5 Mistakes that are Compromising Your Crypto Wallet Security
Cryptocurrencies offer financial freedom and innovative opportunities, but this freedom comes with a responsibility: safeguarding your digital assets. Despite the decentralized nature of crypto, many users unknowingly put their wallets at risk. Here are five common ways you might be compromising your crypto wallet security-
When we talk with people in the crypto space, the conversations are as diverse as the individuals themselves. Some come from a solid security background, ready to discuss complex encryption methods and layered security protocols. Others are newcomers, drawn in by stories of overnight millionaires during the latest bull run. Then there are those who’ve made a modest fortune and now want to ensure their digital wealth is safe and secure.
You got into crypto just in time, snapping up coins during a dip, and now, thanks to the bull run, your investment has skyrocketed in value — but none of that matters if you lose it all because of a small mistake.
We’ve identified a recurring set of red flags and common mistakes that people make, regardless of their experience level. To help you navigate the crypto world safely, we’ve distilled these into the five most common security mistakes you should avoid. Whether you’re a seasoned pro or just starting, avoiding these errors is key to keeping your crypto assets secure.
Mistake №1: Using a Custodial Wallet
A non-custodial wallet is a type of cryptocurrency wallet where you retain complete control over your private keys. This means that you’re responsible for safeguarding your seed phrase and managing your assets without relying on a third party. Because you hold the keys, you alone have access to your funds, offering greater security and privacy compared to custodial wallets, where a service provider manages keys on your behalf.
Custodial wallets are convenient, but they come with significant risks. When you use a custodial wallet, you’re trusting a third party to hold your private keys. If the custodial platform is breached, your assets are at risk. Also, you have limited control over your funds, potentially facing restrictions or loss of access due to platform policies.
-> Learning: Self-Custody Wallets are the way to go. A self-custodial crypto wallet is a digital wallet where you keep total control of your seed phrase. Always remember — Not your keys, not your Crypto.
Mistake №2: Wallets with in-built Cloud Drive Backups
Backing up your crypto wallet is crucial, but storing backups in cloud drives can be dangerous. Cloud services are frequent targets for hackers, and a breach could expose your wallet backups. Also, cloud providers can experience outages or data loss, putting your backups at risk.
Some wallets provide an encryption password to your private keys stored in the drive. However, this setup is much inferior to offline backups (Paper or metal plates).
Learning: Create a physical backup of your seed phrase and store it securely. You can use Metal Plates to store your seed phrase. To learn more about such backups, visit AirGap Shop.
Mistake №3: Using a Wallet Exposed to Online Connections
Out of convenience many crypto wallets run on devices that are regularly connected to the internet — like your laptop. This exposure opens the door to various security threats, including:
Malware and Viruses: Malicious software can infiltrate your wallet and compromise your private keys.
Phishing: Online connections can lead to phishing attacks where hackers trick you into revealing sensitive information.
Keep in mind that every device connected to the internet can be attacked or connected to somebody else.
-> Learning: Store your funds in a truly airgapped cold wallet setup. Find a comparison table here
Mistake №4: Wallets with Weak RNG Mechanisms
Your journey into self-custody begins with creating a seed phrase, a crucial element in setting up a secure wallet. The seed phrase is essentially a series of 12 or 24 words derived from a random number string. This string is generated using a component known as a Random Number Generator (RNG). However, There are various concerns about the credibility of RNG chips used in consumer and security device. It is essential that the RNG produces a high level of randomness; without it, the security of your private keys is compromised.
This might look a small thing for new users but it is the most crucial part of seed phrase generation. If your seed phrase lacks randomness, it can lead to predictable patterns, which can be exploited by hackers. Some wallets use weak RNG mechanisms, resulting in easily guessable private keys. This opens the door for Brute-Force Attacks, where hackers use computing power to crack the predictable keys. To overcome this reliance on RNG chips, companies such as Silicon Graphics used lava lamps as their source of randomness. Learn more about their Lavarand project here.
-> Learning: Consider solutions that add an extra layer of randomness on top of the RNG data string or go for methods such as coinflips and dice rolls to create your seed phrase.
Mistake №5: Weak Seed Phrase Backups
The seed phrase is your key to restoring your wallet, but weak backups can put it at risk. Here are some of the commonly used backups:
Screenshots: Taking a screenshot of your seed phrase and storing it in your photo library is another risky move. It can be easily accessed by anyone who gains entry to your device or cloud-based photo storage.
