If you are planning to transfer your crypto assets from an exchange to a crypto wallet, there are a few important things you must know. In case you’re thinking your crypto wallet to be 100% safe, then I must tell you to reflect on this thought once again. I’m sure, after reading this guide, all your queries will be answered.
A brief overview for traders
We know that the financial marketspace has completely changed, and people have started to invest in crypto more than ever. The reason individuals are adopting crypto investment is that it offers decentralized, borderless, and fast transactions. However, with their growing adoption comes another responsibility, i.e., to ensure the safety of crypto assets. If you have also stepped into the crypto investment field, then you might have one question in mind- “Can crypto wallets be hacked?”
Well, the short answer to this question is “Yes.” However, the hacking depends on only one factor- the type of wallet you are using and the safety of your seed phrase. But, before we dive deeper into this, it is significant that we take a look at a few background details.
Work mechanism of crypto wallets
It is important to note that a crypto wallet does not actually store your cryptocurrency. However, it stores the private keys of your assets. These private keys are known to be secure digital codes that allow you to access and control your crypto assets on the blockchain.
But, it is significant to note that if someone gains access to your private key or recovery phrase, they can transfer your funds to their wallets/accounts without your permission. Also know that blockchain transactions are irreversible, and this is the reason why recovering stolen crypto is not possible. There are different types of crypto assets available in the marketspace, including the hot wallets (connected to the internet) and cold wallets (offline storage). The security level varies depending on which type you use.
Types of wallets and their vulnerabilities
- Hot Wallets- Hot wallets are connected to the internet. Examples include software wallets, mobile apps, and exchange wallets. While convenient, they are more vulnerable to hacking attempts such as malware, phishing attacks, and exchange breaches.
- Cold Wallets- Cold wallets, such as hardware wallets and paper wallets, are not connected to the internet. This makes them considerably more secure against online attacks. However, they are not completely immune. Physical theft, loss of recovery phrases, or supply-chain tampering can still pose risks to these wallets.
Common ways crypto wallets get hacked
Crypto wallets may get hacked, and these are the common ways through which they may be attacked:
- Phishing scams: Fake emails or websites trick users into sharing private keys or seed phrases.
- Malware: There are Keyloggers or clipboard hijackers who are responsible to replace wallet addresses during transactions.
- Social engineering: In this category, attackers impersonate customer support or trusted contacts to ask you for your seed phrase. Once you share your Secret Recovery Phrase, they will gain access to your wallet and drain all your assets.
- SIM swapping: Hackers gain control of your phone number to bypass two-factor authentication.
Exchange breaches: Centralized platforms may be hacked, affecting users’ wallets and funds.
| Important Note:
Your recovery phrase (also called a seed phrase) is the master key to your wallet. Never share it with anyone, store it online, or take screenshots of it. If someone has your recovery phrase, they have full control over your funds, no matter what wallet you use. |
How to protect your crypto wallet?
If you’re relying on the safety of your hardware wallet, then your assets may not be as safe as you think. It is your behavior and additional security practices that decide the safety of your assets.
- Use a hardware wallet Cold storage) for large holdings.
- Enable two-factor authentication (2FA) and other security features on Exchange accounts.
- Avoid clicking suspicious links or downloading any files from unknown sources.
- Verify website URLs carefully before entering login details.
- Keep your software and your hardware devices updated.
- Store your recovery phrase offline in multiple secure locations and do not share it with anyone.
Tip: You can also think of diversifying storage methods. Many experienced investors keep a small amount in hot wallets for transactions and the majority in cold storage.
Conclusion:
By taking a look at the details above, we can say that crypto wallets can be hacked. However, the likelihood of the same depends largely on user behavior and the type of wallet used. Most hacks occur due to phishing, scams, or weak security practices rather than flaws in blockchain technology. However, you can always take proactive security measures to significantly minimize your risk. Experts at Coins Everything recommend you to purchase a hardware wallet for better crypto security.