Therefore, the hackers find it very easy to access these wallets and steal the money from it, sometimes without even the users knowing about it.
If you too are ignorant about the ways to protect your wallet, this is the right place to be.
Over the years cryptocurrencies have attracted several users from all over the world taking the number of users to several millions.
However, not all of them are as privileged as the others because they are unaware of the potential pitfalls.
One of the most significant downsides of cryptocurrencies is the high chances of hacking of the crypto accounts and wallets and loss of funds.
However, there is nothing to worry about if you only protect you and your wallet in the ways mentioned below.
However, for that you will need to have a comprehensive knowledge about how these hackers work and access crypto wallets and steal money from it.
This article will have everything covered and enlighten you about it all.
How to Protect Crypto Wallets from Hacking Techniques?
Today, the world has gone digital in almost every aspect, and in such a situation, digital safety is bound to be under constant threat.
Therefore, there is no scope for any complacency, especially when you are dealing with digital assets such as cryptocurrencies.
In fact, according to some reports, the security issues resulting from unexpected and unforeseen hacking of crypto accounts in this particular field has increased tenfold over the years.
For example, an Atlas VPN report indicates that hackers have stolen approximately $3.78 billion in 2020 alone through 122 cyber attacks.
This number is expected to increase every year due to the increasing development in hacking software.
Therefore, as a crypto investor, you should be concerned about the security of your wallet so that you do not fall prey to cyber attacks.
However, to protect your crypto wallet from the hackers out there, or any other external threats for that matter, it is important that you know about these wallets and choose the right kind of wallet in the first place to safely store your private keys.
For that you will first need to know the types of wallets that you can choose from.
Ideally, you can choose from a custodial or a non-custodial wallet.
Both of these come with their own pros and cons and it depends on your personal preference as to which one you will choose eventually.
A Non-Custodial Wallet:
A non-custodial wallet is also known as the self-custody wallet. This is because you own your crypto holdings and also have total control over your private keys stored in it.
This also means that if you want to use a non-custodial wallet, it is your responsibility to remember your private keys.
You are also expected to maintain proper security measures to protect your private keys and funds.
This is quite a responsibility because if you lose your wallet there may be ways to recover it but especially when you lose your private keys, you will not be able to access your crypto – period, and no exceptions.
This means that you should have proper back-up mechanisms such as storing your private keys offline in a cold wallet. Make sure this is from a reliable hardware provider.
You may also write them on a paper and store it in a vault or even use sophisticated non-custodial wallets that come with multi-signature protection.
No matter whichever option you choose, just make sure that you store the device safely in some secure place so that it is neither stolen nor destroyed.
A Custodial Wallet:
A custodial wallet is just the opposite of a non-custodial wallet. This means that the wallet is with a third party such as the crypto exchange.
They will have the control over your private keys and hold your coins. In lieu of that you are given a kind of IOU.
This means that you do not own the coins unless you withdraw them.
This can be a concern to you but then you will be saved from the hassles of remembering and storing your private keys safely or otherwise you may lose your funds permanently.
The exchange should also come with a strong security and regulatory framework as well as quite an enviable track record.
At this point it is important to remember that from the point of view of the hackers, a custodial wallet is preferred more than a non-custodial wallet.
Why? This is because it is more vulnerable since the exchange owns the private keys and not you.
This does away with one wall of defense to your wallet.
Therefore, to save your funds from the hackers, you should store your crypto assets safely, preferably in a cold wallet rather than in a hot wallet on the crypto exchange.
The cold wallets will offer you a much higher level of security and protection for your crypto coins than a hot wallet.
Knowing the Hacking Techniques
Now that you know about the type of crypto wallet to choose to prevent cyber attacks, it is important at this point to know about some of the most common techniques the hackers follow to get into your wallet and steal funds.
It is actually a technique in which information about the wallet is mainly stolen by the hackers. For this they usually use cloned websites. These duplicate websites look just like any legit crypto platform.
It is easy to defraud users by using these cloned websites that often come with ambiguous domain names.
For example, Binance.co in place of Binance.com will make it pretty indistinguishable.
People will log in to these websites using their credentials and will be easily hoodwinked by the hackers.
As soon as you input your details, the data is transmitted to the hackers which they use then to access your real crypto account and wallet which is on the legit website, Binance.com, for example.
False Hardware Wallets:
The usual targets in this process are those individual crypto users who have a hardware wallet already.
The hackers usually trick them so that they use a bespoke replacement. This is actually designed to steal your crypto keys.
This process is followed in parts.
The first part of the trick is to send the target a package which includes the customized hardware wallet.
This package usually comes with a warning note that the current device of the target is vulnerable to attack and therefore it is needed to replace it.
And that is to be done with the hardware wallet shipped.
