Crypto Security Essentials

Before you get started on your crypto journey, it’s important to understand the basics of wallet security and the do’s and don’ts of engaging with digital assets. This will help ensure you keep your crypto safe, and safeguard against unfortunate realities like theft and fraud. While these are legitimate concerns you should be aware of, there’s no need to fear. This explainer will cover the fundamentals of security, common security risks in cryptocurrency, and best practices to protect your crypto assets.

Your wallet is the most important component of your crypto toolbox. Every crypto wallet has a unique private and a public key. Private keys are required to access and control your funds. Your public keys allow you to transact with other wallets in the crypto ecosystem.

To unlock your private key and access a wallet, most crypto wallets use what’s called a seed phrase. A seed phrase, or recovery phrase, is a string of 12-24 random words generated by your wallet that give you full access to all of your holdings. Think of it as an ultra secure password.

The first and foremost rule of crypto is: back up the seed phrase to your crypto wallets. Store your seed phrase securely in multiple locations to prevent loss due to hardware issues, misplacements, or deletion. Make sure never give out your private keys or seed phrase to anyone unless you want them to have direct access to your assets. 

Most wallets also require a password for day-to-day wallet access. Use strong, unique passwords for your crypto accounts — avoid reusing your common passwords, as they can be leaked from other parts of the internet. Consider using a password manager to securely store them. If you lose your password, you can access your wallet with your seed phrase. If you lose your seed phrase, you will lose access to your wallet. 

Different types of wallets come with their own security considerations. For example, If you’re holding funds on a centralized exchange, understand that your funds are held in the custody of the exchange and access to your funds is a service they provide, rather than your crypto remaining under your direct control. Your funds could be vulnerable if the exchange is hacked or mismanages customer funds. That’s why non-custodial wallets like Solflare can be a more secure option, even for crypto newbies. 

Once you’re familiar with crypto and wallets, you can consider using hardware wallets, which are physical devices that store your private keys offline and provide enhanced security against online threats. But now that you know the basics of wallet security, it’s time to discuss best practices as you explore crypto and web3.

Before engaging with any cryptocurrency, wallet, or dapp, research a platform or service before using it — its features, security, reputation, and track record.  As web3 is permissionless and open to anyone, you should be informed about the products you’re using, and verify all websites, links, and wallet addresses for accuracy. When you’re transacting from your wallet, double check wallet addresses before sending and receiving funds. If you send funds to the wrong address by mistake, you won’t be able to retrieve them.

In general, be vigilant against suspicious emails, calls, and texts, and social media posts claiming to represent crypto exchanges and public figures. One of the most common types of fraud in the world today is phishing scams, wherein attackers impersonate legitimate entities to trick you into revealing sensitive information or stealing your funds. Phishing scams can appear as websites that appear nearly identical to trusted companies, or socially engineered through calls, messages, and emails. 

The best way to guard your personal information is to never share personal account details with strangers, on social networking sites, or any websites without first verifying their legitimacy. You should also avoid downloading suspicious files or visiting untrusted websites that could compromise your security.

It’s also important to be aware of the risks associated with crypto exchanges, platforms, and services you may be accessing. Exercise caution when using cryptocurrency exchanges, as hacks, changes in regulation, and business have occurred in the past. Understand the risks associated with decentralized finance (DeFi) protocols, including vulnerabilities in smart contracts and potential loss of funds.

Do

• Backup Your Seed Phrase: Store your seed phrase securely in multiple private locations, written down, and never stored on your device or in the cloud,  to prevent loss due to hardware issues, misplacements, or deletion.

• Use Strong Passwords: Set strong, unique passwords for your crypto accounts and avoid reusing common passwords from other platforms.

• Double Check Addresses: Before sending or receiving funds, always double-check wallet addresses to ensure accuracy and prevent sending funds to the wrong recipient.

• Research Wallet Providers: Choose reputable wallet providers that prioritize security features, such as Solflare, to safeguard your assets effectively.

• Stay Informed: Stay updated on security best practices and new developments in the crypto space to protect yourself against emerging threats.

Don't

• Never Share Private Keys: Avoid sharing your private keys or seed phrase with anyone, as this could grant them direct access to your funds.

• Avoid Suspicious Links: Be cautious of emails, calls, texts, and social media posts claiming to represent crypto exchanges or public figures, as they could be phishing attempts.

• Be Wary of Centralized Exchanges: Understand the risks associated with centralized exchanges, where your funds are held in custody by the exchange, making them vulnerable to hacking or loss.

• Exercise Caution with DeFi: Be mindful of the risks associated with decentralized finance (DeFi) protocols, including vulnerabilities in smart contracts and potential loss of funds.

• Don't Trust Unverified Sources: Verify the legitimacy of platforms, services, and communications before providing personal information or engaging with them to mitigate the risk of scams and fraud.