One of the things about cryptocurrency that attracts many people to start buying it is the fact that the blockchain technology it’s built on is nearly impossible to hack.

This is because the blockchain is constantly undergoing re-examination by the miners that verify every transaction. The verification is inherent in the process itself, so any attempt to “hack” the transaction would fail that process.

However that doesn’t mean there aren’t security vulnerabilities in other parts of the system. Transactions themselves are fairly safe, but the following vulnerabilities still exist.

The digital wallet of either the sender or the receiver
Cryptocurrency exchanges
Cell phone or computer hacks
Phishing attempts

In most of these cases only one or two people are vulnerable to an attack, but in the case of a cryptocurrency exchange hacking, many thousands of cryptocurrency owners could be at risk.

Digital Wallet Security

The security of most online digital wallets are only as good as the level of security the user puts in place. Most digital wallets use 2-factor authentication, which combines the use of a password with a cell phone verification step.

This means that even if someone gets a hold of (or guesses) your password, they would still need your phone in order to access your account.

The vulnerability with using any online digital wallet is that it’s still accessible to online hackers. If one of them is dedicated enough, there are ways to both hack a password and fake someone’s cell phone (see below). It isn’t easy, but it’s possible.

How to better-secure your digital wallets:

Use a desktop-based or smartphone-based wallet. This stores all of your information on your own device rather than online. So when the device is turned off, or offline, no one can make any hacking attempts.
Use a hardware wallet. These USB-based wallets are considered the most secure type of wallet.

The danger with offline wallets is that if your hardware fails – like your computer dies, or you drop your USB wallet into a lake – all of your cryptocurrency in that wallet is gone forever.

So if you use a hardware based device, protect it just as you would a wallet with real money in it. Keep it securely locked in a safe and away from elements that might destroy it.

Cryptocurrency Exchange Hacks

Many people think that large financial organizations (like banks) can’t be hacked. However you’ll find news reports often that prove the opposite is true.

Any organization that holds large amounts of any currency are a direct target for hackers. This is just as true for large cryptocurrency exchanges that offer an online wallet service for users.

Some firms that have been hacked in some way in the past few years include:

Mt Gox
Bitfinex
Tether
Coincheck

Cryptocurrency exchanges usually use two-factor authentication, which is extremely secure and usually very safe. However you have little-to-no defense against an advanced hacker organization that successfully infiltrates the security of the cryptocurrency firm itself.

Any “back-door” that the firm may have to help users resolve online wallet issues could be used to access those accounts “from the inside” – such as account password resets.

Usually companies will verify account password resets via email, but if a hacker has obtained access to your email account, that level of security won’t protect you.

Cell Phone or Computer Hacking

Hackers can often get access to the phone portion of 2-Factor authentication access to your online wallet by obtaining your cell phone number (either in-person or using electronic spying devices). Once they have your phone number that’s associated with a cryptocurrency exchange account, they will call your cell phone provider to try and port the number over to their own device.

Once successful, all they need is your initial password to gain access to your wallet — or they can attempt to reset your password and confirm the reset from the phone.

Hardware or other offline storage of wallets is much safer than online wallets, but these are still vulnerable.

A laptop or cell phone can be stolen from a hotel room, as can a USB-based hardware wallet.

If a computer is used on a public network, the computer itself could be infiltrated and the wallet obtained. This is why a USB-based hardware wallet is the safer of the two options, because even when your computer is on a public network, you can unplug the USB wallet and keep it stored securely someplace safe.

Hardware based solutions are certainly the safest of most other cryptocurrency wallet options, but just keep in mind that nothing is 100% safe if you don’t take the steps you need to take to keep your wallet secure.

Phishing Attempts

The most common attempt to gain access to a cryptocurrency wallet is via email.

Hackers will craft emails that seem to come from the cryptocurrency exchange, in an attempt to get you to type in your “old” password.

Paypal was very susceptible to this for many years because logging into the account was password only. In recent years Paypal switched to 2-factor authentication, so the hacker would still need access to your cellphone to get into your account.

This is why most (good) cryptocurrency exchanges have 2-factor authentication. However phishing attempts could still give access to your password (and/or phone number) to potential hackers.

So, never click on an email link that claims to be from your cryptocurrency exchange. Always open a browser and log into your account separately. If everything looks fine there, ignore the email.

Keeping Your Crypto Safe

Cryptocurrency is one of the fastest growing trends in recent years. Because of this, there will always be people attempting to take advantage of users financially. This is the nature of anything that has enormous value. It’s been that way for everything from gold to the money inside of bank vaults.

If you owned anything else with high value, you would certainly do everything you could to keep it safe. If you treat your cryptocurrency the same way, you can use cryptocurrency safely and securely, without worry..

The best way to get started with cryptocurrency is to educate yourself. Learn all you can about cryptocurrency in Ormeus Global’s learning system known as InnerQuest. Just log into InnerQuest through the Ormeus Global Back Office and explore all of the cryptocurrency topics.