The rise of cryptocurrencies has been nothing short of meteoric. But as the amount of money flying around in crypto has increased, so has it's appeal to bad actors.
Crypto hacks have now become a depressingly common occurrence – in 2022 alone crypto hackers stole a whopping 3.8 billion. These criminals are always on the lookout for new ways to steal your digital assets, whether it's a crypto exchange, crypto wallet or a bridge between blockchains, Bitcoin, Ethereum and the other cryptocurrencies available out there are under attack.
Protecting your crypto is a must. Fortunately, there are steps you can take to ensure that you don't become the next victim of nefarious activity.
In this article, we'll provide you with the top 5 essential tips to protect yourself from crypto hacks as well as taking a look the different types of crypto hacks out there.
Understanding the Types of Crypto Hacks
Before we explore the tips, let's lay out the most common types of cryptocurrency you might come across.
Exchanges are a way for users to buy, sell and store cryptocurrency, and many crypto investors rely on them. Exchange hacks happen when hackers find ways to exploit vulnerabilities in a cryptocurrency exchange's security system to steal digital assets. As exchanges hold a large amount of crypto assets for their users, they are juicy targets for would-be hackers. A major crypto exchange hack can potentially see a massive amount of cryptocurrency stolen.
A bridge hack targets crypto at its most vulnerable point as it is moved between one blockchain and another. All cryptocurrencies exist on a blockchain network. Sometimes, these cryptocurrencies need to be moved from one blockchain to another, for example when turning BTC into ETH. This is done through something called a cross-chain bridge. While these bridges are incredibly useful, they are also a weak point and a tempting target to bad actors.
Wallets let you access, manage, and move around your cryptocurrency. Broadly speaking they come in two types, hot – which are always connected to the internet, or cold – which are offline. As hot wallets are online, that raises the possibility of them being hacked.
Understanding How Hackers Operate
There are a few different ways bad actors look to get their claws into other people's crypto.
A phishing attack is a scam where victims are tricked into giving up their private keys or personal information, or downloading damaging malware. In these types of attacks, attackers tend to masquerade as a legitimate entity or person, hoping to gain the trust of the victim. Once the attacker gets the information they're after, it won't be long before the victim finds their funds stolen.
Any software that is used to store and transfer cryptocurrency is a potential target for bad actors. Hackers will be looking for weak points and bugs in the code that could leave it vulnerable to being exploited. When these are identified, that opens the door for hackers to swoop in with a crypto exchange or cross-chain bridge attack.
Perhaps the most direct and obvious way for a hacker to get their hands on stolen funds is by getting hold of your private key. With so many different ways to store your private key, the potential method of theft is very much a movable feast, and could result from anything from stealing a piece of paper to hacking into a device.
Top 5 Essential Tips to Protect Yourself from Crypto Hacks
Now that we have a basic understanding of the types of hacks around, let's dive into the top 5 essential tips to protect yourself from crypto hacks.
Tip #1: Secure Your Passwords and Use Two-Factor Authentication
Securing your passwords is the first line of defense against crypto hacks. Never ever use the same password for multiple accounts or use easy-to-guess passwords, like your name or date of birth. Instead, create a unique combination of upper and lower case letters, numbers, and special characters, making it virtually impossible to guess.
There's more to security than just difficult to guess passwords though. It's also a good idea to use two-factor authentication (2FA) whenever possible. This adds an extra layer of security by requiring you to enter a code on top of your password to access your account. It may seem frustrating to have to go through an extra stage to access your assets, but 2FA will massively improve your security. Rather than a potentially hackable SMS-based solution, use an authenticator app, such as Google Authenticator or Authy, to generate the codes.
Tip #2: Keep Your Software and Hardware Up-to-Date
Keeping your software and hardware up-to-date is crucial to protecting yourself from any potential crypto hacking. Over time, vulnerabilities are uncovered in software code, and cybercriminals can exploit these vulnerabilities to gain access to your digital assets. Therefore, regularly updating your software and hardware, including your operating system, web browser, and antivirus software can make a real difference.
Tip #3: Use a Cold Storage Wallet
A cold storage wallet stores your digital assets offline, making it more difficult for hackers to get their hands on them. There are a few different types of cold storage wallets out there, including hardware wallets and paper wallets. Hardware wallets are physical devices that store your digital assets and require a PIN to access, while paper wallets are as simple as printed copies of your private keys that you can keep in a safe place.
Tip #4: Be Careful Where You Store Your Crypto
Precisely where you store your crypto is a key aspect of protecting against any cryptocurrency hacks. If you are going to store your digital assets on an exchange or hot wallet, then make sure the one you choose is reputable and has a proven track record of keeping bad actors at bay. You should also avoid storing your crypto on exchanges for extended periods of time, as they are more susceptible to attacks.
Tip #5: Educate Yourself and Stay Informed
Finally, educating yourself and staying in the loop with any new developments in the crypto space is a good way of protecting yourself. Regularly read news and updates about the crypto industry to keep on top of the latest security threats and best practices. You might want to do a bit of crowdsourcing on security matters too. By joining online communities and forums, you can learn from other crypto enthusiasts and experts.
Real-life Examples of Crypto Hacks
Crypto hacks are no theoretical threat; they really do happen. Decentralized finance and blockchain bridges are generally subject to the biggest crypto hacks these days, but as we've already seen, crypto hacks can take many forms.
Here are some examples of the most high profile and biggest cryptocurrency hacking incidents that have occurred over the years:
- In 2014, Mt. Gox, one of the largest crypto exchanges at the time, lost 840,000 bitcoins (worth over $460 million at that point) due to a hack. It was one of the first high profile hacks in the crypto space.
- In 2020, a Twitter hack compromised high-profile accounts, including those of Elon Musk, Bill Gates, and Barack Obama, to promote a Bitcoin scam.
- In 2022, an unbelievable $625 million was stolen in ETH and USDC from the Ronin Network which supports popular blockchain gaming platform Axie Infinity. Perhaps unsurprisingly, this is often touted as the biggest crypto hack in history.
A Safe and Secure Crypto Space
The sheer size and audacity of the real-life examples underscores the pressing need to protect yourself from would-be crypto hackers. Following the top 5 essential tips outlined in this article will help you do just that.
So, remember to secure your passwords and use 2FA, keep your software and hardware up-to-date, use a cold storage wallet, be careful where you store your crypto, and educate yourself and stay informed. By doing so, you can enjoy the benefits of crypto without worrying about the risks. And if everyone does the same, then it helps contribute towards a safer and more welcoming crypto environment for everyone to enjoy.