1. Introduction
2. The Current Scenario
3. Crypto Security
4. Enable 2-Factor Authentication
5. Using Yubikey
6. Using a cold Wallet to secure crypto
7. Conclusion

Introduction

Web3 is growing like crazy in 2024. More and more people are jumping in to take advantage. There are many useful solutions, advanced and scalable infrastructure, and better decentralized financial systems. But everything is still not mainstream. It is still in the phase of what the Internet was in the early 2000s. As of writing, we are seeing a massive uptrend in the industry. Given the rise and the coverage by mainstream media, you may be willing to get on the ship. But one of the main concerns with the growing wealth will be its security. One might want to protect himself from attackers and scammers and ensure his digital safety. 

Data from Metav.rs indicates that Web3’s market capitalization is currently $27.5 billion which is a substantial rise from the $3.2 billion it was valued at in 2021. Based on projections, the Web3 market has a significant potential for growth. It is expected to grow at a compound annual growth rate (CAGR) of 47.1% between 2023 and 2030. The market is predicted to soar to $81.5 billion by the end of this period. These figures highlight how crucial it is to take strong precautions to safeguard your cryptocurrency holdings in this rapidly changing digital environment. The sudden loss of your digital assets could occur from not putting in place sufficient safeguards, which emphasizes how urgently better security measures need to be implemented.

The Current Scenario

Data from Beosin EagleEye reveals alarming figures regarding the financial toll of hacks, phishing scams, and rug pulls within the Web3 ecosystem. The total losses resulting from these illicit activities reached an astounding $2.02 billion in 2023 alone. The disintegration demonstrates how dire things are: 267 rug pulls resulted in losses totaling about $388 million, while 191 major attacks caused losses of about $1.397 billion. Furthermore, phishing scam losses totaled approximately $238 million. These figures highlight the urgent need for increased awareness and strong security protocols to reduce the risks involved in using Web3 platforms and properly protect one’s digital assets.

130 out of 191 attacks (roughly 68% of all attacks) were directed towards DeFi projects Approximately $408 million was lost as a result of these attacks, which makes up 29.2% of all losses and the highest amount of any kind of attack. In terms of losses, centralized exchanges (CEXs) ranked second. A total of $275 million was lost as a result of nine attacks on CEXs. Furthermore, there were sixteen attacks against decentralized exchanges (DEXs), with an estimated $85.68 million in losses. Throughout the year, exchange security’s vulnerability was still a major worry, especially in light of DeFi security.

Public blockchains came in third place with losses of roughly $208 million. At number four on the list, cross-chain bridge attacks contributed roughly 7% of all losses in 2023. Bridge attacks have significantly decreased, even though they were significant the year before. Lastly, two incidents Alphapo and CoinsPaid caused crypto payment platforms to lose a total of $97.3 million. Lazarus, an APT group from North Korea, was blamed for both attacks. These results highlight the complexity of cybersecurity threats in the Web3 domain and stress the need to put strong security controls in place across a range of platforms and industries.

Crypto Security

Crypto security is protecting digital assets from theft, hacking, or other malicious activities by creating a secure environment for them to exist in. It involves various practices including encryption, authentication, and access control. You can ensure that the digital assets are stored securely and cannot be accessed by anyone other than the rightful owner. It reduces the risk of fraud and protects against various data breaches by making it more difficult for hackers to access sensitive information.

Securing your digital assets in this industry can be overwhelming. The most important thing is to choose a trustworthy exchange. Probably the one with no or minimal history of nefarious activities. Crypto once stolen will be very difficult to recover as you can see the statistics related to the crypto hacks in history. Projects and people are taking sufficient measures to protect themselves from such activities. There is no insurance and big companies to bail you out when things go south.  Errors can have serious financial consequences in this dynamic environment. Therefore, it is critical to prioritize crypto security. Crypto security is essential to maintaining user trust in the system because it protects users from possible losses. It is not only about protecting assets; it is also about reducing the possibility that they will be lost completely. The aim is to make the crypto market safe for everyone. For a person beginning to explore the industry, it can be overwhelming to keep track of funds and their security. In this piece, we will discuss several methods to keep your digital assets safe and secure. 

