Bitcoin 60,000, Ethereum 3,000, NFTs, and the rise of DeFi – 2021 is quickly becoming the year of the blockchain, with interest in these topics reaching the mainstream, and creating a frenzy not seen since the end of 2017.
As interest in the blockchain, cryptocurrency, and non-fungible tokens reach more and more individuals around the world, purchases in crypto and of NFTs are reaching heights never seen before. With many in the general public entering this space for the first time, security and monitoring of newly acquired digital assets has never been more important.
New entrants in this area may be surprised to learn that hackers stole close to $4B USD worth of cryptocurrency in 2020 alone. While the impact of hacks remains to be seen for 2021, March saw that NFT digital art is already attracting attackers, with NFT marketplace NiftyGateway being the victims of a hack which saw the loss of artwork worth thousands of dollars from user accounts. The following month, the crypto world saw an $80M USD hack of EasyFi, a DeFi Polygon network powered protocol. With various aspects of blockchain technologies still in nascent stages, bad actors will continue to identify and exploit vulnerabilities for financial gain.
As these hacks continue and with the increasing possibility that they will continue to rise in the months and years to come, it is of paramount importance for users, both new and experienced, to be able to manage, monitor, and protect their digital assets. But how?
Using A Crypto Wallet
One of the most common mistakes that crypto users make is overestimating the security of their tokens on the platforms which they acquire them from. Popular exchanges such as Binance and Coinbase have not only greatly simplified the crypto buying process, but they have also simplified the crypto “storing” process, allowing their customers to “keep” their crypto in the associated accounts.
Many end users, often with limited crypto experience, sometimes draw comparisons of this service with what they see with their stock brokerage accounts. After all, if one can buy, sell, and hold Tesla stock shares from their Robinhood account, why can’t one do the same with cryptocurrency on their Binance account?
Quite simply, cryptocurrency is not the same as shares in a publicly traded company, and as such, they should not be treated the same way. Coins stolen from crypto exchanges are sent to the hacker’s wallets – likely with little hope of full recovery. Unlike with stock shares, where a paper trail would be more prevalent should shares be “hacked”, the same doesn’t exist in the crypto world.
Crypto holders would best be served by storing their crypto in a crypto wallet. Remember, “Not your keys, not your coins.”
Crypto wallets can generally be classified into two types – “hot” or “cold”. Hot wallets are connected to the internet and can be accessed at any time (think of a wallet connected to your browser, or as an app on your phone, etc…). Cold wallets are not connected to the internet and stored “off-line”. Many cold wallets look like USB keys, and are very simple data storage devices with limited functionality. They hold the private key to your wallet – which protects your funds from unwillingly leaving at any time. As this key is never online, attackers will not have the mechanisms to hack your private key to transfer funds.
Exercise Good Security Practices
If the word “password” sounds like a good password to you, expect to lose all of your crypto at some point in your life. These days, computers can check anywhere from 10,000 to 1 billion passwords per second. With such a weak password, your crypto will be gone before your coffee even finishes brewing in the morning.
While many platforms and other crypto products already employ good security measures, it is important to strengthen them even further where you can. If two factor authentication can be employed, ensure that this option is checked. Use passwords that are not tied to personal details (e.g. your name) or words which can be found in the dictionary. The best passwords are those which are a mix of numbers, letters, and special characters. Pro Tip: create a memorable sentence and use the first letters as your password (For example: Aiwr500maiwr500m! = And I would roll 500 miles, and I would roll 500 more!).
Further, ensure that when accessing personal financial details, you are not connected to a public network (e.g. the local coffee shop). Hackers can use sophisticated tools while you are connecting online to public wireless access points to record and steal the information you are entering online. A private, secure, and hard-wired connection is always best – especially when talking about financial related transactions.
Employ Crypto Security & Monitoring Software
Crypto wallets, two factor authentication, complex passwords, and a secure internet connection. While these are great starting points to protecting your crypto and your related accounts, more sophisticated users of cryptocurrency may want to actively put their assets to work and not just hold it as a store of value in a wallet.
Examples of this include users who may want to offer up their tokens into “liquidity pools”. In these cases, this requires a crypto holder to deposit their tokens into a smart contract so that they can earn interest – thus providing a mechanism for users to potentially earn very lucrative passive incomes.
For users who want to earn more crypto with their existing crypto, what other forms of protection can be employed to secure their funds? Enter PARSIQ.
PARSIQ is one of the first crypto-centric available solutions out there, providing compliance and risk management solutions for any user that is involved with cryptocurrency transactions.
PARSIQ’s software protects its customers by providing monitoring services. With PARSIQ’s product, workflow automation can be set up (allowing for the establishment of triggers which provide alerts for when an event happens). The software analyzes transactions as they happen, cross-references transactions based on data which is sourced off-chain, and then produces a risk score based on this analysis. Depending on the score assigned, users may be flagged to take further action – extremely valuable especially if an action was not initiated by the crypto owner.
Additionally, with PARSIQ, users can monitor their smart contracts, the integrity of their transaction partners, balances for millions of crypto addresses, and more, all in real time.
Need a report to feel more secure? PARSIQ also provides reporting capabilities – allowing crypto holders to receive “Proof of Reserve” emails to show that their balances remain safely in place. These also may serve to be extremely valuable for if/when crypto may be compromised, providing an audit snapshot of before and after an intruder attack.
For more avid users of crypto, employing additional security measures to ensure the safety and security of their digital assets is something that should be seriously considered. This additional protection may be the difference between waking up to a depleted smart contract versus an alert that an attempted attack was prevented.
With blockchain and crypto still in the early stages of growth, there remains vulnerabilities of all kinds in existing and new blockchains that bad actors will surely look to take advantage of. The increase of new entrants into the crypto space, coupled with inexperience in how to manage this emerging technology, places many participants in the growing crypto community in a vulnerable state.
All users, experienced and new, would benefit greatly from actively taking measures in protecting their funds through secure wallets, by exercising good security practices, and by employing the services of blockchain security and monitoring software – like PARSIQ.
In the world of crypto, once the coins leave a wallet – they’re gone. Therefore, it’s best to ensure that when funds do transfer, it’s only because you authorized it to do so.