This delivered replacement typically comes with specific instructions. It will ask you to plug in the piece of hardware to your computer and feed in the wallet recovery key furnished with it.
Once you do that, everything is recorded and is transferred to the hacker. Now the hacker, and not you, will be able to access and unlock your wallet and steal the funds stored in it.
At this point you should remember that no hardware wallet provider will ever ask you for the recovery keys.
And, they will never ship you any replacement all by themselves unless you specifically ask for one.
Therefore, anyone who does either or both of these should raise the red flag.
You may know that Two Factor Authentication, commonly known as 2FA, is usually sent via SMS which is a technology that is most commonly used today.
The hackers exploit such verifications which are highly susceptible to social engineering attacks and endpoint exploits.
The malicious players can easily intercept these SMS verification messages by a method called SIM swapping.
This is a process that involves impersonating a target and tricking the employees in the telecom to transfer control of a SIM card number to the hacker from the owner.
When the hackers get the ownership they can intercept every 2FA message that is meant for your crypto account.
There are also several other tricks to intercept 2FA verification messages that are even more advanced.
These tricks involve utilizing SS7 or Signaling System 7 telecommunication protocol.
This protocol is used in the 2FA SMS process as well as in handling communications made between several telephone networks.
One of the most common techniques used by the hackers to get access to the crypto wallets illegally is by using malware.
There are a lot of different versions of malware available and the hackers use them to corrupt the most commonly used operating systems such as Windows and macOS.
A few of these viruses are specially designed to detect and copy crypto addresses.
These wallet addresses are then swapped with the address belonging to the hacker.
When such an interchange is successful, the crypto coins are sent to the other address that is actually controlled by the hackers.
You should have extra vigil for malware attacks because you may not be tricked by the traditional method in which you needed to click on a malicious link and download it along with the malicious software without your knowledge.
This malware would then infect your system.
Today, you may be redirected somehow to a specific website that is loaded with malware.
When you access the website, the viruses will start searching for device exploits immediately. This would then infect the crucial clipboard modules.
There are also instances when the hackers target the employees of a crypto exchange. They access their computers and compromise the central exchange infrastructure.
Consequences of Losing Wallet
It is very easy to lose your hardware wallet due to its physical nature. Therefore, it is very important that you do everything that is possible to prevent losing it.
Still, if you lose your wallet somehow, you may simply buy another one and then set it up as normal.
Therefore, losing a hardware wallet is actually not a grave risk since you may not lose your crypto but still it is a hassle.
As for the cold wallets especially, these come with a seed phrase. This is some sort of a unique amalgamation of words that may help you to recover your lost wallet.
These words can number anywhere from 12 to 24 and are typically generated in an exclusive and random sequence.
When you get your new wallet you must enter this seed phrase and you will regain access to your wallet along with your entire crypto portfolio.
This means that losing your seed phrase can only result in the loss of your crypto assets and therefore it is important to store it safely.
This is important because it is the only way in which you can regain access to your crypto account and coins.
Also, if someone else gets hold of it, your wallet can be transferred elsewhere by them. This is one irretrievable action on the blockchain.
However, if you lose your crypto keys then, as said earlier, you lose your crypto.
Therefore, the main point is to keep your private keys safe. So, do not store it where you store your physical storage device.
Protecting Crypto Wallets
Now that you know about both the type of crypto wallet to choose as well as the techniques that the hackers follow to get access to your crypto wallet, it is time to know the ways to protect your crypto wallet.
One – The easiest and perhaps the safest way to protect your funds from the hackers is to use a non-custodial wallet.
Since you already know the benefits of it such as crypto ownership and control of private keys along with your responsibilities, further explanation is therefore not required.
Two – You should never use any unregulated exchanges to store your crypto holdings.
This is because their security measures are not up to the desired standard or at par those you will find in a regulated crypto exchange.
In most of the cases, you will not even know about the management team behind them and therefore you will not be able to seek their help when needed.
Three – You should use an app-based 2FA, especially when you keep your crypto in a regulated crypto exchange, in addition to SMS-based 2FA verification.
This will protect your account even better because the SMS-based 2FA verification can be easily undermined.
Four – You should never reuse crypto account and email passwords across multiple platforms.
This will increase the risk of interception and hacking of your crypto account and wallet.
Instead, use a unique password for each that comprises upper and lower case letters, numbers and symbols making it hard for others to guess.
If these passwords are hard to memorize, you can store them in password manager service but make sure that they encrypt them.
There are few password manager services that may even help you with generating unique passwords that can be changed automatically as well.
Protecting your crypto wallet from being hacked is your job. Since the techniques followed by the hackers are evolving it is best to know them along with the wallet protection methods. You must have got some idea about it from this article.