Enable 2-Factor Authentication

Choosing a trustworthy cryptocurrency exchange is essential to protecting your investments from exchange-related risks. But it’s important to understand that you might not be compensated for any losses you suffer if your account is compromised by circumstances outside of the exchange’s control. You can protect your exchange account using two-factor authentication. This emphasizes how crucial it is to add an extra security layer by implementing two-factor authentication (2FA). Users who have enabled 2FA must enter a code they receive through text message or mobile app each time they log in or try to make a withdrawal. This considerably lowers the possibility of cryptocurrency theft, especially when email accounts are compromised.

Without 2FA, hackers who manage to access your email account can use the “forgot my password” function to modify your exchange password and access your account without authorization. Once they gain control, you won’t be able to stop them from executing cryptocurrency transfers without your permission. Exchanges in these kinds of situations usually don’t pay back the losses incurred. As a result, turning on 2FA is not only a preventative step to improve security but also a vital one to safeguard your cryptocurrency holdings against loss and theft.

Using Yubikey

The previously discussed authentication techniques have a major flaw in that they only authenticate the user, not the service, making them vulnerable to man-in-the-middle (MitM) attacks. Malicious actors can construct phony pages in a MitM attack that closely mimics the login process. The attackers quickly use the information they have obtained to gain access to the real website when users enter their login credentials on these phony pages. Then, when asked for a verification code, people unintentionally give it to attackers, giving them access to their accounts. 

This vulnerability emphasizes how crucial it is to put in place extra security measures to authenticate users and services, reducing the possibility of MitM attacks and improving online safety in general. To combat such threats, FIDO U2F keys, commonly known by the popular model name YubiKey, were developed. These keys offer a significant advantage by establishing a unique relationship between the service and the U2F key during registration.

Both the service and the U2F key save particular data that is particular to every user and service during the registration process. The key then responds to a specific request sent by the service during authentication, but only if the request is legitimate. By using mutual verification, the communication’s legitimacy is confirmed by both parties. Moreover, the open key cryptography used in this authentication method increases security by guarding against fraud, interception, and other similar threats. Furthermore, this authentication mechanism relies on open key cryptography, which enhances security by protecting the entire process against falsification, interception, and similar threats. 

Using a cold Wallet to secure crypto

A cold wallet is not connected to the internet. They make use of a crypto-bridge to receive transaction data offline, sign the transaction data, and send the transaction data back through the crypto-bridge to broadcast the transaction online.  It is inconvenient for most of the users, but it makes up for it by providing the extra security. They are offline and are less susceptible to online hacks. Examples of cold wallets include hardware wallets and paper wallets.

The hardware wallet is a popular form of cold wallet that provides a reliable means of safely storing cryptocurrency. Usually, a hardware wallet is a small USB device that holds a keystore file. Users can attach a hardware wallet to their computer or mobile device and use the USB port to send a signature to initiate a transaction. Despite its security benefits, the primary risk associated with using a hardware wallet is physical theft. Hardware wallets often have pin code locks to reduce this risk. By requiring users to enter a specific code before accessing their cryptocurrency stored on the device, these pin codes serve as an extra security measure. Another form of cold wallet is a paper wallet. A paper wallet is a private key and address that are only stored on a piece of paper.

Conclusion

Investing in cryptocurrency may appear riskier than traditional assets due to the added threat of hacking and digital theft. While other assets primarily face the risk of price depreciation, cryptocurrencies entail the additional risk of cyberattacks and scams. However, investing in crypto doesn’t have to be excessively risky. By implementing appropriate measures to safeguard your digital currency and ensuring compliance with legal regulations, you can mitigate the risk of falling victim to hacking or fraudulent activities. Taking proactive steps such as using secure wallets, enabling two-factor authentication, and staying informed about potential threats can help protect your investments. Additionally, conducting thorough research before investing and avoiding speculative behavior can further reduce risks associated with crypto investments. While cryptocurrencies present unique challenges, exercising caution and adopting prudent strategies can significantly minimize the likelihood of financial losses due to hacking or scams. You can safeguard your investments by being vigilant and implementing measures like utilizing secure wallets, turning on two-factor authentication, and keeping up with potential dangers