Cryptocurrency has only recently become a mainstream topic of conversation. Over the last 10 years since its rise to fame, a narrative has become so well known that it has almost become a cliche and that is the topic of crypto hacks.
Whilst the cryptocurrency space continues to rapidly grow, so too do the methods used by hackers to steal this digital currency. In this highly unregulated market, hacks and thefts are not unusual or unique and they are incredibly common. This itself poses the question: should more be done to stop crypto hacks?
There are a number of ways in which the cryptocurrency industry can be better protected and safeguard the users who trade millions in crypto each year. Debates are frequent as to whether the crypto market should be better regulated or governed by an external regulator or body. But in a time where a resolution to these debates are unlikely to be achieved, let’s take a look at some of the ways in which more can be done to prevent the sheer volume of crypto hacks which happen every day.
Encouragement of using cold wallets
A lot of crypto investors buy popular digital currencies, such as Ether or Bitcoin, on an exchange as a way of keeping the currency on that platform. Whilst digital exchanges use their own range of safety precautions to try and prevent thefts, they aren’t protected from hacks. One of the best ways that you can protect your trades and investments is to trade using a secure wallet. There are two central types of cryptocurrency wallets you can use to conduct trades and, of the two, a cold wallet device is considered the safer option.
Cryptocurrency wallets look like a standard USB drive and they act as a physical store for coins and tokens. As they are not connected to the internet, cold wallets are unable to be hacked online. Each crypto hardware wallet comes with a unique and private key, which is a password-like code which enables you to decrypt the wallet and gain access to the coins or tokens which are stored on there.
Although using hardware cold wallets are highly effective in protecting against digital thieves, they themselves carry their own risk in that, should you lose the password key, you will be unable to ever recover the contents – there is no back up option. This is, presumably, why a high number of traders use these wallets to make big trades, but then the argument comes in that they are risking their trades and crypto anyway.
Trading using only Bitcoin
Bitcoin is largely considered to be “hack-proof”. This is because the blockchain on which Bitcoin operates is constantly reviewed by the entire network. This then makes any attacks on the blockchain highly unlikely. Bitcoin, as a network, has not been hacked since its inception, which leads many to suggest that, in order to trade safely and avoid hacks or loss, new or inexperienced traders should be encouraged to trade using only Bitcoin.
If someone tries to hack the Bitcoin blockchain, then they would need to hack not just one, but over half of the participating computers in something known as a 51% attack. This is perhaps one of the most significant threats present to blockchains, but is also one which is very highly unlikely to happen.
A majority (51%) of the computers is required to decide on which transactions to approve and decline, meaning that 51% could potentially alter a blockchain’s ledger. As mentioned above, this situation is highly difficult to achieve and is unlikely to happen.
The use of secure devices
Like a lot of things related to crypto, the majority of protection tips come down to a personal level, as opposed to the cryptocurrency market as a whole. One of the best and easiest ways in which you can prevent yourself from falling victim to crypto scams or theft is to use secure devices.
One of the best tips is, when handling crypto investments, to use a secure and private internet connection as opposed to a public network. For an added level of security, you may also wish to consider using a VPN (virtual private network), which encrypts your online traffic and can allow your IP address and location to be changed. VPNs are an easy and straightforward solution to help shield online data and browsing activity from third parties.
Following on from this, did you know that 51% of people use the same password for both professional and personal accounts? Although using the same password may seem convenient initially, it can quickly become inconvenient should a hacker crack your password and compromise all of your important data. It’s also recommended to use two-factor authentication (2FA) of multi factor authentication for an extra layer of security, which again makes it more difficult for hackers to gain access to your crypto exchange accounts.
The crypto market is a highly unregulated one and with constant pressures on regulators and governing bodies across the world to implement some protection for traders, this unfortunately doesn’t seem likely anytime soon. Whilst there are plenty of things which can be done to stop crypto hacks, these need further support from regulators. In the meantime, however, it’s best that traders take their own initiative when it comes to making secure investments and trades using crypto.
Cryptocurrency scams are becoming more common, so having steps in place to protect your trades and personal data is highly encouraged. It may also be worth looking into the more common crypto scams and making yourself familiar with the potential signs and indications so that, should someone try and instigate a hack, you can steer well clear.
If you believe you have fallen victim to a crypto or trading scam, then there are now some steps in place and options available so that you can attempt to recover your money. If you entrusted a regulated broker who went on to trade and lose your money, then you can also look into the ways you can attempt a recovery. Whilst there may not be much movement in the protection of traders, thankfully, more is being done and set up to help traders recovery money lost in trades.