It may alarm you to learn that the cybercrime industry will cost the entire world over $10.5 trillion annually by the end of 2025.
One of the most lucrative targets for hackers is a crypto wallet. Understanding common crypto hacks can help you protect your crypto assets in the future.
Let’s explore the key information you need to keep in mind.
Understanding Crypto Hacks
Hackers have plenty to gain from stealing crypto assets.
This provides plenty of incentives for cybercriminals to target crypto wallets. These attacks function using a variety of methods ranging from exploiting weaknesses in the software to taking advantage of people’s trust.
After the hacker successfully accesses your crypto wallet, they will try to empty it and transfer the funds elsewhere. If this occurs, there’s no way to recover the stolen funds.
Different Types of Hacks
To protect yourself, you first need to understand the various types of crypto hacks that can occur. This will help you recognize them in the future. Listed below are some of the most notable.
Social Engineering
A social engineering crypto hack often occurs when a hacker attempts to impersonate you or someone you know. This could include trying to convince you that they are from an official support team and asking for details about your account access.
Although simple in nature, these attacks can be difficult to spot. Some hackers are experts at impersonation.
For example, they might take their time to learn all they can about how a wallet provider operates so they can pose as an employee.
Phishing
Hackers use emails, text messages, and other forms of communication to attempt to gain access to your wallet. These messages will often contain malicious links or downloads that can give the hacker access to your data.
An example would be an email disguised as a legitimate wallet provider asking for you to click on a link or download a file. There are ways to discern fraudulent emails, though. You should always examine the sender’s email address and check for any spelling errors.
There may also be errors in the body of the email.
Ransomware
Ransomware is a form of attack where the hacker takes control of your system and demands payment to relinquish it.
The attacker will typically make use of sophisticated malware to gain access to your wallet. They will then encrypt all the data stored in it. This means that you won’t be able to access any of the funds until you pay the ransom.
However, there is no guarantee they will decrypt your data. In many situations, the attacker will take your money and leave.
Even the FBI recommends against paying ransoms in cases like these.
Paying up will provide hackers with more resources and facilitate future attacks.
Smart Contract Vulnerability
Smart contracts are those that run on the blockchain and self-execute when certain conditions are met. Hackers can exploit these contracts to gain access to funds.
They achieve this by finding vulnerabilities in the code of the smart contract and using them to their advantage. A common example is when hackers use a code that creates an unlimited number of tokens. Other scenarios could include bugs in the code allowing them to manipulate it to meet their needs.
Exchange Hacks
Unfortunately, many exchanges have weak security protocols in place. This makes them vulnerable to attack. Cybercriminals often target exchanges due to the large number of funds stored there.
They can then steal these funds and transfer them away before anyone notices. They often hack into exchanges by exploiting vulnerabilities in the software, targeting users with phishing attacks, or by manipulating smart contracts.
They carry out these attacks hoping that they can act unnoticed until they obtain funds.
Wallet Hacks
This involves hackers gaining unauthorized access to a user’s wallet. Hackers often use the above methods to do so.
They might even use a combination of them to gain access. Once they do, they can then transfer away any funds stored in the wallet.
Hardware and Software Vulnerabilities
Hackers can exploit hardware and software weaknesses to gain control over a user’s wallet. This could be done by targeting the device itself or any other connected services.
The attacker might also use malware to infiltrate the system, allowing unrestricted access to your data.
Insider Threats
Many people make the mistake of overlooking insider threats. This occurs when an individual within an organization has access to confidential information and uses it for malicious purposes.
This type of attack often happens without the wallet owner’s knowledge. Hackers in these scenarios could be disgruntled employees, malicious contractors, or other insiders who have access to sensitive data.
Preventive Measures to Take
Protecting your digital assets is easier they might seem. There are plenty of steps you can take to ensure that your information remains secure.
Let’s explore the top ones you need to know.
Use a Reputable Provider
One of the best ways to secure your crypto wallet is to choose a reputable provider. Research different services and read reviews to determine which one suits your needs.
You can avoid many potential issues by doing so.
Secure Passwords
Whenever possible, use unique passwords for each account.
Make sure that these passwords are long and difficult to guess. If you have trouble remembering your password, consider storing it in a safe place.
A password manager application is great for this purpose.
Two-Factor Authentication
This process requires users to enter two different forms of identification before they can access the account. For example, you might be asked to enter a code sent to your phone and then enter a password.
This provides an extra layer of security that is difficult for hackers to overcome.
Store Funds in Cold Storage
This is a great way to protect your funds from attackers. Cold storage involves storing your private keys offline on a secure device, such as an encrypted USB drive or hardware wallet.
Without an Internet connection, hackers cannot gain access to your assets.
Keep Your Software up to Date
Software updates contain security patches that protect against vulnerabilities. Make sure you keep all of your applications and hardware updated so that hackers have fewer opportunities to exploit weak points.
Archive Your Data
Archiving your data will help protect against data loss and damage. You can do this by backing up your wallet to an external storage device. Even if your system becomes compromised, you will still have access to your funds.
Recognize Common Threats
Learning to recognize the aforementioned threats is essential for keeping your crypto assets safe. This will give you the knowledge and skills necessary to protect yourself against cyber criminals.
It will also make it easier to spot suspicious activity on your accounts.
Buy Crypto Safely
A common mistake that people make is buying cryptocurrency from an unreliable source.
Make sure you only purchase your digital assets from a reputable provider. If you don’t, you could end up losing your funds.
For example, a hacker might intercept the transaction and steal your money.
Encrypted Passwords
To add an extra layer of protection, use encrypted passwords. This involves encoding your credentials so that they are not readable in plain text.
Encrypting your passwords will make it more difficult for hackers to gain access to your accounts. Keep in mind that your crypto platform will not store encrypted passwords. It’s your responsibility to remember them or store them in a safe location.
If you forget, you won’t be able to access your wallet in the future. It’s also likely that your wallet provider won’t be able to assist you.
Use a Multi-Signature Wallet
As the name implies, a multi-signature wallet requires multiple signatures to authorize transactions.
This means that you can set up an agreement between two or more parties in order to use funds. In this way, the funds can only be spent if all parties agree. This makes it much harder for hackers to steal your money, as they won’t be able to get enough signatures to authorize a transaction.
Get Started Today
The best time to begin protecting your assets against crypto hacks is today. This way, you can ensure that all of your information stays as secure as possible. Even a single incident could be catastrophic, so keep the above guidelines in mind.
Want to learn more about how we can help improve your crypto risk management? Feel free to get in touch with us today.
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