Cybersecurity Guide for Cryptocurrency: Known Cases, Consequences & Precautions

Introduction

According to CoinMarketCap.com, a market research website, more than 10,000 different cryptocurrencies are traded publicly and this market will continue to proliferate. The same company reports that the total value of all cryptocurrencies in August 2021, was more than $1.9 trillion. 

Despite a massive increase in the crypto market, users are still worried about the cybersecurity of this virtual currency. Cryptocurrency is volatile, which means that some investors have made millions of dollars while others’ initial investment has been wiped out. 

In this guide, we will delve into some cryptocurrency risks, concepts, consequences, and precautions. 

What is a Cryptocurrency? 

A cryptocurrency is a digital currency that can be used to buy goods and services. It is based on blockchain, which is a peer-to-peer and decentralized technology that uses an online ledger with strong cryptography to secure online transactions.  The most popular cryptocurrencies are Bitcoin, Ethereum, Binance Coin, Tether, Cardano, Dogecoin, and USD Coin. 

What Do I Need to Know About Cryptocurrency Exchanges? 

A Cryptocurrency Exchange is Digital Currency Exchange (DCE) that is used to exchange cash into cryptocurrencies. In simple words, exchanges allow you to buy and sell cryptocurrencies. You can store cryptocurrency in your digital wallet. Some exchanges also provide additional services such as exchanging Bitcoin into other currencies like Litecoin, USA Coin, and so forth. 

Although most crypto exchanges operate online, yet you can find some ‘brick and mortal’ businesses that allow you to exchange traditional currencies and cryptocurrencies. These money exchanges are similar to currency exchange booths at markets or at international airports where you can exchange your local currency for the money of the country you are visiting. Below is the list of some types of cryptocurrency exchanges: 

  • Centralized Cryptocurrency Exchange (CEX): A CEX is just like a traditional stock exchange. 
  • Decentralized Cryptocurrency Exchange (DEX): A DEX allows for direct and secure peer-to-peer crypto transactions without the need for an intermediary. 
  • Hybrid Cryptocurrency Exchange (HCE): The HCE is a combination of both CEX and DEX. 

What is the Role of Cryptocurrency Wallets? 

A cryptocurrency wallet is a software program that allows users to store, retrieve, and manage their digital assets. A cryptocurrency wallet is similar to debit and credit cards that carry traditional money in a digital form. Wallets are the backbone of crypto assets. Below is the list of some essential terms associated with a wallet. 

  • Public key: It is a cryptographic code that enables a user to receive cryptocurrency into his wallet. 
  • Private Key: Another type of secret code that is combined with a public key to make sure security. 
  • Wallet Address: It is similar to the account number of a traditional bank’s user. 
  • Cold Wallet: An offline wallet, which is not connected to the internet. 
  • Hot Wallet: A wallet that is connected to the internet. 

What are Cryptocurrency Risks & Vulnerabilities? 

The nascent nature of cryptocurrencies is subject to a high degree of uncertainty. No central authority manages and controls this currency, neither the central bank nor any national or international organization. The value of cryptocurrencies is strictly determined by a value that market participants place on them via their transactions. Doing so can cause a loss of confidence that may result in the collapse of trading activities and a sudden drop in values. The following sections gain an insight into more risks and vulnerabilities associated with cryptocurrency. 

Security Risks 

Security is one of the biggest risks in the cryptocurrency market. The following sections describe security risks in detail. 

Account Risk

Users can access digital currency via a private key, which is a complex code that grants access to their digital account. A private key is used for encryption purposes. However, the private key can create a risk of theft or compromise. According to Bryan Gour, a cyber innovation architect at City National Bank of California, “When it comes to risks with cryptocurrency, I think the main one is that most people store their private key on their PC like any other file. There are a lot of dangers associated with keeping a key on a computer.” 

Wallet Risk

A Wallet is a digital place where you store public and private keys to your crypto assets. If the wallet is not secured, everything in your crypto business is useless. Crypto attackers can exploit your wallet to steal or theft your public and private keys and, thus, your entire crypto assets.  

