Eleven years on from the creation of Bitcoin and cryptocurrency security is still a genuine struggle. Crypto security firm Slowmist keeps an ongoing log of blockchain, exchange, and wallet hacks. So far, the company estimates that blockchain hackers have lifted a cool $13 billion in 319 separate events.
And hacking is big business. Far from the stereotype of a solo operator launching cyber-attacks from a laptop, cryptocurrency attacks these days are more likely attributable to an organization such as the Lazarus Group.
Most recently, the North Korean crime syndicate has been associated with a series of phishing attacks targeting cryptocurrency companies on LinkedIn. They used a sophisticated technique known as spearphishing, sending personalized job offers to employees to gain access to corporate systems.
With these cybercrime gangs constantly on the prowl, how can the average Joe cryptocurrency user keep their funds safe? Here are a few ways.
Use a Custody Provider
Using a custody provider that you can trust is one way that you can keep your crypto safe. However, you should choose your provider carefully. Established firms that have a solid track record in financial security are generally a safer bet than small exchanges that may be storing your funds with the same level of security as an individual user wallet.
Skrill is one example. The company’s experience in the financial sector predates cryptocurrency, having started as a payments firm in the UK in 2001. It expanded into cryptocurrency in 2018 and has been growing its footprint in the space ever since. It now supports twelve different cryptocurrencies, including Bitcoin, Ethereum, and the major altcoins. Users can buy or sell quickly using their Skrill fiat balances and trade between supported cryptocurrencies.
Skrill isn’t a cryptocurrency exchange as much as a cryptocurrency service provider. However, as a reputable financial firm, it can be relied upon to choose custody partners that will provide robust protection for your cryptocurrency holdings. The fact that it doesn’t hold customer’s cryptocurrencies on its own wallets like exchanges do also makes it far less likely to become a target for hackers.
If you prefer a hassle-free option with no upfront cost investment, or if you’re a total beginner to crypto, then using a custody provider is the best choice for storing your cryptocurrencies. The trade-off is that you need to trust a provider with your funds.
If you prefer to keep custody of your own cryptocurrencies, then a hard wallet is the safest way to do so. Hardware wallets store cryptocurrencies offline, meaning that hackers are less likely to be able to get their hands on your funds.
There isn’t a vast array of choices for hardware wallets. Trezor and Ledger are the two market leaders, both offering reliable, pocket-sized devices that start from around $60 for Trezor wallets or $75 for Ledger wallets.
However, aside from the up-front costs of buying the device, you’ll also need to make sure you have a secure means of storing the seed phrase. This phrase is the only means of recovering your cryptocurrency if you lose or damage your device.
The catch is that if someone gets access to your seed phrase, they can access all the funds on your hardware wallet. Therefore, you should never store your seed phrase on any online device, as hackers can easily steal it. There are plenty of stories of people who kept their seed phrase online only to discover their funds are suddenly missing. Many people keep their seed phrases written down on a piece of paper or even emboss it onto a metal plaque.
Software wallets involve online storage of your cryptocurrencies so you can access them via a web browser or smartphone app. A software wallet lets you keep custody of your funds yourself, but without having to buy a separate device.
There are many providers of software wallets to choose from, including Atomic Wallet, Enjin, and Coinbase Wallet. You can easily find free smartphone apps for any of these in the Google Play Store or Apple App Store.
However, using a software wallet doesn’t free you up from the hassle of having to keep a seed phrase as a backup. Just like a hardware wallet, it’s strongly advised to store the seed phrase offline somewhere. But because your seed phrase for a soft wallet is always generated on an internet-connected device, you can’t be sure that it’s 100% safe.
Storing cryptocurrency remains a trade-off between various factors, including risk, cost, hassle, and trust. However, even with the ever-more-sophisticated techniques used by hackers, there are still plenty of options to help keep your crypto funds safe from theft if you take the right precautions.