The crypto world has opened up numerous innovative investment avenues for retail investors across the globe. But with the new opportunities come potential pitfalls.
Cryptocurrency wallet hacks are among them. And while the threat posed by such attacks is significant, you can protect yourself in several ways.
Let’s look at how hackers get into your wallet and what you can do to stop them.
Hacker Techniques Used to Access Crypto Wallets
Before we look at how to protect yourself from cryptocurrency wallet hacking, it’s a good idea to look at how hackers get into these. Below, you’ll find a selection of tactics they use.
1. Phishing Attacks
Phishing attacks are a common information-stealing technique used by hackers. Attackers utilize cloned websites that look strikingly similar to legitimate cryptocurrency platforms to defraud targets. Misleading domain names are also deliberately chosen for the schemes. For example: Binance.co instead of Binance.com.
Because the websites are in many cases indistinguishable, targets are easily hoodwinked into logging onto the cloned websites and using their crypto account credentials to log in. Upon inputting this information, the data is transferred to the hackers. Once they get this information, they then use it to access the victim’s real account on the legitimate crypto website.
2. Fake Hardware Wallets
Fake hardware wallets are another form of hacking that you need to be aware of. Typically, hackers target individuals who already have a hardware wallet and then trick them into using a modified replacement designed to steal crypto keys.
In the first part of the ruse, the target receives a package with the modified hardware wallet. The bundle usually includes a note warning the target that their current device is vulnerable and needs to be replaced with the delivered wallet.
The shipped replacement usually bears instructions asking the user to plug in the device to a computer and input their crypto wallet recovery key. Once the keys are entered, they are recorded and transmitted to the hackers, who are then able to unlock the wallet on the blockchain. Accessing the wallet allows them to siphon funds.
It’s important to note that hardware wallet providers never ask customers for their recovery keys. Moreover, they never ship replacements unless you explicitly ask for one.
3. SMS 2FA Verification Exploits
Two-factor authentication (2FA) via SMS is one of the most commonly-used verification technologies today. It is, however, susceptible to endpoint exploits and social engineering attacks.
In some cases, malicious actors can intercept SMS verification messages via SIM swapping. SIM-swap ploys involve the impersonation of a target and tricking telecom employees into transferring control of a SIM card number from the owner. Transfer of ownership allows hackers to intercept 2FA messages connected to a user’s crypto accounts.
More advanced 2FA interception tricks involve exploiting Signaling System 7 (SS7) features. SS7 is a telecommunication protocol that’s used to handle communication between different telephone networks. It is also central to the 2FA SMS process.
Hackers are using numerous versions of malware to target popular operating systems such as Windows and macOS. Some of the viruses are programmed to detect copied cryptocurrency addresses and swap them for wallet addresses belonging to hackers. Successful interchanges usually lead to cryptocurrencies being sent to unintended addresses controlled by hackers.
Earlier versions of the malware primarily infected systems by tricking victims into downloading malicious software. Today, however, targets are in some instances redirected to websites laden with malware. Upon accessing the website, the worms immediately search for device exploits and infect vital clipboard modules.
In other instances, crypto exchange employees are targeted. Access to their computers usually helps to compromise vital exchange infrastructure.
Safeguarding Your Crypto Wallet
Since you’ve now got a better idea of how hackers get into cryptocurrency wallets, we can move on to looking at ways to protect yourself. Below, you’ll find four ways to do this.
1. Use a Non-Custodial Wallet
If you have significant crypto holdings and believe that your funds are at risk of being hacked, a non-custodial wallet is recommended. Non-custodial wallets give you full control of your crypto wallet keys and are preferable if you don’t want third-party access.
Using a non-custodial wallet, however, also calls for greater responsibility on how you store your keys. You could lose your crypto holdings if they get lost.
It’s important to have a sensible backup strategy. Some users simply write down their keys on a piece of paper, but the best option is to use a hardware wallet. They provide an extra layer of protection against phishing sites, cyber-attacks, and malware and just require a pin to access the private keys.
Some hardware wallets have a multi-sig feature for additional protection and utilize multiple keys. The keys can be distributed among people with an interest in the holdings.
Coldcard, Trezor, and Ledger provide hardware wallets with a multi-signature (multi-sig) option. There are also reliable web-based non-custodial crypto wallets. MetaMask wallets are a good example.
2. Avoid Unregulated Exchanges
It is irresponsible to keep cryptocurrency holdings on an unregulated exchange. This is because their security measures are often not up to the same standards as regulated ones. In many cases, the management behind them is usually faceless. This means that in the event that funds are lost, there are few repercussions.
Most regulated exchanges are based in the US. They include Coinbase and Gemini.
3. Use App-Based Two-Factor Authentication
If you keep your crypto on a regulated exchange, it is best to use app-based two-factor authentication to protect your account in addition to SMS verification. This is because SMS-based 2FA can be undermined more easily.
Another favorable 2FA option is YubiKey. Developed by Yubico, the USB hardware authentication device uses a cryptographically hashed key to verify synced online accounts once plugged into a computer.
4. Avoid Reusing Email and Crypto Account Passwords
Reusing passwords across multiple platforms increases the risk of hackers using the same passwords to compromise connected accounts.
Among the best ways to avoid this habit is to use unique passwords that are hard to memorize and then store them in a password manager service that keeps them encrypted.
The top password managers also help with the process by generating unique passwords that can also be automatically changed.
Protect Yourself From Cryptocurrency Wallet Hacks
Crypto wallet security is becoming a major priority as more retail investors put their money in the nascent but fast-maturing sector.
As hacker tactics evolve, it is best to take all standard wallet protection measures when dealing in crypto. Having read this article, you should have a better idea of what to look out for—and how to protect your money.
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