In the dynamic world of DeFi, safeguarding your digital assets goes beyond mere caution; it's about adopting a rigorous regimen of transaction hygiene. As the dApp and wallet landscape continues to evolve, the importance of maintaining the utmost security measures has never been more important. This article will cover the main points for what it takes to acknowledge and practice caution to keep your assets safe:
Contract Interaction caution and potential risk scenarios
Crypto-specific phishing attacks
Zero Trust approach - Verify
Last tips / security tricks
Crypto wallets are intended for holding and recovering crypto assets that can only be accessed by you, think of it as a machine-readable proof of ownership of your crypto assets. Remember, cryptocurrencies are never kept in a specific location or have a physical form. The only ability to hold or track such assets is by finding the transaction details and records on the blockchain.
1. Public and private keys act as the basis of crypto wallets:
The public key consists of public related information consisting of your wallet address. By sharing the public key to others can allow users to send payments directly to your wallet.
The private key in a crypto wallet is the same as the password for your online banking account or even consider such private credentials similar to a social security number for you or anyone else's identity. The private keys provide access to many if not all of your crypto.
NOTE: If a bad actor gets hold of your private key, they can perform fraudulent transactions or steal your crypto that has irreversible consequences including but not limited to losing access to all your crypto.
2. Hot & Cold wallets:
Using hot and cold to describe a wallet is similar to what we call a “hot site” and a "cold site" with security.
🔥 Hot Wallets are the most common type which is the wallet that connects to the internet. Because of the better accessibility and convenience, it also comes with a much greater risk of attacks and fraud outcomes.
🧊 Cold Wallet s store the crypto tokens offline. Most refer to this wallet preference as vaults that you can use for your crypto. This also includes new generation cold wallets that connect to the internet while retaining their basic working functionality, these are referred to as warm wallets.
NOTE:
Putting all of your crypto in one wallet automatically implies a single point of failure.
If someone gets access to your private key, they not only own your funds, but they own you.
Bad actors that have access to your private key(s) also have the ability to impersonate you on-chain.
3. Contract Interaction & Caution:
In attention to smart contract dynamics, in the context of employing a wallet, an intricate system unfolds with the smart contract inherent to the project. Essentially, to this process, is the necessity to authenticate through signature authorization, facilitating the platform's capability to execute token operations on the user's behalf.
NOTE:
Users should not trust all other sites innately; or, even better, NEVER put trust in new platforms by default.
The most common attack methods are malicious links shared in phishing, private messages, and emails.
Bad actors build clones of common dApp protocols that seem identical, but are malicious that target users who interact with the site and unfortunately end up taking control of funds and private wallet credentials. We will be going more depth in the next section for crypto-specific phishing attacks.
4. Phishing Attacks:
Stay with me here; this may be a long one, being aware of such phishing methods could save you and your funds. It's important to remain cautious and verify the authenticity of any communication or website related to cryptocurrencies.
Fake Exchange Websites: Attackers create websites that mimic legitimate cryptocurrency exchanges. Users unknowingly provide their login credentials, private keys, or other sensitive information, thinking they are accessing their genuine accounts.
Malicious Email Links: Phishing emails are sent, seemingly from reputable sources like exchanges or wallet providers, with links that direct users to fake websites. These sites prompt users to input their private keys, passwords, or other confidential details.
ICO Scams: Attackers impersonate upcoming Initial Coin Offerings (ICOs) or token sales, requesting users to send funds to a specified wallet address. Users who comply end up losing their cryptocurrencies.
Social Media Impersonation: Scammers create fake profiles on social media platforms, pretending to be well-known figures in the crypto industry. They interact with users, promote fake giveaways, and request private keys or cryptocurrency deposits.
Fake Mobile Apps: Fraudulent mobile apps imitate legitimate crypto wallets or exchanges, tricking users into installing them. Once installed, these apps capture login credentials and private keys.
Phishing on Social Media: Attackers share posts on social media platforms promoting fake giveaways or contests, asking users to send a small amount of cryptocurrency to receive a larger amount in return.
Impersonation of Support Services: Scammers pose as customer support representatives for exchanges or wallet providers and ask users for their private keys or account details under the guise of assisting with an issue.
Malicious Browser Extensions: Users may unknowingly install browser extensions that claim to enhance their crypto experience but actually capture their private keys and login information.
Ponzi Schemes: Attackers promise high returns on investments in fake crypto projects, encouraging users to send funds. The scheme collapses, and users lose their money.
Email Spoofing: Attackers send emails that appear to be from a legitimate crypto service, asking users to verify their accounts by providing sensitive information or private keys.
Summary:
Always use official website links
You can do this by going to a trusted search engine and manually searching the site/protocol rather than selecting a direct link off a website or social media platform.
Double-check email sender addresses
Never share private keys or sensitive information online and highly consider where you safe keep such information at all times, just like how you would secure your social security number.
5. Zero Trust Approach:
Bad actors exploit social media platforms to amplify their fraudulent ploys. One tactic involves the unauthorized use of images of celebrities or prominent business figures (such as Elon Musk or Emin Gün Sirer) to fabricate an illusion of credibility. They might even promise giveaways or free tokens to lure potential victims. Hence, it's important to maintain a healthy dose of skepticism when encountering crypto opportunities promoted on social media and diligently undertake your own investigation before taking any action.
6. Last Tips / Security Tricks:
Phew. Almost there, a lot of details, right? Crypto security may seem daunting and almost impossible to keep track of-- but once you get the handle of such precautions it'll become second nature!
Crypto Hygiene Tips (Best Practices):
Do Not Keep Your Mnemonic On Your Computer
Avoid storing your mnemonic phrase on your computer. Instead of managing a lengthy string of characters, the wallet seed phrase – also referred to as a mnemonic phrase – should be handled with care.
Always commit to DYOR, however, the most common option is to transcribe or commit the mnemonic phrase to memory or by physically writing it down and securely storing it physically where only you know.
Use one mnemonic phrase for each wallet
Utilize a distinct mnemonic phrase for each individual wallet. To preempt errors, it is wise to abstain from endorsing contracts from unfamiliar sources encountered on platforms like Discord or other social media channels. If circumstances necessitate contract engagement, opt for a wallet with minimal cryptocurrency holdings (e.g., exclusively executing contracts via your hot wallets).
Avoid using mobile hot wallets
Your mobile phone's frequent connections to diverse public WiFi networks, websites, and files considerably broaden its attack surface when contrasted with laptops or desktops. This heightened exposure escalates the vulnerability to potential wallet hacking incidents. Mobile devices typically possess fewer robust security measures, risking them to be more receptive to malware attacks directed at mobile wallets.
Avoid Airdrops if you have second thoughts
Avoiding airdrop scams requires a combination of caution and preventive measures. Since airdrops often originate from new tokens, differentiating between legitimate offers and scams can be challenging, but not impossible
Conclusion (DYOR)
Becoming well-versed in the diverse categories of crypto wallets proves indispensable when venturing into Decentralized Finance. Furthermore, in the wake of the various breaches witnessed in recent times, security has rightfully emerged as a crucial consideration in the realm of blockchain interaction.
Hot wallets and cold wallets, the common iterations of crypto wallets, come with their respective merits and vulnerabilities. Thus, the onus lies on you to meticulously determine the optimal combination that aligns with your approach to managing crypto. While it might seem repetitive, I conclude this with a reaffirmation:
Do Your Own Research.
For any additional questions, please view our other knowledge base articles or contact a support team member via the chat button. Examples are for illustrative purposes only.