What is it like to lose your entire portfolio on a security mistake you could prevent in two minutes? Crypto wallet security is underrated until it’s not. There are many ways to lose money other than trading, and cyber-attackers don’t precisely care about the size of your account.
We often associate cyber-threats with crypto security. But there are more likely ways to lose crypto that don’t involve malware or fraud. And if you don’t want to find out, it’s worth learning the most common mistakes.
Whether you use a cold storage wallet or web wallet, ERC-20 tokens, or NFTs, there’s always something you can do to protect your digital assets.
Crypto Is NOT as Secure as People Think
Blockchain technology is in many ways safer than traditional financial systems. Crypto wallets are not. Why?
Take Ethereum for example. It’s a decentralized network with autonomous, trustless programs (called smart contracts). It uses a secure proof-of-stake mechanism to keep consensus in a public, immutable database.
However, there are thousands of ways to buy Ethereum. You can use exchanges, crypto-fiat platforms, P2P sites, wallet companies, or decentralized applications (Web3 wallet dApps). While the Ethereum network might be “secure,” the platform used to store crypto isn’t necessarily:
- You might be investing in decentralized cryptocurrencies from a centralized, custodial wallet
- The blockchain might never get hacked, but maybe your exchange does
- You might have Metamask private keys, but if someone gets them, you no longer have full control
We should not confuse blockchain-level and app-level security.
e.g., A wallet built on the public Ethereum network isn’t the same as a wallet built on privacy blockchains like Monero.
You can still lose security in an app built into a secure network. Inversely, an app cannot guarantee security if the network doesn’t. You need both.
That doesn’t mean you shouldn’t use popular blockchains because they’re not secure enough. They’re worth using, as long as you know how to prevent risks and compensate for their limitations.