How to Protect Your Digital Assets
The rate at which people lose their digital assets today has increased significantly.
15:27 06 September 2022
The rate at which people lose their digital assets today has increased significantly. Over 45 billion worth of digital assets has been tagged lost to hackers since the creation of cryptocurrency. This work has provided useful insights on how crypto traders and other investors can protect their digital assets from attacks. Readers will come to understand from this work, the major reasons why they tend to lose their digital assets easily to hackers. We have further provided in this work the list of the most popular storage wallets for storing digital assets involving Cryptocurrencies.
Have you ever lost your digital assets to hackers in the past? Have you mistakenly shared your private key with phishing sites and unsuspecting scammers previously? Do you find your digital assets disappearing mysteriously from your storage wallet? Then you need to read this work carefully to learn how to protect your digital assets and regain total control over your assets.
The fact that people often stored their digital assets using hot wallets has largely exposed them to attacks. Many tend to avoid hot wallets today and prefer to use cold wallets. This work has examined both hot and cold wallets exposing the advantages and disadvantages of using both. You will also find in this work the best way of protecting your wallet whether you are using hot or cold wallets.
Digital assets are usually protected with a unique seed phrase. Sharing this seed phrase with an untrusted third party can lead to a total loss of one's digital assets. The seed phrase is used to gain access to the stored digital assets and anyone who obtains this phrase, gains control over the assets too. Users are therefore required to protect their seed phrase at all costs and avoid sharing with an untrusted agent or phishing websites.
Often digital assets could come in various forms. While some tend to have fixed values, others have their values appreciate or depreciate over time. This work has paid greater attention to the crypto digital assets whose value is set by the community of holders and hence in constant volatility. The fact that the crypto digital assets are predominantly virtual assets has made them most vulnerable to attacks. This work has therefore provided useful insights on how crypto traders can safeguard their digital assets to avoid loss from hackers.
What are digital assets
Digital assets refer to all virtual assets stored electronically and protected by unique secret codes. This unique code which could come in the form of seed phrases or passwords is used in gaining access to the digital assets. Often some Digital Assets are accorded value by their users. Only a few digital assets could be said to have fixed values (e.g. stablecoins and other central banks' digital currencies). All other Digital Assets tend to fluctuate in value. The most popular digital assets are Cryptocurrencies, NFTs, Music and video clips, slide presentations, spreadsheets, websites, documents, logos, and CFD Commodities such as gold, crude oil, silver, etc.
Types of digital assets
Digital assets are broadly categorized into Blockchain-based assets and non-Blockchain-based assets. Examples of the two have been listed below:
- Blockchain-Based digital assets:
- Cryptocurrencies: examples include Bitcoin, Ethereum, Cardano, Polkadot, Binance Coin, Ripple, etc.
- Non Fungible Tokens (NFTs): Examples include Axie Infinity, Axie Infinity, CryptoPunks, Bored Ape Yacht Club, Art Blocks, NBA Top Shot, Mutant Ape Yacht Club, etc.
- Non-Blockchain-based digital assets: These include assets transferrable online such as Photos, Emails and email accounts, Documents, Animations, Illustrations, Audio/Music, Manuscripts, Social media accounts, Gaming accounts, Logos, Metadata, Contents, etc.
This work has paid greater attention to the Blockchain-based digital assets involving Cryptocurrencies.
Guide on How to protect your digital assets
Protecting one's digital assets from all forms of attacks is a very important task every crypto trader and investor must never neglect. This is because any compromise in safeguarding one's digital assets could lead to a total loss of the whole assets. We have therefore provided below some safety tips to help investors protect their digital assets from attacks from hackers and other malware.
- Never share your seed phrase with anyone: The most important tool that protects one's digital assets is the seed phrase. Sharing this seed phrase with anyone or untrusted websites; grants them access to one's digital assets, making it possible for them to elope with the assets. Investors are advised to keep their seed phrases secret at all times and never share them with anyone or a website demanding them.
