Protecting cryptocurrencies: How to keep your digital assets away from hackers

Sept. 8, 2022, 10:02 a.m.

Protecting cryptocurrencies: How to keep your digital assets away from hackers

The Story

In its half-year cyber threats report, Acronis, a cyber protection company, shared digital assets worth $44 billion was stolen from cryptocurrency and de-fi platforms between June 2021 & June 2022.

What are cryptocurrency & de-fi platforms and why are they susceptible to hackers?

Cryptocurrency platforms are trading platforms used by cryptocurrency exchanges for buying & selling cryptocurrencies. Individuals looking to trade cryptocurrencies open accounts with crypto exchanges. These exchanges give their account holders access to their trading platforms.

Defi platforms are decentralized financial platforms that enable a range of decentralized financial services including trading of cryptocurrencies.

These platforms hold the accounts and funds of millions of investors and traders, making them targets for hackers. They are susceptible to hacking mainly because they are decentralized. Their decentralized nature implies they run on open-source software. An open-source software is a software with a source code that anyone can modify, inspect, and enhance. This feature allows users to audit the source code.  An audit of the source code boosts users’ trust in the protocol. Cybercriminals, however, take advantage of this to analyze the source code for loopholes and exploit these loopholes.  


How can you protect your digital financial assets?

Here are a few ways investors can protect their digital financial assets.

Cold Storage - These are hardware devices that look like USB drives. They store cryptocurrencies. Traders and investors in digital financial assets should not store their assets on crypto exchanges or defi platforms. Digital currencies are not regulated, this implies investors and traders not in any way protected when crypto exchanges go bust or fold up.

Asset Protection Trust – Digital assets can be transferred to a trustee. This type of trust arrangement separates the owner of the asset from the liability that comes with owning the asset. The trustee takes on this liability.

Guard your private keys – Ensure your private keys are store safely and properly backed-up.

Stay clear of public wi-fi for all financial transactions – Public wi-fis are available for public use, therefore hackers can use malware to compromise passwords on public wi-fis.

Enable two-factor authentication on your crypto wallets – This ensures proper verification before a digital wallet can be accessed. Digital wallets that allow for biometric verification are almost impossible to hack as biometrics are difficult to replicate.

The cryptocurrency market is the youngest financial market in the world. While it was designed to operate as an independent financial system, free from controls and regulations, its decentralized and transparent nature makes it an easy target for cybercrime. This market is also known for wild price movements and volatility.

This implies the risk on the digital financial assets is in 2 folds. There is the risk of a loss through the activities of hackers, there is also the risk of a loss from market volatility. Investors and traders must learn to manage these risks.

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