Hacked Slowmist, a prestigious blockchain security firm, stated that during 2021, crypto hackers have stolen almost $10 billion in cryptos. In this scenario, the Ethereum blockchain had the most number of hack incidents with 80% of cases.
Furthermore, at the time of writing this article, we’ve had 18 crypto scams so far during 2021 that represent more than $62.4 million.
These attacks continue to be a problem for all protocols, which is why they are taking smart contract audits more seriously. Therefore, in this article, you will discover how to protect your funds from hackers.
1. Get a Secure Personal Wallet
The majority of people who start in the ecosystem start by buying cryptos on an exchange and leaving it there. This happens because it’s the easiest way to get them. However, centralized exchanges aren’t immune to hacks. Of course, they take their own safety precautions to prevent thefts, but sometimes hacks happen.
Therefore, to protect yourself from Crypto Scams is by having a secure wallet. There are two primary types of wallets: Hot wallets and cold wallets. Hot wallets are usually wallets in apps or web extensions that people use more frequently. Two very famous hot wallets are trust wallet and metamask.
On the other hand, cold wallets are physical storage like USB drives that are linked to a private key. The ecosystem calls it “cold” because they act like a saving account where holders basically hold for long-term their cryptos there. Two very good examples of cold wallets are Trezor and Ledger.
Here, the main security factor is that the wallet you use gives you a seed key, which is usually 12 or 24 words long.
Choosing the best and most secure cold wallet may not be an easy task… 🤔
Here are the important features a cold wallet should have. 💪
How many points does your cold wallet checks out on our list here? 🔐🔐🔐 pic.twitter.com/xjGP7IYRBP
— ELLIPAL (@ellipalwallet) August 30, 2021
Note: As far as possible, we think that a good option to avoid Crypto Scams is that you always keep your funds in the cold wallet and manage them through a hot wallet. For example, Metamask has integration with Trezor and Ledger. This means that you can connect any of these cold wallets with Metamask, which is accepted by most of the major protocols. In other words: Have maximum security with maximum compatibility when handling your cryptos.
2. Avoid Crypto Scams by Choosing a Crypto Exchange For Different Purposes.
There are two types of exchanges: Centralized and decentralized exchanges. We’ll make a brief description of them so you can know their different features of them:
– Centralized Exchanges
Nowadays, many people in the ecosystem start interacting by opening an account in a centralized exchange. This happens because these platforms let people, with zero crypto knowledge, can buy cryptos very easily. However, the main disadvantage is that people are exposed to possible hacks.
In this platform, users purchase and sell using either fiat money or swap it with another cryptocurrency. They are often accessible via a web browser or a web application. Some of these crypto exchanges, like any bank, provide FDIC protection for the first $250,000 deposited or kept as a US Dollar balance.
Therefore, popular cryptocurrencies such as Bitcoin, Ether, Cardano, and Ripple are often available on a wide range of centralized exchanges. However, in terms of safety and security, these transactions are not all the same. The most famous centralized exchanges are Binance, Crypto.com, among others.
Also, one of the great advantages of this type of centralized platform is that many of them allow you to exchange cryptocurrencies for fiat money such as dollars, euros, and others. Also, several of them have debit cards with which you can withdraw fiat money at ATMs.
Centralized vs Decentralized exchanges📊
What is the difference?
In traditional, centralized crypto exchanges, you first need to deposit your funds into an exchange account in order to trade. This means that the exchange is custodial, i.e. that, while the funds are … pic.twitter.com/VYsLnisi7p
— NewsCO (@Newsco_NWC) October 21, 2021
– Decentralized Exchanges:
This type of exchange is very different from the previous one, having these 3 main characteristics:
- User has custody of funds: In decentralized exchanges, you do not have to enter personal data to access the services, you only have to have a wallet previously created.
- Anonymous: The fact that the only link between you and a platform is a wallet allows transactions to be anonymous. The anonymity is not 100% but it is quite high.
- No Hacks and Server shutdowns: These types of exchanges are totally independent platforms that are free from any type of external manipulation due to their high degree of security. Therefore, it is highly unlikely that there will be any hacks, let alone any kind of electronic shutdown.
There are many decentralized exchanges on different blockchains and there are others that operate on several of them at the same time. The most used are Curve, Uniswap, and Pancakeswap. You can see more exchanges here.
The main uses that users of decentralized exchanges are to swap cryptos and to have higher profits with investments than in a cryptocurrency exchange. So after getting profits, people normally pass part of their profits to centralized exchanges to swap them by fiat money to pay monthly expenses.
Note: Depending on your goals, you can manage both types of exchanges to avoid from Crypto Scams. For example, if you want to invest in staking liquidity pools of a protocol and then collect the profits, you can invest it in a decentralized exchange and send it to a centralized exchange and withdraw the fiat money through an ATM.
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