- Back up your wallet and avoid taking screenshots of them: The importance of backing up one's digital assets can never be overemphasized. Often backing up one's digital assets serves as the best means of recovering one's digital assets in cases of mobile phone theft or damage. Cryptocurrency traders are advised to safeguard their digital assets by backing up their seed phrase externally. In this case, it is important to store them on a different device offline. This will prevent hackers from accessing them and help owners to retrieve them in the future. Thus, the best way of backing up one's digital assets is to write down the 12 to 24 recovery phrases or seed words and store them offline. Users are requested to do the same for other digital assets safeguarded by username and password. Added to this, every user is discouraged from taking screenshots of his recovery phrase to save them on his phone. This is because some attackers often found their way to access one's phone storage to obtain such secret information.
- Import your digital assets only on trusted crypto exchanges/websites: A great number of crypto traders lose their digital assets when they try to import them to an exchange to sell or swap them. Often they failed to verify the authenticity of such crypto exchanges before entering their seed phrase into them. It is a well-known fact today that hackers have created a pseudo version of most crypto exchanges including centralized and decentralized exchanges. Investors are advised to ensure they distinguish the manipulated version from the original crypto exchange before entering their seed phrase. Also, not all websites are trusted and regulated today. Therefore the holder of every digital asset must avoid entering his recovery phrase on any unverified website.
- Avoid clicking on any link you see online: Very often, hackers tend to design codes that detect all wallet addresses stored on one's phone. They do so using some disguised links posted online. Clicking on such links often grants them access to share and transfer various digital assets on one's phones. This is because the code has been designed as a smart contract that once clicked, grants them access to all digital assets stored on one's device. It is therefore very important that all crypto investors should avoid clicking on any link they stumble upon on the internet, especially on social media pages such as WhatsApp, Telegram, Facebook, Twitter, Instagram, etc.
- Avoid downloading malicious files and apps from the internet: Often downloading some files from unknown senders online greatly endangers one's digital assets. This is because downloading such files could share one's secret data including the private key with the senders once downloaded. Similarly, some applications downloaded from the internet today require the user to grant them access to his storage devices, location, messages including email, etc. Hackers are known to design malware applications and use them to obtain this permission to access one's device to obtain a private key.
- Install an anti-virus/anti-malware on your device: A very important precautionary measure to protect one's digital assets from hackers is to download strong antivirus which will block malicious files from downloading on one's phone. Also, anti-malware software helps to prevent malicious applications designed to hack your phone from downloading on your device.
- Avoid using SMS verification for logging into your wallet: The use of SMS verification for logging into one's account has become very popular among various decentralized crypto exchanges. Hackers now capitalize on them to hack unsuspecting users' accounts. Some hackers have learned to call users claiming to be agents from an exchange and seeking to obtain some information regarding one's private key. Added to this, the increasing rate of SIM swapping has made the use of SMS verification a very wrong option for accessing one's digital assets as it is now easy for hackers to claim one's phone number via sim swapping. To guard against this, investors are advised to use authentication apps like Authy and Google Authentication for Two-Factor Authentication (2FA) for accessing their wallet addresses on any exchanges instead.
- Lock your phone and Laptops with strong passwords when not in use: An important safety measure for safeguarding one's digital assets from theft is to always lock up one's phone with strong passwords when not in use. This will prevent intruders from accessing one's phone. The same applies to desktop digital storage users operating on their laptops.
- Never access your digital assets wallet using unsecured public Wi-Fi: Using a public wi-fi to access one's digital assets online can grant hackers the ability to view all your traffic, including one's usernames and passwords typed while logging into the digital wallets. Hackers tend to copy and save this information immediately after the owner enters them which enables them to access one's digital assets using a different device afterward. Users are therefore advised to keep their connections private while assessing their digital assets and avoid sharing their network with a third party.
How to store your Crypto digital assets
Crypto Digital assets such as Bitcoin and altcoins are stored using a digital wallet. Often, the wallets could come in the form of hot or cold wallets. A hot wallet is one needing the internet to function while a cold wallet works fine offline and does not need to depend on the internet. Each crypto wallet always provided the user with a unique seed phrase/recovery phrase for safeguarding his digital assets on the device. Users are therefore expected to copy and safeguard their secret phrases used in storing their digital assets on any of the two wallets. Losing one's seed phrase could amount to losing the whole digital assets once it falls into the wrong hands.
