Course 2 Review: Diving Deeper Into Cryptocurrency Security

Introduction

In our past four lessons, we covered everything you need to know about crypto security - from setting up your crypto wallet to exploring advanced security concerns. By learning about these security functionalities, you can safely work your way up from a crypto beginner, to an expert. 

Without strong security measures, no crypto trading or investing strategy is complete! As the crypto landscape evolves, so do the potential threats and real-life attacks that crypto users encounter. This makes staying informed and understanding crypto risks even more crucial. Let’s review everything you need to know about crypto security, from basic wallet protection to advanced case studies. 

Lesson-by-Lesson Review

We delved into different crypto-security fundamentals in each lesson, and how to approach threats from multiple angles. 

Course 2.1: Introduction to Crypto Security and Wallets

Your crypto wallet holds your valuable funds and keeps them safe during transactions. While creating your crypto wallet is easy, you should also have measures in place to keep it safe. Since cryptocurrency largely operates on a decentralized and anonymous system, it’s even more difficult to recover stolen funds. Here’s what you should know to keep your crypto safe in your wallet.

Hot wallets vs. cold wallets

Just like with bank accounts, you have multiple crypto wallet options to choose from. However, the main two types are hot and cold wallets. Hot wallets have a constant connection to the Internet and usually live on a software or application. You can log into a hot wallet through an online account, making it more convenient and faster to use.

A cold wallet is stored on hardware, such as a USB or hard drive, which doesn’t have an Internet connection. To open the wallet, you’d need to connect the hardware to another protected device, such as a laptop. This makes cold wallets less susceptible to hacking. There are also custodial and non-custodial wallets. With custodial wallets, the owner allows another person or entity to manage the wallet. With non-custodial, only one person is in charge of the wallet.

Crypto wallet public keys vs. private keys

Every crypto wallet has a public and private key. The public key acts like an account number - to send money to someone, you input their public key. The private key is like your password - if anyone else gains access to it, they can open your wallet. To keep your private key safe, you need to store it in a way no one else can find it. Some users will encrypt their private key with a customized code. Some will write theirs down on paper, or record them in encrypted audio files. 

What is two-factor authentication (2FA)?

To keep your wallet and other crypto accounts even safer, you can use two-factor authentication (2FA). This allows the user to verify their identity in some other way when logging in, such as by answering a security question. You should also choose strong, unique passwords for each account, and conduct regular data backups to protect your crypto information.

Read the entirety of Course 2.1 HERE.

Course 2.2: Secure Crypto Wallet Management for Beginners

Now that you know your crypto wallet options, you can create your own! As long as you have a device with a reliable Internet connection, you can set up your wallet in just four steps. 

1. Choose your wallet. Make sure that no matter which platform or software you choose, it’s reputable. Download it from a certified and trusted source - malicious actors can add code onto fake copies of crypto wallet software to hack into your accounts. We recommend MetaMask.
   
   
2. Create the account. You may have to add your name and contact information, but don’t worry, others can’t see this information.
   
   
3. Generate a strong and unique password: Store the password like you would store the wallet’s private key.
   
   
4. Deposit funds: Transfer some funds either by depositing fiat currency through your bank or credit card or by having another user send you some crypto.

It may surprise you to learn that people have lost collective millions in cryptocurrency, due to losing their private key. Without your private key, you can’t log into your wallet. If you lose it, you also lose all the cryptocurrency inside it.

To back it up, you can use a seed phrase. This phrase is a string of random words containing your private key's data. In an emergency, you can use a seed phrase to recover your account.

Read the entirety of Course 2.2 HERE.

Course 2.3: Advanced Cryptocurrency Security and Threats

Did you know that billions of dollars in crypto is stolen every year? Hacking and scamming ploys remain a serious threat, not just to individual crypto users, but to entire platforms! Here are the most prominent and common crypto hacking attempts and scams you might encounter:

• Pump-and-dump scams: This scam includes promoting an up-and-coming crypto project, promising huge returns to investors. Once the public invests and the value increases, the developers and advertisers sell their stakes and abandon the project.
  
  
• Fake ICOs: These fake initial coin offerings collect funds from investors, but never actually get off the ground.
  
  
• Fake wallets: Scammers will add code to official wallet software and then spread it online. When you download it, the code redirects your transactions to the scammer’s accounts.

To combat these scams (and other security threats) crypto users should:

• Use advanced security measures: Use encryption and 2FA, and conduct regular security audits of your accounts.
  
  
• Keep educated: Stay informed and well-learned of common or emerging scams and threats.
  
  
• Share news: Keep in touch with other members in the crypto space to share experiences and best practices.
  
  
• Stick to verified sources: Only engage with official, reputable sources. This includes when downloading software or logging into accounts - ensure you’re on the correct website, platform or app.
  
  
• Lock away sensitive data: Use cold storage methods to keep data like your private key or seed phrase safe, or only use reputable online platforms with strong security.
  
  
• Stay anonymous: Go a step further to anonymize your transactions by using a VPN and switching between different exchanges and wallets.
  
  

Read the entirety of Course 2.3 HERE.

Course 2.4: Advanced Topics in Cryptocurrency Security

With the basics down, we can dive into the more advanced concepts the crypto security landscape has to offer. This includes DeFi or decentralized finance. This peer-to-peer (P2P) network offers a fast, convenient, and anonymous experience. DeFi eliminates the need for any third-party intermediaries, with smart contracts taking their place. 

Smart contracts

Once both parties agree on the terms, a smart contract uses code to carry out the transaction automatically. With no bank or other overseeing party involved, crypto users on DeFi have complete autonomy of their accounts. The transaction is then recorded on the blockchain, a public ledger that is unchangeable once verified, keeping the DeFi transparent and honest. 

Cryptocurrency regulations around the world 

The regulatory landscape of crypto security is varied across the globe. Some countries, such as the US, Canada, and Great Britain, are more neutral or positive in their crypto positions, with regulations that:

• protect users, 
• ensure proper taxation, 
• and allow for accessible crypto trading. 

Other countries, such as Korea or China, have less encouraging regulations. When it comes to crypto, regulations walk a fine line between protecting users and stifling their freedoms. Regulations can cause massive changes in crypto security measures - one example lies in the 2019 Travel Rule implementation by the France-based Financial Action Task Force (FATF). 

This new regulation caused crypto platforms to create and launch new anti-money laundering and Know Your Customer initiatives to comply with the rule. While it helped to prevent criminal activity, it also served to uproot the anonymity of crypto users. However, emerging crypto technologies like zero-knowledge proofs and multi-party computation hold great potential for the future of crypto security. 

These concepts, alongside other ongoing research into how best to solve ongoing blockchain challenges such as scalability, can help to improve crypto security and usability. As more regulatory framework comes into play as well, overseeing bodies will have to find a balance between supporting consumer safety and embracing crypto innovation. 

Read the entirety of Course 2.4 HERE.

Course 2 conclusion

Cryptocurrency is a fantastic technology, allowing users across the globe access to new investment opportunities, and to enjoy full autonomy over their digital assets. With these advantages, though, come multiple security concerns - from common scams to potential regulatory constrictions. 

Amid a growing and evolving crypto landscape, staying engaged and educated on security threats is a top priority. Reading through our course, you can become familiar with the best practices and security measures to keep safe while becoming a crypto expert!

Before you click away, we highly recommend reading through each of the past four lessons and exploring these security topics in-depth. In them, you’ll learn more detailed defense measures and go through real-life case studies of security hacks.

Stay tuned for course 3 where we teach you how to build the best portfolio!