Managing and earning cryptocurrency is a lot of hassle and losing it is a lot like losing yourself. While security of this blockchain based currency is a major concern, here is what you can do to secure your crypto fortune.
With the ever fluctuating crypto-rates, every time, it’s now or never. While Bitcoin climbed up to $17,900 in the past, the digital currency frenzy is always in-trend and its security is crucial. No crypto geek wants to lose their currency due to malicious activities, negligence or any other reason.
Before we delve into securing our crypto currencies, lets discuss the structure and strategy of this crypto vault that ensures the absolute security of a blockchain based digital currency.
Why blockchains are secure, at least, in theory
Below are the three core elements that contribute in making blockchain a fool proof digital technology.
- Public key cryptography
- Digital signatures
Public Key Cryptography
This cryptography involves two distinctive keys i.e., private and public keys. Both keys decrypt and encrypt data asymmetrically. Both have simultaneous dependency of data which is encrypted by a private key and can only be decrypted with the public key. Similarly, data decrypted by public key can only be decrypted by a private key. Various cryptography schemes including TLS (Transport Layer Security protocol) and SSL (Secure Sockets Layer) have this system at its core.
The strategy works well with you putting in your public key into the world of blockchain and keeping your private key confidential, not revealing it on any platform or place.
Also called a digest, the hash of a message gets calculated on the basis of the contents of a message. The hashing algorithm generates a hash that is created deterministically. Data of an arbitrary length acts an input to the hashing algorithm. The outcome of this complex process is known as a calculated amount of hash with a predefined length.
Due to its deterministic nature, the input and output are the same. Considering mathematical calculations, it’s easy to convert a message into hash but when it comes to obtaining an original message from hash, it is tediously difficult.
A digital signature is an encrypted form of hash of a message and is an outcome of a private key. Anyone who has the access to the public key can break into the digital signature by decrypting it and this can be used to get the original hash. Anyone who can read the message can calculate the hash of a message on its own.
The independently calculated hash can be compared with the decrypted hash to ensure both the hashes are the same. If they both match, it is a confirmation that the message remains unaltered from creation to reception. Additionally, it is a sign of a relating private key digitally signing the message.
A hash is extracted from a message and if a message gets altered, it will produce a different type of hash. Note that it is complex to reverse the process to find the message of a hash but it’s easy to compute the hash of a message.
A hash that is encrypted by a private key is known as digital signature. Anyone having a public key can decrypt a digital signature and they have the ability to compare the digital signature with a calculated hash of the message. If the value of an original message is active and the message is signed by the entity having the private key, it means that the hashes are identical.
What are Crypto wallets and transactions
Every crypto-wallet is a combined collection of single or more wallets. A crypto-wallet is a private key and it can create a public key too. By using a public key, a public wallet address can be easily created. This makes a cryptocurrency wallet a set of private keys.
To enable sharing wallet address with the public, they are converted into QR codes eliminated the need to maintain secrecy. One can always show QR codes to the world without any hesitation and anyone can send cryptocurrency using that wallet address. However, a cryptocurrency transaction needs a private key and currency sent into a wallet is owned by the owner of the wallet.
In order to transact using cryptocurrency, a transaction is created that is public information. A transaction of crypto currency is a collection of information a blockchain needs. The only needed data for a transaction is the destination wallet’s address and the desired amount to be transferred.
While anyone can transact in cryptocurrency, the transactions are only permitted by the blockchain if it is assured by multiple members in the network. A transaction should be digitally signed by a private key in order to get a valid status or else, it would be treated as invalid.
In other words, one signs a transaction with the private key and then it gets to the blockchain. Once the blockchain accepts the key by confirming the public key data, it gets included in the blockchain that validates the transaction.
Why you should guard your private key
An attack on your private key is an attempt to steal your cryptocurrency. By using your private keys, an attacker attempts to digitally sign transactions from your wallet address to their address. Moreover, an attacker can destroy your private keys thus ending your access to your crypto wallet.
What are some risk factors involved in owning a crypto wallet
Before we move on to creating a security wall around our crypto currency, it is important to know from whom we are protecting our digital currency or who can prove to be a threat for our crypto wallets.
If you lose the access to your crypto currency, you have lost it all as there isn’t any ledger with a centralized authority and once you lose the access, you can’t regain it by any means. Since a crypto wallet is paired by a private and public key, losing the private key means losing your wallet. In other words, you don’t own any cryptocurrency. This is the very first and foremost threat.
The next in line threat is what we hear often. Attackers, hackers or attempters who want to gain access to our cryptocurrency. The malfunctions may be opportunist or they may have their private intentions.
Threats for your cryptocurrency
Opportunist hackers are low profile attackers who get access to your laptop for transacting money to their public wallet address. Opportunist hackers doesn’t attack or target a person specifically, but if they get access to your crypto currency, they won’t shy away from taking your digital cash.
Dedicated attackers, on the other hand, target single handedly or they may be in a group of hackers who work together for a sole purpose that is – stealing cryptocurrency. Their targets include every individual, crypto trader or even a crypto exchange. They initiate phishing campaigns and before executing the attack, they get well-versed with their target by conducting a pre-research. Level 2 attackers go for a broader approach and write malicious code that may steal private keys from a system if it gets attacked or infected.
Another kind of hackers are backed by nation states. They are a collective group of people with top level coordination and established financials. They are motivated by gaining access to finances or their will. The crypto currency attacks by Lazarus Group, backed by the North Korea, are an example.
How to Protect Your crypto wallet
Regardless of the kind of threat, it is you and your private key that needs to be secured. Here’s how to ensure maximum security of your cryptocurrency.
Throw away your access keys and you will lose your cryptocurrency forever. Obviously, you won’t do it ever and since the aforementioned thought came into your mind after reading the phrase, here are some other ways to secure your cryptocurrency fortune.
- Go through the complete password recovery process. This means going through the process of forgetting the password and creating a multi-factor token. These measures should be taken while setting up a new hosted wallet or else, be prepared to lose it all.
- No matter how fast the tech world progresses, basics will remain the same. You should have a printed paper backup of your keys and they should be placed in a secure location such as a bank’s locker or in a personal safe vault. Don’t forget to wipe out the printer’s memory after you are done with printing as printed files can be restored and re used to hack your digital money.
- Do not keeps those keys with you nor should you be hiding those keys in a closet that can get damaged due to fire, theft, etc.
- If your wallet has multi-signature enabled on it and has two public or private keys for the authorization of transactions, make it to three keys. While the third key will be controlled by an entrusted party, it will help you in the absence of a second person.
Tahha Ashraf is a Digital Content Producer at Cubix, a mobile app development company. He is a Certified Hubspot inbound and content marketer. He loves talking about brands, tech, blockchain and content marketing. Along with writing for the online fraternity on a variety of topics, he is fond of creativity and writes poetry in his free time.