As blockchain and cryptocurrencies become more and more popular and practical, they will become more attractive targets for hackers. Blockchain wallet security can be an important issue in the blockchain network.
One of the most challenging problems in bitcoin and almost all blockchains is the securing process of private keys. Blockchain usually uses elliptic-curve asymmetric cryptography to control the ownership of coins or accounts.
We need a particular software or hardware, that can be called a blockchain wallet, to store the private keys and sign the transactions. There are different ranges of blockchain wallets from online wallets to cold wallets. Many of the experts in the blockchain field believe that the most secure one is the hardware wallet.
First of all, let’s see how blockchain wallets work. A crypto wallet is a tool that allows you to interact with the blockchain network. We must pay attention that when we create a cryptocurrency wallet, in fact we automatically generate a set of public and private keys.
As you know, we have both hot wallets and also cold wallets.
Hot wallets are digital wallets that are easily accessible via mobile devices, laptops, and desktop. These wallets include cryptocurrency exchange, online and software wallets.
In these wallets, we can easily transfer and manage your crypto assets. Hot wallets are exposed to the internet, making them hot targets for hackers.
Cold wallets, refer to physical devices, in which we can store our private key, contrary to hot wallets, they operate in an offline environment while guaranteeing access to your funds at any time. Cold wallets will provide a greater level of security.
Even though the hardware wallet is secure in many aspects, some essential issues should be addressed.
Hardware wallets must have a secure element to store secrets and keys and perform cryptographic operations. One of the main problems in current hardware wallets is the backup and recovery process. Almost all of the wallets use a word list to back up private keys and restore them when needed. The user must write these words on a paper and keep it safe. This method converts the seed of private keys from digital format to physical format and also moves the problem to the outside of the wallet.
The other issue in cryptocurrency wallets is separating funds between wallets. We know that a hardware wallet is a secure option, but it is also risky that the user puts all of the funds on one device.
When the user creates a blockchain wallet, he/she needs to pay attention to some steps and complete those key security features. The steps are as following:
Verifying the email address allows us to send login codes when suspicious or unusual activity is detected, to remind the user of his/her wallet login ID, and to send bitcoin payment alerts when the user receives funds.
Enabling two-factor authentication via sms code, or google authenticator to further protect the user’s wallet from unauthorized access.
Let’s see how it works, setting up 2FA (two-factor authentication) will add a 3rd credential; a unique one-time use code that will also be required to log in to your wallet successfully. Pay attention that a new code will be generated for each login attempt. Once you have set up 2FA with your chosen method, the login process will require you to input your wallet ID, password, and then a 2FA code.
The user’s backup phrase is the most important of all security measures. It is the key to ensuring the user’s access to his/her funds if the user forgets his/her password or blockchain is unavailable.
Remember that making a backup of the wallet helps ensure the user can always maintain access to the user’s funds.
There are some ways to secure the cryptocurrencies:
Unlike hot wallets, cold wallets do not connect to the internet. So they are not prone to cyberattacks. An offline wallet, also known as cold storage, provides the highest level of security for savings.
Pay attention that while trading or cryptocurrency transactions, use only a secure internet connection and avoid using a public Wi-Fi.
As you know, there is no limitation for blockchain wallet creation. So we can have multiple wallets and diversify the cryptocurrencies in multiple wallets. Also pay attention that we need to make regular backups. This is because of that we need to have regular backups for ensuring to have all recent cryptocurrency change addresses and all new transactions that we create.
Make sure that your personal device is up to date. Also pay attention to using a strong antivirus and firewall to improve your device’s security.
One of the main issues is weak passwords. Make sure you have a strong and complex password, which is difficult to guess. Any password that contains only letters or recognizable words can be considered weak and also easy to break. Strong passwords must contain letters, numbers, and also must be at least 16 characters.
Be careful while making crypto transactions and avoid any unknown links.
Hardware wallets are the best balance between very high security and ease of use. These devices are designed to be just a wallet and nothing more.
There are some features that we must consider when choosing the hardware wallet.
Is the hardware wallet chip tamper-resistant?
Is the operating system tailored for cryptocurrency assets protection?
Is the authentication process safe enough?
What are the extra coverage and features?
Blockchain wallet security is one of the main issues that we must consider when we are working with cryptocurrencies. We must choose the best wallet to store our funds. Don’t underestimate the value and importance of blockchain wallet security.