Clipboard Storage: Pasting your seed phrase into a document or notepad seems convenient, but it’s risky. Hackers often exploit clipboard vulnerabilities to steal sensitive data, and if your device is compromised, so is your seed phrase.
Notes Apps: Applications like Evernote or Apple Notes are useful for quick jotting, but they are not designed with high-security data storage in mind. A compromised device or account could easily lead to the theft of your seed phrase.
-> Learning: Create a physical backup of your seed phrase and store it securely. Backing it up on paper is a start, but consider that it can easily burn or get destroyed when being exposed to water. A recommended backup method is the engraving of the seed phrase into stainless steel (since it is extremely durable and has a higher melting point than other metals). Explore some backup solutions here.
Key takeaways:
- Gain control by using a self-custody wallet
- True Randomness is key when creating your seed phrase. Do not rely solely on the RNG chip.
- Store your funds offline via a cold wallet.
- Use offline methods like metal plates for seed phrase backups.
- Refrain from using cloud drive backups for your seed phrase.
AirGap to the rescue
AirGap is a non-custodial wallet that allows you to turn your spare device into a cold wallet. AirGap has been open source from day one and is built by industry leading security experts in Web 3.0. With AirGap, you are the sole custodian, ensuring that only you have control over your crypto assets.
Another key security feature of AirGap is its unique approach to transaction signing. Instead of exposing your wallet to online connections, AirGap uses QR codes for offline transaction signing. This airgapped approach greatly reduces the risk of malware, phishing, and other online threats. By keeping the wallet isolated from direct internet access, AirGap minimizes the attack surface that hackers can exploit.
True Randomness
AirGap addresses the issue of weak Random Number Generators (RNGs), which can lead to compromised private keys. To enhance security, AirGap employs a unique entropy generation method, using human inputs from coin flips and dice rolls. This approach ensures a higher level of randomness and unpredictability, resulting in more secure private keys. By incorporating these human elements, AirGap creates a robust and reliable key generation process that resists brute-force attacks and other forms of cryptographic vulnerabilities.
The best way to back up your seed phrase
Back up your seed phrase on durable metal plates or other robust offline methods. These offer fireproof, waterproof, and long-lasting protection, ensuring that your seed phrase remains intact. AirGap offers two kinds of metal plates: Punch Plates and Engraving Plates. To know more about the plates, visit AirGap Shop.
To celebrate Bitcoin Halving, AirGap has announced a flat 10% off on AirGap Metal plates. Simply use the code halving2024.
Want more security?
Utilize Social Recovery (Shamir Shares) for enhanced security.
Social recovery in crypto helps you regain access to your assets if you lose your private key or seed phrase. It uses Shamir’s Secret Sharing to split the key into several parts, called “shares.” Each share is incomplete by itself but can be combined with others to recreate your key. You give these shares to trusted people or secure places. If you lose your key, you can collect the shares and recover your crypto. This way, you can get back into your wallet without compromising security.
Check out this video below to learn more about AirGap’s social recovery feature.
Setup a multi-sig wallet with AirGap
A multi-signature (multi-sig) wallet is a type of cryptocurrency wallet that requires more than one signature (or approval) to complete a transaction. Instead of relying on a single private key, a multi-sig wallet uses a combination of keys, providing an added layer of security.
Here’s how it works:
- Multiple Participants: A multi-sig wallet involves multiple parties or devices, each with its own unique key.
- Transaction Approval: To send funds or authorize a transaction, a certain number of keys (often a majority or a predetermined number) must approve the action.
- Enhanced Security: This setup helps prevent unauthorized transactions, as no single key can authorize spending alone. It is commonly used by businesses or groups that require multiple approvals for added security or by individuals who want an extra layer of protection.
With AirGap, you can create a multi-sig account with SAFE Wallet on Ethereum and all other EVM-compatible chains.
To know more, visit our docs here.
Conclusion
Securing your crypto wallet requires attention to detail and a focus on safety. By addressing these five common risks, you can significantly improve your wallet’s security and protect your digital assets. Remember, the key to crypto security is decentralization and personal control over your private keys. Don’t compromise your safety for convenience — take the necessary steps to ensure your crypto is secure.
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