3 Tips to Protect Your Wallet From Hackers + What to Do If You Lose Access?
Protect your wallet
/!\ This is for educational purposes only, and should not be used for unauthorized access, tampering or accessed illegally without owner permission.
Your crypto wallet is probably the most important asset that you own and you need to take steps to protect it.
You can be the greatest crypto trader in the world but if you lose access to your cryptocurrency wallet you will still lose all of your gains. Although you may not think about it much, your cryptocurrency wallet is the single biggest point of failure in your cryptocurrency security, making it a tempting target for hackers.
It’s especially problematic for individuals sitting on Bitcoin wallets set up in the early days of cryptocurrency, who may not have followed best practices. If you haven’t already done it, the best time to get serious about your cryptocurrency wallet is today.
To help you get started we’ve compiled this list of our top 3 tips to protect your wallet from hackers.
Tip #1: Don’t Keep Your Cryptocurrency in an Exchange Wallet
Crypto exchanges have improved significantly over the past few years, but keeping large amounts of cryptocurrency in an exchange wallet is still risky. Recently there has been a series of high-profile crypto wallet hacks. For example, the decentralized exchange Pancake Swap lost over $200 million in an attack.
There is also the risk that you can lose access to your funds. Exchanges like Coinbase and Binance regularly receive negative feedback about their customer service.
This is particularly true in cases where customers have lost access to their accounts due to some perceived breach of the terms and conditions. These customers usually get their money back at some point, but they could lose valuable trading opportunities in the interim.
Exchanges can do this because they hold the “keys'' to all wallets kept on their platforms. They can legally and technologically revoke your access on a whim. This fact alone should be enough to make you think twice about leaving large sums of cryptocurrency sitting in their wallets.
As a basic rule: Only leave cryptocurrency in an exchange wallet if you’re planning to trade it or convert it into fiat.
Tip #2: Pick the Right Kind of Wallet
Once you’ve decided to pull your crypto out of your exchange wallet, you are met with another challenge: what kind of wallet do you use?
There are a dizzying number of wallets that crypto investors can take advantage of. Many are so-called desktop or mobile wallets. These wallets are stored directly on your computer or your smartphone. They have the advantage of being easy to set up and access, but their most important point of failure is the security of your device.
Many investors who wish to stay in crypto for the long haul prefer to keep their cryptocurrency stored in offline wallets. These wallets come in two varieties: hardware and paper wallets.
Paper wallets were one of the earliest forms of cryptocurrency wallets. They are print-outs that contain your wallet address and a QR code that makes it possible to share your wallet information if you need to send or receive payment.
Paper wallets are very secure when generated correctly and are unlikely to be attacked in a hack. The downside is that paper can be damaged or lost, which might result in you losing access completely if you didn’t keep a backup somewhere.
Other users prefer to use hardware wallets like the popular ledger wallet Trezor. The hardware consists of elaborate USB devices specifically designed to secure your cryptocurrency.
These wallets have the advantage of being fairly robust and secure. Plus, users can do things like stake cryptocurrency or hold multiple cryptocurrencies in a single device.
The downside of these devices is that they are electronic. There have been reports of major vulnerabilities with Trezor because it contains a flaw that allows hackers to pre-install malware.
Fortunately, these vulnerabilities don’t allow hackers to directly steal your cryptocurrency. Instead, they rely upon social engineering attacks or fake addresses to trick you into sending your cryptocurrency.
Thus, no matter which wallet you chose, you need to practice basic security hygiene.
Tip #3: Inform Yourself About Common Social Engineering Attack Vectors
No matter which wallet you pick, the main vulnerability in your security is you.
Around 33% of all data breaches involve social engineering or phishing attacks. These attacks do not require sophisticated hardware, access to your devices, or even pre-installed malware (although that makes it easier). All they need is your email or telephone number.
Social engineering attacks rely upon making the target believe that they are receiving a genuine email or request for information. The user then willingly enters or sends details that can be used to breach multiple devices.
This approach can be as simple as encouraging you to install an add-on that shows you a wallet address that the hacker controls instead of your intended recipient. Or, a hacker can take a more complex approach like using your Gmail or Apple account to take over your computer or phone to access your wallet apps.
These attacks are easily dealt with if you avoid them to begin with. You should use two-factor authentication apps with all of your devices. Additionally, you should avoid connecting your hardware to a device you don’t know.
It is also important for users to follow basic internet hygiene by ensuring their software is up to date and running regular scans to screen for malware.
Bonus Tip: What If I Lose My Wallet Access?
Hacks are bad enough, but occasionally a user can lose access to their wallet. It is estimated that around 20% of all Bitcoin currently mined is sitting in locked wallets. This often happens in cases where a user had a hardware wallet stored for an extended time or if they had a paper wallet that was damaged or destroyed.
The best way to avoid this problem is preparation. Cryptocurrency wallets rely upon seed phrases when you create them. You should write down this seed phrase and store it somewhere safe. It will enable you to recover your wallet should the device get lost or become compromised.
If you don’t have access to your seed phrase, the problem becomes trickier. If you still have access to the wallet, you can attempt to crack it, but to do this you will need at least some idea of what your password is, otherwise it will be impossible for you to gain access. If you lack both access and your seed phrase, then it will be impossible to recover your wallet.
Contact us if you need some help about wallet recovery.