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How to ensure digital asset security?
#Digital assets

How to ensure digital asset security?

Learn more about protecting your digital assets and be aware of the main risks of using cryptocurrencies or tokens.

Digital asset security is essential for any holder of crypto coins, tokens, or NFTs. Unfortunately, the field of digital assets is of great interest to scammers, and any asset holder can lose their funds. It is necessary to carefully consider how you can protect your assets, as there are significant risks.

The best protection methods depend on exactly how you store your assets. According to Crypto Head research, 126 major hacks have been recorded over the past ten years. In total, more than $3 billion was stolen. On average, each leak costs $25 million. Today, not only bitcoins but also other digital assets, such as security tokens and NFTs, are targeted by scammers. This article will tell you how to protect your digital assets and look at the most effective protection methods.

How can digital assets be stored?

Each owner of a cryptocurrency or token stores them in a special wallet (address). Each address has a unique private key. This is a long password that provides protection against unauthorized access. It is important not to lose this key because, in this case, you will lose access to your crypto. Cryptocurrencies are decentralized assets, and your investments in them are not guaranteed by any issuing center, though more and more countries provide their own digital asset regulations. It is also impossible to change the private key. Therefore, losing the private key means access to the wallet is most likely lost. According to ChainAnalysis statistics, about 100 billion dollars in bitcoins are irretrievably lost since the owner does not have access to their wallet.

Keys can be stored in online wallets. This provides quick access to digital assets, which is especially important for users who want to connect to crypto exchanges quickly. Many crypto exchanges also offer online crypto wallet services that are easy to connect to their trading systems.

However, storing digital assets on exchanges is an unreliable method of providing digital assets safety. Hacking episodes happen from time to time. For example, after a hack in 2014, Mt.Gox, the largest crypto exchange at that time, was forced to declare bankruptcy due to the loss of funds of more than $450 million in the equivalent of cryptocurrencies (mainly in bitcoins). Some exchanges add protection for investors in case their software is hacked. They introduce insurance for traders. However, this method cannot be considered reliable.

Are there more reliable ways to store digital assets?

Yes, if you use the so-called “cold storage.” The essence of this method of providing digital assets safety is to use wallets that do not have an Internet connection. In order to hack such a device, a fraudster must gain direct access to it.

Cold storage options include physical USB keys, dedicated computers working without an internet connection, or hardware wallets. A hardware wallet is a unique flash drive-like device designed specifically for storing cryptocurrencies.

There are also specialized third-party services that store private keys. For example, Vo1t, which Genesis previously acquired, has an underground bunker that is explicitly used to store digital assets. The bunker houses servers that provide cold storage. At the same time, the servers are configured in such a way as to immediately destroy all data if intruders try to gain access to them. At the same time, in case of destruction of information on servers, clients will not lose access to their cryptocurrencies since there are backups of keys on servers in other countries. There are also other services that offer such protection. For example, Prosegur Crypto uses biometrics to access digital assets.

Are there other risks?

Cryptocurrency wallet hacks are not the only risk. Hackers are actively attacking the sphere of decentralized finance (DeFi). According to a study by Crypto Head, there have been 1.1 billion attacks over the past ten years.

One of the biggest hacks in history was the attack on the Poly Network. It is a decentralized trading network that has created a protocol allowing you to transfer tokens to another network. The hacker attack was successful; the attackers managed to steal digital assets worth more than $600 million. It became possible because of a vulnerability in the protocol.

Cryptocurrency fraud is the largest form of fraud. A study by Crypto Head showed that more than $15 billion was stolen due to hacker attacks over the past ten years. The largest known example of a scam is the $4 billion OneCoin Ponzi scheme. The company has positioned itself as a new cryptocurrency network. Its founder, Ruja Ignatova, has been on the wanted list since 2019. 

Unfortunately, anyone can become a victim of scammers. Attackers are persuasive; they act subtly. Therefore, it is extremely important to familiarize yourself with the project in detail before investing in it.

digital asset security

Summary

Cryptocurrency fraud remains a serious problem. Of course, all possible methods are being fought against it, but the users themselves can provide the best protection against such fraud. We will give some tips to help reduce the risks.

  • Use cold storage. It is safest to store cryptocurrencies and tokens without access to the Internet. This is especially true if you have large amounts in your accounts.
  • Review projects before investing in them. Read the information about the project in detail. If there is no data about the token or coin, it is probably a fraudulent project.
  • Don’t give your private key to anyone. Attackers can use social engineering techniques to obtain this information.
  • Work on crypto exchanges with a good reputation. 

Remember that digital asset security depends only on you. Therefore, approach the security of digital assets responsibly. If you plan to issue your own tokens, you also need to consider your client’s safety. You need to properly create smart contracts and consider additional digital asset security measures. We at Stobox have extensive consulting experience for projects that issue various types of tokens. We are ready to help you figure out all the nuances of digital asset regulation, choose the right type of digital assets, and ensure maximum security for your clients. Contact us to find out more during a free consultation.

FAQ

How do you keep digital assets safe?

To ensure the safety of digital assets, you should choose a reliable storage method, not succumb to social engineering, and not share the private key with anyone.

Are digital assets regulated?

Each country has its own digital asset regulation. In addition, the type of asset also matters. At the moment, security tokens are a more regulated type of digital asset, as they are at the junction of traditional finance and blockchain.

How secure are digital assets?

It is important to understand that you are the only person responsible for the digital assets that you own. Products belonging to the decentralized finance industry differ from the traditional financial market because they do not have a single issuing center. Accordingly, you will have nowhere to turn if you lose or steal digital assets. On the other hand, this same fact provides increased security since you are the only one with access to your assets.

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