Types of digital assets storage wallets
There are six major types of storage wallets for cryptocurrency digital assets. We have discussed them below:
- Exchange wallets: The exchange wallet is one of the hot wallets used for storing digital assets. It is usually provided by various crypto exchanges. Examples include eToro wallets, Binance, and Capital. com, Kraken. The eToro wallet full review has provided useful insights towards understanding the exchange wallets for beginners. Digital assets stored on an exchange wallet are usually safeguarded using Password, SMS and email verifications, and Google authenticator. The fact that they are accessed online makes them prone to attacks. Virtually all crypto exchanges charge fees for transacting on their platforms and this could discourage investors from storing their digital assets on an exchange.
- Online Wallet: The online crypto storage wallets refer to those crypto wallets that the user can only access through the web or the internet. Hence, it can be regarded as a hot wallet. The online crypto storage wallets bear the greatest risk as they are prone to attack and hacking. Notwithstanding the backdrop, traders are usually attracted to the online wallet because of the fast rate of executing transactions. Examples of online wallets are Oxigen wallet, Green Address, Metamask, and Nifty wallet.
- Desktop Wallet: The Desktop wallet is another hot wallet that runs on laptop computers. Here, the user will have to download the storage applications on their PC. The Desktop wallet offers users more control over their crypto digital assets than we find in the exchanges today. However, the fact that desktop wallets depend on the internet function makes them susceptible to attacks and hacking. Examples of desktop wallets are Multibit, Bitcoin Core, Armory, and Exodus wallets.
- Paper Wallet: The Paper wallet is the oldest form of digital assets storage wallet which provides a printout of all the user's transactions for easy assessment. Oftentimes, the Paper wallet provides the users with a private key, wallet addresses, wallet QR codes, and backup seed phrase. The paper wallet offers more security than all other forms of hot wallets discussed above. The only limitation associated with the paper wallet is that it requires so much time to transfer the digital assets stored in them. Examples of paper wallets are Bitcoin Armory and BitAddress.org.
- Mobile Wallets: The mobile storage wallet is a very portable crypto wallet offering users quick access to their investments at all times irrespective of time and location. The mobile Wallet has been designed for smartphones such as Android, iOS, or Windows. They depend largely on the internet to function and hence bear some risks to the digital assets stored in them. Examples of mobile wallets are BreadWallet, CoPay Jaxx, electrum, Mycelium, etc.
- Hardware Wallet: The hardware storage wallet is the most popular cold wallet for storing digital assets today. Many investors have considered it the safest as it does not require the internet to function. This reduces its exposure to attack. With the hardware storage wallet, investors can easily purchase crypto from their preferred crypto exchange and store them offline on their hardware. This provides optimal security for the stored digital assets. The hardware storage wallets provide private keys with which the owner can access them offline. Often, the hardware storage wallet comes in different shapes and forms. They are built with a large storage capacity to hold all the user's digital assets. The major disadvantage associated with hardware wallets is that it is very expensive to purchase them. Examples of hardware wallets are D’CENT Biometric Wallet, Ledger Nano S, Trezor Model T-Next Generation, Steel Bitcoin Wallet for Hardware Wallet Backup, SecuX V20, SecuX W20, Trezor Model One, and SafePal S1.
Which is the most secure wallet for storing digital assets?
Cold wallets have been recommended by experts as the best storage wallet for safeguarding various digital assets. The reason for this choice is based on the fact that cold wallets do not need the internet to function. Thus, they provide maximum security for assets stored in them away from hackers' reach. There are no fees charged for storing digital assets on a cold wallet. The only challenge in using the cold wallet is the high cost of purchasing and maintaining it.
Can the lost digital assets be recovered?
The decentralized nature of most digital assets transactions, especially those involving cryptocurrency, has made it increasingly difficult to trace them in cases of loss or hacking. However, experts have been able to recover some of the lost digital assets using hash codes for such transactions when they are transferred to a centralized exchange. However, not all hacking activities can easily be recovered today due to the sophisticated devices used in perpetuating such acts.