5 ways to protect your crypto wallet from hackers
PHOTO: Pixabay
PUBLISHED ONFebruary 13, 2022 11:00 AMByKames Narayanan
You’ve seen the news. Between 2018 and 2020, Singaporeans lost around $29 million to crypto hacks. Gasp!
The crypto market is the Geylang of investments. It’s eccentric, highly risky and the kicker, it’s also an unregulated marketplace. What this means is that when you’re the victim of a crypto fraud, the chances of you recovering your money is close to zero. None, nada!
Which makes it all the more important that if you’re invested in cryptocurrencies, you do everything to protect your money stowed away in digital wallets. Prevention is better than cure, especially in the crypto market, where you’d be hard-pressed to find one.
Crypto scams can happen in many ways. Amongst them, phishing, Ponzi schemes, and pump and dumps are the more popular scam tactics. The tactics are ever-evolving but you don’t have to get into all nor do you have to be a coding genius to protect yourself from getting scammed.
Here are a few, simple ways that you can prevent yourself from falling prey to the scams. Remember, rule number one — it’s always better to be safe than sorry!
Do not click on any suspicious links
This is the crypto market equivalent of not taking sweets from strangers. Always listen to your mom, kids.
Phishing is an age-old method employed by cyber criminals. It involves mass emails containing an attachment or hyperlink. When you click the link or download the attachment, you immediately become vulnerable to phishing. All it really takes is one wrong click for hackers to get a hold of your confidential information. Poof! There goes your opportunity to become a crypto millionaire.
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Before clicking on anything, check the sender’s email address. All emails should be delivered from the platform’s official address. Any information that you gather from the information should also be from verified sources. For example, before responding to emails from Crypto.com, take a moment to read through their guide on how you can defend yourself against phishing.
Spread your assets across multiple wallets
The same way your ah ma, nenek, and patti stash their cash in Milo tins and cushion covers, you want to store your cryptocurrencies across multiple wallets online and off. Especially, if you’re investing in large amounts, you don’t want to put all your eggs in one basket.
With no limits on the number of wallets you can create, it’s entirely up to you how you want to diversify your assets. However, each wallet does have its own fees. For beginners who are investing a few hundred dollars, given the fairly small investment amount, the cost of multiple wallets might not make financial sense.
Crypto wallets can broadly be classified into two categories: Hot and cold.
Hot wallets are basically the wallets that connect to the internet via an application on your phone, desktop, or directly on the web browser. MetaMask, Coinbase Wallet, and Edge Wallet are some examples.
Because these wallets are connected to the internet, they offer great convenience and accessibility. But this also means your wallet is at higher risk of being hacked. At the very least, when one wallet gets hacked, you’d have the rest of your assets sitting elsewhere. Think of it as cutting your losses.
Do you then just cross your fingers and pray to god after diversifying your assets across wallets? Well, no. This is where cold wallets come into play.
Get a cold wallet
When you buy cryptocurrencies on cryptocurrency exchanges, your crypto assets are stored by these third-party companies. Good on you if you’ve done your research and invested with a reputable cryptocurrency exchange.
However, the thing is, these exchanges, as reputable as they come, are not entirely fool-proof. Given that even trusted exchanges like Crypto.com have been a victim of hacks, you can never be too sure about the safety of your cryptocurrencies unless…you store them in a cold wallet.
What is a cold wallet? A cold wallet, also known as cold storage or hardware wallet, is a physical device that stores your cryptocurrency completely offline. This puts your assets completely out of risk from any hacks that can happen online. In order to make transactions, you just have to connect them to your computer like you would a USB drive or external hard drive.
Cold wallets are your best bet to keep your cryptocurrencies safe. Bear in mind, do not store your recovery password online. Not on your mobile phones, not on computers. Paper is the way to go.
Also, if you’re extra cautious, you can have an additional wallet for back-up purposes in the event that your hardware wallet is damaged or lost. There’s a catch, if you lose the physical device and/or the password (private key) without having a backup, be ready to kiss your crypto assets goodbye. These cold wallets do not come with a password reset feature.
Ensure secure password protection
This might sound like a no-brainer but many of us are guilty of using the same password across multiple accounts. This is something you do not want to do. Password protection is key. Ideally, your password should be a complex 16-character mashup of alphabets, numbers and special characters.
On top of that, when applicable, set-up your two-factor authentication (2FA). If the application you’re on does not support 2FA, rethink using the exchange or wallet in the first place.
READ ALSO: Iras, CNB, Singapore Poly latest organisations to warn of fake SMS, emails
Do your own research
My wannabe crypto millionaires — listen close. While there is plenty to do to safeguard your crypto assets, you want to first ensure that what you’re buying into is not a scam. No one can save you from a pump and dump scam if you don’t save yourself.
Again, because it is an unregulated market, the value of crypto coins can be artificially inflated. Once the price has been 'pumped' up, the scammers then 'dump' their initial investment at a higher price. This will then result in a sudden steep decline in the price of the crypto coin.
With plenty of 18-year-old Tiktokers telling you which coin to buy next, you might be tempted to take @CryptoBaddie’s advice. She might be right or she might completely miss the mark.
The risk is yours to take but making educated choices would definitely save you from getting caught in a rug pull. Always do your own background checks into the people behind the project and get a reading of the overall public sentiment on platforms like Discord and Twitter before you spend your hard earned dollars.
And lastly, repeat after me: Only invest what you can afford to lose.
Now, if your crypto account has already been hacked…what can you do?
I hate to break it to you but there’s not much else you can do besides drowning in your own tears. The crypto market is an unregulated marketplace so there’s nothing the police can do. However, if you did invest your money with a large, reputable exchange, then there’s a chance you might get your money back.
Earlier this year in January, 400 users of Crypto.com were hacked. However, the exchange was quick to act by pausing withdrawals and fixing the issue. Thankfully, all of the accounts affected were also reimbursed. This goes back to researching the exchanges you’re investing with.
This article was first published in MoneySmart.