Volatility Risk

Cryptocurrency volatility is a sudden change in a crypto market such as crashing prices unexpectedly. The market may quickly move in the opposite direction of what the user was expecting. No one can be prepared for market volatility. If you don’t care about market volatility, you will put your investment at higher risk. 

Regulation Risk

There is a lack of cryptocurrency regulation because this virtual currency is not backed by any central government and even there are no global cryptocurrency regulators. 

Exchanges Risk

Cryptocurrency exchanges are highly at risk of frauds, hacks, and pump-and-dump schemes. A pump-and-dump scheme works when malicious actors encourage crypto investors to purchase cryptocurrency assets to artificially inflate their value, which is known as “pumping.” After that, these bad guys sell their crypto assets at a high price and this is referred to as “dumping.” Choosing the wrong cryptocurrency exchange can put your investment at the biggest risk. 

Cryptocurrency Hype Risk

The hype for cryptocurrency is not always exciting. The key reason behind the hype surrounding cryptocurrency is that most users do not know about what they are investing in and they just end up listening to the general public. People witnesses a market boost up of fast-and-furious in 2017. The cryptocurrency hype was the main reason behind this market surge. After crypto users began to figure out what they did invest in, the prices crashed.  

Vulnerabilities and Attacks 

In addition to the aforementioned risks, there are also some vulnerabilities and attacks on the cryptocurrency world. Some of them are listed below: 

  • Spear-fishing PowerGhost Attack
  • Graboid, a Cryptominder Worm
  • Facexworm: Malicious Chrome Extension
  • Exploiting a rTorrent Vulnerability

Precautions: How Can I Protect My Crypto Business? 

To thwart cryptocurrency risks and attacks, you need to comply with the following recommendations. 

Wisely Choose Cryptocurrency Exchange

Before selecting your cryptocurrency exchange, do market research to check the veracity of the exchange’s owner. To this end, you need to look at some online reviews on the websites like Forbes and Reddit. Moreover, you need to check whether this secure and legitimate platform is offering the following factors: 

  • Two-Factor Authentication (2FA): An authentication system that confirms a user’s identity through two or more factors (e.g., something you have or something you known) before granting access to systems or web resources. 
  • Proof of Reserve: This service audits the exchange in question to verify that the total amount of money held by an exchange matches the funds required to cover the anonymized set of customers’ balances. 
  • Offering Cold Storage: Cold storage means offline storage. Offline storage significantly reduces the risks of online attacks.  
  • Liquidity: Once you have decided which cryptocurrency you are going to buy, ensure that your crypto exchange offers sufficient trading volume and liquidity to make easy and fast transactions. Inadequate liquidity may cause low prices and the speed of your transactions.  
  • Fees: Some exchanges charge less fee but make sure that you are not compromising liquidity and security over the low cost. 

Secure Your Wallet 

Securing a wallet is a prerequisite to keep your investment safe. To this end, always create a backup of your cryptocurrency wallet. It is like creating a backup of your office files, images, or audio and video data. A secure backup of the wallet can save you against cyber-attack, computer failures, or even a human error that may lead to social engineering attacks such as phishing. You still have a secure offline copy of your wallet if your original wallet has been compromised. In addition to the wallet itself, you also need to create a backup of its username, password, and PIN codes. Use the following security measures for the wallet to add multilayer security: 

  • Use Two Factor Authentication (2FA)
  • Employ a strong password 
  • Encrypt the wallet 
  • Keep your wallet up-to-date or use the latest version 

Prepare for Volatility 

Always expect the ups and downs of the crypto market. As a crypto user, you will often see a dramatic increase in prices. You must be mentally ready for any volatility of the market to stay in the business. 

Block Crypto-jacking 

A Crypto-jacking attack is specifically designed to attack cryptocurrencies. Therefore, users must be trained through a security awareness training program to block and thwart crypto-jacking attacks. Furthermore, you need to install an anti-crypto-mining or ad-blocking extension on your web browser. Use an endpoint protection tool to detect known crypto miners. 

Use a Good Cybersecurity Program 

A good cybersecurity program always safeguards you in the face of cybersecurity threats and attacks. Since you are using your computer to store your wallet and use web services to operate cryptocurrency functions, you must look for an authentic and reliable cybersecurity tool like Kaspersky Crypto-Exchange Security. 

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