From a security perspective, cryptocurrency wallets are as vulnerable as social media accounts and file storage systems. Cryptocurrency wallets are transforming conventional banking account systems by residing in hard drives, laptops, and mobile phones. Their security depends on robust measures to safeguard the digital assets of wallet owners and their transactions. In this blog, we have explored key cryptocurrency wallet security mechanisms that businesses should consider before developing a cryptocurrency wallet.
Two-factor authentication
Two-factor authentication, also know as 2FA, is a text code that a user receives on his phone. Sometimes, 2FA may also require a thumbprint. It is another secure method to ensure that only an authorized person gets access to the wallet. If someone manages to crack the password through any methods, they will still need to pass the second-level authentication. It will typically be a code sent to the user’s phone, to be entered into a sign-in field to access the wallet.
Multi-sig or single-use?
Usually, a single-key address means that whoever holds the corresponding private key gets access to all funds. Effectively, it means that a user only needs one key to sign transactions without requiring authorization from anybody else. While managing a single-key address is more efficient than a multi-sig, it leads to certain security challenges. Having a single key access enables only one single point of failure to protect funds. However, it also becomes the target of cybercriminals who constantly develop new phishing techniques to break in. Moreover, the single-key address is not a suitable option for medium to large businesses that depend on cryptocurrencies. Imagine a company stores funds on a standard address with a single corresponding private key. It implies that the private key either needs to be entrusted to a single person or assigned to multiple entities. Multisig wallets, however, offer a solution to tackle both the problems. With a multi-sig address, a user can only move funds after getting multiple signatures from defined entities.
Wallet encryption
Encrypting the wallet with securities like AES-256-CBC adds an extra layer of security and protects it with a passphrase. By using a passphrase, users can lock their funds from being spent. So, even if attackers gain access to the device on which the wallet is running, they will fail to do anything unless they get access to the passphrase. However, there are instances where cryptocurrency wallet developers do not consider using this method. The reason being that encryption/decryption for every transaction increases the processing time. As a result, it increases costs and affects services.
DDoS Attacks
A DDoS (Distributed Denial-of-Service) attack is a method that hackers use to disrupt legitimate users’ access to a target network or web resource. Typically, they accomplish this by overloading the target with a huge amount of traffic or disseminating malicious requests. It causes the target resource to crash or malfunction entirely. As cryptocurrencies have gained significant traction in recent years, crypto exchanges and wallets have become increasingly popular targets for DDoS attacks. A crypto wallet development company can implement DDoS mitigation systems like anti-DDoS hardware and software modules. They occur in the form of load balancers and network firewalls or specialized web applications. Their ability to prevent malicious access requests and sudden surge in traffic is effective for preventing DDoS attacks
Security Alerts
Configuration of multiple alerts for withdrawals and deposits from a wallet ascertains that no information goes unnoticed such as: First-time deposit to a fresh wallet First-time withdrawal from a fresh wallet X percent variation from last withdrawals Same value withdrawal from the same wallet for consecutive X days Withdrawal from a new IP device Mobile number change request before a withdrawal Password change before a withdrawal Second withdrawal for the day Similarly, businesses providing cryptocurrency wallet services can configure many other necessary triggers as per specific business requirements.
Read More- Outlining Ideal Mechanisms to Develop Secure Cryptocurrency Wallets
Concluding Thoughts
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Cryptocurrency transactions are logged on the blockchain network.
To leverage the security features of blockchain for your crypto coins, you can connect with the blockchain wallet development services.
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Any government or central bank does not manage these currencies.
Blockchain security issues are existing in multiple forms.What is a Crypto Wallet?Crypto wallet is a software program that manages your public and private keys, crypto exchange, balance overview, and interaction with other blockchains.
Jaxx, Freewallet, Electrum wallet, and Infino wallets are some of their examples.Hardware WalletsHardware wallets are paid wallets that secure your public and private key on a USB device.
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The physical crypto depository should also follow security practices like public, and private keys should be separated and followed by strong passwords, including multi-factor authentication.Strong PasswordsStrong passwords are the backbone of the entire security chain.
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