Bitcoin is believed to be a secure form of currency. However, it comes with its own share of risks. Bitcoin attracts “the good guys” who are interested in investing, but it also appeals to cybercriminals who are ready to take advantage of any loophole in the system to steal funds. Therefore, Bitcoin investors need to be aware of the risks they’re likely to encounter when trading or safely store bitcoins and ways to protect themselves.
Here are some of the most common dangers faced by bitcoin investors.
Loss through Negligence or Theft
You’ve probably heard of potential millionaires who once invested in crypto and lost the password to their wallets, which left them contemplating their choices and future prospects. As a bitcoin investor, you may find yourself in a similar situation. Unfortunately, losing private keys is more common than you think.
Some of the most common ways to lose the key to your wallet include negligence, theft, malware infection and storing Bitcoins in fake wallets. The problem is that losing your private key means a loss to your bitcoin wallet since you cannot access your wallet without the key. If by any chance a hacker gains access to your security key, you can lose your entire crypto fortune.
Also, you should be very careful when downloading and installing crypto apps. Even on reliable stores like Google and Apple App Store you can find scam crypto apps that have been repackaged and that managed to bypass strict app vetting processes. Most of these apps are fake crypto wallets that lure people into entrusting them with their account information. Thus, make sure to thoroughly check any cryptocurrency wallet before giving away your credentials.
Cyber Security Risks
From malware and ransomware to brute force attacks and phishing, cybercrime is thriving. In fact, it is estimated that by the end of 2021, the cost of cybercrime around the world will rise to $6 trillion.
Bitcoin trading platforms and other third-party service providers are even more prone to hacking and other malicious acts. For instance, in September 2020, KuCoin, an Asian cryptocurrency exchange, lost roughly $281 million after their system was compromised in a data breach.
Similarly, in September of 2015, BitPay Exchange lost roughly $1.8 million worth of bitcoins through a phishing attack.
Other risks may arise if cybercriminals gain control of ample consensus nodes on a bitcoin network. This and similar changes may alter the blockchain, rendering it vulnerable to cyber-attacks.
Lack of Regulation
While bitcoin’s lack of centralization comes with advantages such as lower transaction costs, the absence of regulation decreases Bitcoin’s stability. In this day and age, cryptocurrencies have pretty high volatility since there are many factors that affect these fluctuations, like geopolitical events and even statements that governments of influential individuals make.
On the other hand, government entities in different countries are concerned about the fact that the way Bitcoin empowers anonymity makes it easy for the cryptocurrency to be used for drug trafficking, money laundering, and other illicit financial transactions.
These concerns may in the future encourage certain countries to curb the right to acquire, use, hold, own, or use digital currencies.
How to Keep Your Bitcoins Safe
Even though you can’t predict which security threats are coming your way, there are some ways you can significantly strengthen your security and protect your digital currencies and transactions. We came up with a list of some of the easiest ways to further protect your cryptocurrencies and Safely Store Your Bitcoins.
Use Offline Storage
Unlike online wallets, offline wallets, also known as cold storage, are not connected to the internet, making them less vulnerable to hacking.
Cold storage keeps private keys in an offline mode, which reduces the chances of theft. But, using cold storage can be quite inconvenient sometimes, so it’s advisable to split your coins and keep those meant for daily trading in online storage and the remainder in cold storage. Standard offline storage methods include hardware wallets, sound wallets, paper wallets, and storage devices like USB drives.
According to crypto experts, one of the most secure ways to store crypto is via a paper wallet. This way, you have to print out your private and public keys on a piece of paper. From that moment, the only way to access your cryptocurrency is by logging in with those credentials. Most people laminate this paper and store them in safety deposit boxes to ensure that they’re keeping their keys from intruders.
Enable Two-Factor Authentication
Two-factor authentication helps you connect your bitcoin account with a phone, physical dongle, or mobile app. This can significantly increase your wallet protection since even if cybercriminals get a hold of your username and passwords, which are usually your primary line of defense, they will still need a secondary authentication to enter your account.
Hence, make sure that the online wallet you choose supports two-factor authentication and enables it immediately.
Use a Separate Email to Access your Bitcoin Wallet
Most people have an email address that they use for daily communications. But, they also use the same email for their PayPal, Twitter, Facebook, and other accounts.
You may also find yourself sharing this particular email address with friends and family, who even end up sharing it with other people, and before you know it, your email will have reached malicious parties. While it may be convenient to have everything in one place, it can eventually lead to increased cyberattack risk. Moreover, if you connect this email to your online wallet, you are at a higher risk of being hacked and getting your money stolen.
Therefore, it is advisable to use a different email for your online wallets to reduce the risks of being compromised. Also, if you want an even higher level of security, choose encrypted email providers like ProtonMail that use end-to-end encryption to cipher your communication and prevent potential intruders from glancing over your sensitive data.
Bitcoin and other cryptocurrencies are becoming more and more appealing to both serious investors and cybercriminals. If you consider investing in cryptocurrencies in the future, make sure to protect your account by upgrading your cybersecurity framework so it can meet the high standards necessary for these kinds of transactions.
