A Chainalysis report states that the value of stolen and hacked cryptocurrencies has declined significantly in 2023 compared to the previous year’s data.
Illegal proceeds from cryptocurrency scams fell 29.2% and illegal proceeds from hacks fell 54.3%. This was aided by a sharp decline in decentralized finance (DeFi) hacks, which may indicate that DeFi systems are improving their security practices.
However, cryptocurrency holders should remain vigilant and proactively protect their assets.
Here are some of the best ways you can protect your cryptocurrency wallet in 2024.
How to protect your cryptocurrency wallet: Experts define five key steps
Despite an overall decline in cryptocurrency-related criminal activity, the ever-evolving nature of scams and hacking techniques may still leave individual users’ cryptocurrency wallets at risk.
Implementing rigorous security measures, staying up to date with the latest trends, and continually monitoring your wallet for suspicious activity are some of the important steps digital asset owners need to take to protect their cryptocurrencies.
1. Choose your cryptocurrency wallet wisely
Choosing the right cryptocurrency wallet is one of the most important steps to keeping your digital assets safe, says Jeff Owens, CEO and co-founder of Haven1, a layer-1 blockchain developed to solve the security of Web3 and liquidity issues, he told Techopedia.
According to Owens, cold/hardware wallets are one of the most secure options users can choose because they allow you to store your private keys offline, just like Ledger. In addition, these types of wallets come with PIN protection and recovery seed phrases, but they may be a bit difficult to use for beginners.
However, other experts point out that each type of wallet offers a different balance between convenience and security, so users can choose the wallet that best suits their security needs and features.
Experts added that users who hold large amounts of cryptocurrency may consider cold storage wallets because they are not connected to the internet and are not vulnerable to hacker attacks.
2. Pay special attention to passwords and private keys
Experts point out that setting a strong password is probably the first step in securing a user’s cryptocurrency wallet.
According to Haven1’s Owens, one of the biggest mistakes cryptocurrency holders make when securing their wallets is weak passwords and a lack of two-factor authentication (2FA).
Additionally, users should also pay special attention to where they store their private keys.
According to Alvin Kan, COO of Bitget Wallet, storing private keys offline for as long as possible via a hardware or paper wallet can prevent hackers from accessing them over the internet.
3. Store your passwords offline
The more information a user stores online, the easier it is for hackers to access it. Therefore, going back to the old-fashioned days of paper and pen could ensure the safety of your digital assets in your cryptocurrency wallet.
Bitget Wallet’s Kan added that the backup process for hardware wallets often includes managing a recovery phase. For added security measures, it’s recommended to write your recovery phrase on paper and store it offline.
4. Update your software regularly
Not updating the firmware on your hardware wallet is another issue that can make certain users vulnerable to hacker attacks.
Updates often include bug fixes and stricter security measures, making them an essential part of protecting your cryptocurrency wallet.
5. Be careful with every transaction
According to a Chainaosis report, fraud revenues fell in 2023, but permission phishing scams increased in importance last year. In permission phishing, scammers trick users into signing malicious blockchain transactions that grant them access to the victim’s wallet.
The report highlighted that in 2023, fraudsters stole $374.6 million from cryptocurrency wallets through permission phishing.
In addition, Bitget Wallet’s Kan said users should be especially careful with links and file downloads and always double-check website domains to avoid phishing sites disguised as official websites.
The Future of Crypto Wallet Security
The integration of advanced encryption, biometric authentication and smart contracts are some of the first steps in an emerging trend aimed at protecting digital assets stored in wallets.
Lian said that integrating biometric authentication into user authentication can provide users with a more secure and personalized way to access their wallets. At the same time, automating security protocols using smart contracts reduces the risk of human error and further improves security measures.
Kan explained that Bitget Wallet has already implemented several new security measures, such as splitting private keys into multiple parts and MPC and AA wallets, which automatically execute transactions through smart contracts to provide users with an additional level of security.
He added that secure multi-party computation (SMPC) is another emerging trend that increases the security of cryptocurrency wallets by allowing multiple parties to collaboratively compute functions while keeping their inputs private.
“Within the context of encrypted wallets, SMPC can facilitate secure distributed key generation and management functions without exposing individual keys to risks,” he explained.
The development of decentralized identity (DID) solutions also aims to make the authentication process more secure by allowing users to verify their identity without revealing personal information. Integrating DIDs with cryptocurrency wallets can help prevent identity theft and fraud.
Conclusion
Despite the recent decline in cryptocurrency crimes, protecting cryptocurrency wallets remains crucial for the safety of digital assets. New scams and hacking techniques constantly threaten individual users.
Important steps to improve security include choosing the right wallet type, using strong passwords, enabling two-factor authentication, storing private keys offline, and regularly updating your software.
Additionally, as the industry evolves, new advancements in cryptocurrency wallet security are providing more robust options to protect your investment, including the introduction of biometric authentication, secure multi-party computation (SMPC), and decentralized identity solutions.
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