Digital currency is, indeed, an innovative – and thrilling – method to complete transactions, but it is not, however, invulnerable to cyber threats. After all, we live in the digital age – everything is possible with a few clicks and some cybersecurity knowledge. Hackers are curiously looking for weaknesses in cryptocurrency wallets and exchanges, so if you are thinking about investing or are already in the game, you should be careful not to fall into the many traps meant to leave your pocket empty. Sure, blockchain is another generation of technology designed to assure maximum asset safety, but just like any invention out there, it is not indestructible. Remember when Binance, the largest cryptocurrency exchange globally, experienced a targeted hack just a month ago? Well, this should be an alarm call and motivate you to take the necessary steps to keep your valuable coins far from malicious actors.
First and foremost, you should have a clear picture of the cybersecurity risks of digital currency, and this is exactly what we are trying to explain in the following paragraphs:
1. Hackable and unregulated exchanges
Although the lack of regulation can sometimes be advantageous, other times, it can pose real problems. Unregulated cryptocurrency exchanges, for example, do not involve a third party in their transactions, i.e., no single governing body, organization, or agency is responsible for the movement, management, or production of the currency. The lack of implication of authority can lure hackers, as there are very few to no protections for holders or very few mechanisms for trying to regain lost funds.
Surprisingly or not, the number of attacks against cryptocurrency systems and exchanges is overwhelming. Some even believe that the world of digital currencies is a true Wild West, where no one knows what to expect next. So many bad-natured individuals, groups, or organizations take advantage of exchange vulnerabilities and use cryptocurrency for illicit purposes that it can be hard to believe. Throughout time, cybersecurity companies have seen attacks from nation-states and even terrorist groups, so nothing is surprising in this world of advanced technology. Experts believe that if a governing body were in charge of these systems, there would not have been so many cybercrimes targeting crypto exchanges.
However, more regulations are expected in the future. Several nations, including the USA, have started to tighten their restrictions regarding digital currencies. In March 2022, President Biden issued a decree that imposes various agencies to examine methods to keep cryptocurrency investors safe, as well as ways to stop crypto’s use for illegal purposes. So, there is hope that more regulations will arise.
2. Gullible investors
It may sound harsh, but investors themselves can be a major weakness in the cryptocurrency space. As previously mentioned, cybercrimes are quite common, especially in the case of unregulated exchanges, so there is a need for a certain level of awareness before jumping into the train of investing in digital goods. However, we cannot blame people who, for one reason or another, fall victim to scams, as there is not much information about these cybersecurity dangers. Apart from what is shared on social media, there are not many communities informing about scams, so it is not hard for investors to fall into the trap of malware or another cybercrime.
For this reason, any potential investor must rigorously investigate the cryptocurrency and exchange that have grabbed their attention before taking action. The “too good to be true” mantra is always a good starting point. We are sorry for ruining your hopes, but there is no 100,000% return per year (maybe in special cases), so you would better question the logic behind such proposals and proceed to buy after you are 100% sure of an authentic offer. How to buy Bitcoin is not that hard, but how to manage your investment can be a bit difficult. That is why we recommend researching the potential scams your next get-rich-quick scheme may involve.
3. Weak smart contracts
Cryptocurrency markets are somewhat dependent on what is usually called smart contracts. These contracts are actually a sort of code that results in automatic transaction completion when pre-defined rules are met. Smart contracts allow reliable agreements and transactions to be performed among anonymous, disparate parties without the implication of a legal system, governing body, or central authority. This sounds great, but as with any code, smart contracts can be prone to vulnerabilities, which, more often than not, go unnoticed and let malicious actors compromise systems and alter redirect virtual coins to their personal use.
Unfortunately, absolutely safe smart contracts are unreachable for most security specialists and programmers, as they imply a certain level of expertise and programming talent. And since blockchains are decentralized and many individuals can design smart contracts, no matter their skill level, we do not expect the implementation of fully secure contracts too soon. But who knows? The future is full of surprises.
4. Your cryptocurrency account security
To acknowledge the risks of a cryptocurrency purchase, it is critical to have a clear picture of what a private key means because, no, you do not actually “store” your coins; you store the private key associated with those coins. This private key is a complex credential code that allows access to an electronic wallet or digital account. So, you do want it to be lost. In this case, ensure you do not keep your private key on your personal computer (PC), as this is the first and easiest place to compromise. Instead, be sure you store this valuable code in a crypto wallet.
Hot or cold? This is only up to you, but we feel obliged to explain the difference between the two so that you can make a pertinent and informed decision. Hot wallets run on the Internet, so they are more prone to online attacks, whereas cold wallets do not rely on an Internet connection. Being mostly hardware devices, this makes them almost unreachable, so the best tip we can give? Consider securing your holdings on a cold wallet!
Cryptocurrency dangers are real, but so are prevention methods!
Salman is a prolific environmental writer, and has authored more than 500 articles in reputed journals, magazines and websites. He is proactively engaged in creating mass awareness on renewable energy, waste management, sustainability and conservation all over the world.
Salman can be reached on salman@cleantechloops.com
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