Security Risks Associated with Storing and Trading Cryptocurrencies

Once upon a time, there was barter trade, then later fiat money. At some point, we roped in plastic cards as a money equivalent, and then came cryptocurrencies. A cryptocurrency is a digital currency that works in a decentralized manner, using encryption.

Decentralized means no government or central bank regulates it, and it is a virtual currency, not tangible. To prevent counterfeiting, improve secure transactions, it uses cryptography or encryption.

With the rising popularity of the cryptocurrency, online scammers have identified a lucrative business in scamming people in exchanges.

With the outbreak of the COVID-19 pandemic, scammers have come up with COVID-related scams that have seen investors lose millions in crypto coins.

As an investor, you should look out for the following risks:

1. Crypto-Phishing

In the cryptocurrency environment, crypto-phishing scams happen via Google Ads and email, with the scams getting more complex every year. In 2020, COVID-19 crypto-phishing scams will be rampant as more people work online and show interest in cryptocurrencies.

A phishing scam is a social engineering scheme that depends on manipulating human emotions. The scamming emails seem to originate from legitimate sources and contain links or attachments that compromise your crypto-wallet and steal from you.

Multiple phishing sites have been selling fake COVID-19 crypto wallets and cryptocurrencies whose aim is to siphon your data for future scams, stealing your credentials, or targeted malware attacks. One COVID-19 cryptocurrency calls itself “The World’s Fastest Spreading Crypto Currency’’ and tries to lure visitors into downloading suspicious-looking files from GitHub.

Another phishing site prompts you to register for a chance to find out more details on a COVID-19 coin that gains value as more people become infected and die.

2. Crypto-Jacking

Crypto-jacking is a very covert affair and refers to when someone uses your computer to mine for cryptocurrencies. The hackers send you malicious emails, which contain a seemingly harmless, but malicious attachment or link.

When you download the extension or click on the link, it automatically releases a crypto-mining code into your computer.

The malicious code infects websites running on JavaScript code and online ads. The minute the code attaches itself to your device, it starts the mining process by self-execution, and you might never realize the code is there.

3. Fake ICOs, Exchanges, and Wallets

Another risk of using cryptocurrencies is falling for fake ICOs (Initial Coin Offerings). ICOs are among the methods used by startups to raise money for their businesses, which do not involve legal bodies.

Crypto-based companies use Airdrops to build communities that act as platforms for gifting individuals who like and share items on social media.

Some of these ICOs are bogus, and thousands of investors lose their investments.

A crypto exchange is a platform where users digitally buy and sell crypto coins. A crypto-wallet is a digital purse where you store your assets, such as Bitcoin and other cryptocurrencies.

Exchanges match different bids and ask from a range of buyers. Fake wallets and exchanges steal from you once you deposit your coins.

How to Protect Yourself from Scams

1. Use a VPN

Buying a VPN subscription is an excellent way to protect yourself from online scams. A Virtual Private Network protects you while you trade online by hiding your IP address and location.

The app also encrypts all your communication between your device and the internet. If you occasionally use public Wi-Fi hotspots to access your crypto wallet, it ensures nobody can intercept your communication.

2. Using a Secure Email Service

Ensure you subscribe to a secure email service, which offers you:

  • Security restrictions
  • End-to-end encryption
  • Confidentiality

3. Multi-Signature Addresses

A multi-signature or multisign address refers to the need for multiple keys for authorizing a single cryptocurrency transaction. Multi sig addresses allow you to stay safe while transacting online and mean you need two or more individuals to hold for you the other keys. However, the other holders cannot transact on your behalf without your key, which means they cannot steal from you.

4. Store the Private Key Offline

Protect your wallet and investments by keeping your private key offline. You can write your key on a piece of paper and store it safely instead of saving it on a device. Please keep the piece of paper safe from moisture or direct sunlight so that it does not fade.

5. Cold Storage

Cold storage refers to cryptocurrency hardware wallets, which are used to store assets and coins. Hardware wallets are popular with many investors, who are always on the lookout for better offline security.

6. Avoid Clicking on Suspicious Links

Please do not click on any suspicious links or download any attachments, no matter how enticing they are. If it is too good to be true, it must be. Phishing scams bank on manipulating your emotions, such as excitement and anxiety.

Conclusion

Trading and storing cryptocurrency is fast gaining traction and attracting online scammers as well. Playing it safe while trading does not take much, but it needs you to stay vigilant and look out for red flags such as websites that promise free goodies or ask you to divulge your data.

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About FinanceGAB

Ajeet Sharma is a financial blogger and I am blogging since 2017. Financegab is a personal blog dedicated to personal finance. The main aim of this blog to help people to make well-informed financial decisions.
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