connected to the internet and you run the risk of losing your coins in a hack.
However, when using crypto exchanges, you can leverage private keys to ensure that your coins won’t be stolen even if the exchange is hacked. A crypto private key is a 256-bit alphanumeric code that allows you to maintain ownership of your coins. You can use the private keys to store your cryptocurrency in cold storage when you aren’t trading. You can then transfer parts of the funds to your online wallet on the exchange whenever you want to trade.
Cryptocurrencies are still gradually gaining mass-market appeal after a decade of being mostly misunderstood, ignored, and vilified by the traditional financial services industry. 2020 could be potentially pivotal in the annals of cryptocurrencies and Blockchain technology as institutional adoption continues to increase.
Cryptocurrencies are still in a niche market and they get this much interest from hackers. You can begin to imagine the potential security challenges that crypto investors and traders will face when crypto-assets go mainstream. Hopefully, this guide should have given you more actionable information to proactively take steps that will ensure the security of your cryptocurrencies going forward.
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