A few years ago, the concept of investing in a cryptocurrency would have gotten brushed off as nonsensical. Most people didn’t even know what cryptocurrency was, least of all that they should spend any money on it.
Bitcoin was something many people had heard of, but definitely couldn’t say how it worked. Buying Canadian stocks listed on the TSX was a much easier method of investing, and as such a lot of new investors steered towards learning how to invest in stocks.
Then Bitcoin shot out of the dark as more and more people started adopting the idea of a decentralized currency.
After that, cryptocurrencies emerged left and right. The world entered a new era of cryptocurrency investment frenzy. Even Facebook created its own cryptocurrency. Not that anyone cares, due to their egregious security practices.
But that’s also the point. It’s easy to get swept up in the frenzy of a mysterious new online currency with all the further media attention. Yet few people take the time to do proper research before they invest, and the dangers are real.
To help shed some light on the matter, here’s a breakdown of the cybersecurity aspects of cryptocurrencies. This post is aimed at going over what risks you face and how to avoid them when investing.
The Biggest Cryptocurrency Cybersecurity Risks
The technology behind cryptocurrency is pretty complicated, to say the least. A lot of people may know what it is, but they don’t understand how it works.
First, this confusion makes people more susceptible to scams like phishing attacks. Second, for some reason, many people often assume all cryptocurrencies are secure.
The latter leads to people not putting in the due diligence needed to investigate the risks and take the precautions they need to stay safe.
Cryptocurrency is a High-Risk Investment from a Security Standpoint
Any investment comes with an amount of risk, but cryptocurrencies are in a field of their own. Because the investor is solely responsible for the safety of their investment. Any mistake, such as having the computer infected with malware, means that money is gone, and no one else is accountable for it.
If you are new to cryptocurrencies, you need to understand the high-risk nature of this type of investment. Users access cryptocurrency wallets with a private key. The key acts as a password that grants them access to their wallet and the cryptocurrencies they’ve bought.
Unfortunately, many people don’t treat this key with the necessary prudence that it requires. Often, they save the key in a document on their computer or phone. But cybercriminals can always hack those devices or infect them with malware. It leads to having their investment stolen in a matter of minutes or hours.
Cryptocurrency Exchanges Are Under Constant Attack
The fact that cryptocurrencies are decentralized is what makes them so attractive.
But, it’s also what makes them dangerous.
No single regulatory body oversees all cryptocurrency exchanges or regulates transactions. While some countries, like Canada, tighten cryptocurrency regulations, others do nothing about it. It leaves space for criminals to do what they want with few repercussions.
It includes a host of different cryptocurrency-related scams.
Moreover, exchanges are under constant attack and often suffer security breaches. Coincheck made the news for having about $550 million worth of cryptocurrencies stolen by hackers, and Binance had $40 million stolen.
It is a risk that those who invest in cryptocurrencies have to consider too.
How to Mitigate The Risks?
With such a volatile investment, you need to take the necessary steps to secure it. Security shouldn’t be an added stress factor on top of everything else. It starts at home, with basic but essential measures like:
- Use a password manager to encrypt passwords and private keys. On top of that, making sure to enable two-factor authentication on all accounts to avoid them being stolen.
- Have a VPN to encrypt the network connections against spying and man-in-the-middle attacks. It’s necessary for keeping transactions safe and also useful for keeping your browsing private.
- Do not store any private keys in plain text on any device.
- Don’t focus on securing cryptocurrency wallets and everything associated with that only. Cybersecurity should always be a concern since it only takes one entry point for a hacker to get access to everything.
- Stay up to date with the latest cryptocurrency scams, especially phishing. Don’t enter sensitive information into a website or click on a link when prompted.
The Bottom Line
Many people invest in cryptocurrencies without knowing the risks and taking proper precautions. Investing in cryptocurrencies can be exciting and even lead to a tremendous financial yield, but don’t take that for granted. Put in the time and do research to make sure that the investment stays safe.