Cryptocurrency wallet scams are on the rise, and hackers are targeting individuals and entire wallet providers. With the notorious Binance breach, they managed to steal two-factor authentication data, API keys and more. These are some important points to consider to minimize risks.
What Is a Cryptocurrency Wallet?
A cryptocurrency wallet lets people send and accept crypto payments. It is a software program that stores public and private keys, and it works with a variety of blockchains. Users need those keys to make payments or access their funds. Other users can see public keys and use them to send funds, and only the wallet owner knows the private key. There are mobile wallets, which keep data online. Also, there are hardware wallets, which store data offline.
How Does a Cryptocurrency Wallet Work?
Although the wallet is a software program, it is digitally stored on a blockchain, which is a secure ledger of transaction records across a network. Since the software is linked to the blockchain, it allows easier transmission of transaction details. One user sends a payment using a public key for the recipient’s account. To send or access funds, an account holder must also use a private key. Completed wallet transfers are recorded on the blockchain ledger.
Why Does a Cryptocurrency Wallet Pose a Risk?
Some people mistakenly think that cryptocurrency wallets are more secure than they actually are because they are linked to a blockchain. However, the software program itself can be vulnerable to misuse. Also, a misguided sense of security may lead people to fall victim to other types of scams that trick them into sharing information with thieves.
How Is Identity Theft Committed in Cryptocurrency Scams?
Identity theft in a cryptocurrency scam can occur through phishing. Users may receive emails that look legitimate and redirect them to websites asking for personal information. If a victim fills in personal information for identity verification, the scammers can steal that information and misappropriate it. Hackers can also access any personal data stored in a wallet program.
How Is a Cryptocurrency Wallet Accessed by Unauthorized Persons?
People often access cryptocurrency wallets through phishing and malware. Since many wallet providers store private keys with user data, a hacker can see a key by accessing a user’s account.
What Types of Programs Do Crypto Thieves Use?
Remote access trojans and cryptocurrency stealing malware programs are the most common methods. They are easier to create and use than most people think, and thieves can often execute Remote Access Trojan (RAT) and Specialized Cryptocurrency-Stealing Malware (CCSM) without users’ knowledge until their crypto balances are gone.
How Is Cryptocurrency Transferred Out of a Wallet?
If a hacker manages to access a cryptocurrency wallet, a stored private key may be available. The thief can then execute a transaction to another account by using the public and private keys.
Which Cryptocurrency Is Targeted Most Often?
Bitcoin is one of the most common cryptocurrencies that thieves seek, and Bitcoin wallet scams are becoming their preferred method of stealing. Although the cryptocurrency itself is protected by iron-clad cryptography, thieves conducting Bitcoin scams have stolen millions of dollars from users in recent years because of weaknesses in private key storage systems. Ethereum is another cryptocurrency that they target.
What Are the Common Cryptocurrency Wallet Scams?
The previous sections provide an overview of phishing and hacking risks. Spoofing is another method. With spoofing, a thief uses malware to access a user’s program remotely. After that, the thief may change the public key for the user’s wallet, and someone who attempts to send money to that person may send it to the altered address if the change is overlooked.
How To Prevent Cryptocurrency Wallet Scams
There are several ways to develop a more comprehensive safety strategy for using a cryptocurrency wallet. The first and most important step is to thoroughly understand how cryptocurrency wallets work. Always use a reputable program, and follow these additional tips:
- Do not share private keys with anyone else.
- If possible, store private key information offline in a secure place or in written form.
- Do not reveal any crypto holdings publicly online with any personal information.
- Always use two-factor authentication and strong passwords.
- Never reply to any communication attempt that asks for personal information.
- Do not keep cryptocurrency in a wallet for a long time.
- Only access the wallet when a secure internet connection is available.
- Use hardware wallets if possible to store cryptocurrency.
- Always cross-check wallet addresses when sending funds.
- For extra security, spread out crypto funds across multiple online and offline wallets.
- Instead of using automatic updates, wait a few days to run new updates to see if there are any vulnerabilities or other issues.
Are Cryptocurrency Wallets Right for Beginners?
Not all wallets are ideal for beginners. Some wallet providers are now developing private cryptocurrencies, AI wallets and other benefits that keep beginners and all people safer. The key is to do thorough research before choosing one or more wallet providers. Also, the tips in the previous section are important to remember.
What To Do After Cryptocurrency Is Stolen
The first step is to contact the wallet program provider immediately. Some companies reimburse users when hackers steal funds. If the funds were stolen and transferred to another cryptocurrency wallet, it may be possible to recover them by filing a lawsuit against “Persons Unknown” when the thief’s identity is unknown. If law enforcement can track the funds to another wallet platform, they can often identify the owner of that wallet. If there are mixers or exchanges involved in the scam, matters can become complicated. However, for a substantial loss, it is worth retaining an attorney who is experienced in cryptocurrency scams. Victims must act quickly to maximize the chances of recovering stolen funds.