Lately, cryptocurrencies have emerged as a notable cybersecurity threat. Unsuspecting users are being scammed or hacked more than ever.
Most troubles start because people don’t fully understand how cryptocurrencies, blockchain networks, and decentralized finance all work.
In other cases, they are not doing their due diligence before making their financial decisions.
Remember to do your homework before starting to trade, buy, invest, or even hold any cryptocurrency.
It’s become very easy to get cryptocurrency help today, whether you’re a complete novice, have some knowledge, or are a full-on crypto enthusiast.
With that out of the way, let’s fully understand how the cryptocurrency sector and the larger blockchain ecosystem negatively affect cybersecurity, so you can better protect yourself against bad actors.
As people don’t fully comprehend the nature of cryptocurrencies, they are more susceptible to being scammed.
We’ll illustrate the point with two practical examples below, but the list is not exhaustive, and new types of scams happen all the time.
A Rug pull is a scam when some developers promise the world a new cryptocurrency but don’t deliver. They generate a lot of hype, especially on Twitter and with the help of bots.
Seeing how the project is poised to grow exponentially, making each $1 convert into $100 in a year (or something similar), people invest heavily.
The developer then takes all this cash or liquidity and bolts. There have been countless rug pulls in the history of cryptocurrencies. A lot of them promise “airdrops,” which are essentially free tokens of the coin.
Users who participate do receive that coin in their wallet and are then slowly nudged to buy more, seeing how others are also buying more (most of these accounts are dummy ones).
Once there is enough liquidity in the pool, the developer takes all the money and abandons the project entirely.
A lot of people still don’t realize that there is no “official support” for any of the leading cryptocurrencies. There is no official Bitcoin, Ethereum, Cardano, Ripple, Solana, Tron, Polygon, Litecoin, etc.
Support sitting there to aid in your account creation or deposit process. You’re on your own because it’s your money and your wallet.
Now, accounts with names like “Cardano Support,” for instance, will swarm you when you join Telegram groups to get assistance. They will be promising help or bringing some issue to light.
All of that is made up, of course. Once they hook someone up, they ask the user to deposit or purchase some coins into their own wallet.
2022 was the biggest year ever for crypto hacking. Hackers reportedly stole around $3.8 billion, mainly from DeFi protocols, and the notable players were linked to North Korea.
Cryptocurrency hacks are virtually impossible. Nobody can guess your seed phrase or use brute-force tools to break into your wallet. That’s just not possible.
The majority of hacks are based on social engineering or phishing, where they pretend to be someone else and ask for your seed phrase to help you.
Note that once someone has the seed phrase in your wallet, it won’t take them more than a minute to gain access to your funds and transfer them all, leaving your wallet empty.
We have extensively covered cryptocurrency hacks of all kinds and magnitudes. We have a whole category dedicated to it.
It’s a recommended read for anyone who wishes to stay on top of new exploits and tools that hackers are using to target users.
Seed Phrases And Account Security
Seed phrases are a concept new to most of us. A cryptocurrency wallet is very likely to be protected by one, and it replaces the traditional password that we’re used to.
Even the most active users of new technology have experienced some trouble using phrases.
It’s used for security purposes because even the strongest 8-character password that mixes alphanumeric characters and symbols is easier to guess (with brute-force tools) than a string of 12 random English words (which can take millions of years even for very powerful computers to crack).
But seed phrases are not convenient. People typically can’t remember them. We tend to store them digitally somewhere, and once lost, the wallet and whatever it contained are gone forever.
As blockchains are inherently decentralized, with no organization controlling your wallets, nobody can help you recover your account if you lose access to your seed phrase.
The reliance on private keys really works when you store your seed phrase on a piece of paper and lock it safely. Losing access to the key has made nearly 20% of all BTC unrecoverable, as per the latest analysis.
Cryptocurrency systems can be confusing. How the network works, for example, is still something a lot of casual crypto users don’t understand.
And that’s the kind of opportunity that bad actors are always waiting for. Stay safe, and remember that only you should have access to your seed phrase!