Another month, another crypto exchange hack. And it wasn’t a small one. This one targeted Binance, the world’s largest crypto exchange. Exploiting a vulnerability in a cross-chain bridge, the hacker managed to carry off $570 million. To re-secure the exchange, Binance had to suspend all withdrawals and deposits.
Unfortunately, hacks of exchanges are now so common that the amounts stolen annually are being counted in the billions. What a lot of crypto users don’t realize is just how exposed to hackers their funds are if they leave them at the exchange once they’ve finished trading.
Is the crypto I keep on exchanges safe?
You might feel reassured by all the security layers that you need to go through when you log in to your crypto exchange. The problem is, these are really security features for your personal access to the exchange platform, not for the place where your deposits are kept. Exchanges usually keep all their users’ crypto stored in a shared pool. Your deposits only become truly yours when you move them off the exchange.
When you think about it, this arrangement represents a huge security risk. The more deposits are kept together and secured using just one set of keys, the more tempting a target they become for bad actors. Why waste time hacking lots of small wallets when you can go after everyone’s deposits at once by attacking an exchange?
This is why hacks of crypto exchanges are becoming more and more common.
And the risk of losing your funds through an exchange-side hack is just one of the problems with relying on your exchange’s custody options. The current era of price volatility keeps creating moments of panic in which large numbers of users try to sell or withdraw their holdings. If an exchange can’t cope with all these requests, whether for technical-processing or liquidity reasons, it may freeze everyone’s access to their funds.
When these panic moments get really bad, sometimes exchanges become insolvent and close down altogether. If at the moment when that happens your funds are still held on the exchange, chances are you’ll have lost them for good.
Software wallets: safer, but safe enough?
To avoid these scenarios, the sensible thing to do is keep your funds off exchanges and in your own crypto wallet when you’re not completing transactions.
However, we must sound a note of caution here, because there are two ways to store crypto in a wallet, and one of them is much less safe than the other. Unfortunately, the unsafe option is the one that most users take.
What is that option? It’s transferring your crypto from your exchange into a wallet that exists purely as software on your device. These types of wallets all share a major flaw: They remain connected to the internet, and so the funds they contain and the security keys for authorizing transactions are accessible to hackers. As time has gone by, hackers have become more and more adept at using malicious apps and phishing scams to trick users into handing over access to their wallets.
Hardware wallets: no internet connection equals no access for hackers
But there’s always been an alternative to keeping your crypto in this vulnerable type of wallet. Known as hardware wallets (or cold storage), it involves storing the wallet and its keys on a device that is never allowed to connect to the web.
Until recently, this much safer method of storing crypto was not popular among casual crypto users, mainly because it was a much more complicated and inconvenient method of accessing and transferring funds. However, these drawbacks were never insurmountable. They were a consequence of hardware solutions whose developers hadn’t quite managed to design systems that offered a good user experience without compromising on security strength.
Now, though, we’re just arriving at the third generation of hardware wallets, and it looks like mainstream crypto users will finally have a reliable security solution that lets them quickly move their funds away from danger hotspots like exchanges and off the web altogether.
One of the hardware wallets from this new generation is the iCoin Wallet. It has a 3-inch touchscreen, multiple processors, 12 GB of memory and a 13-megapixel camera. And for extra convenience when it comes to offline storage of seed phrases and keys, the iCoin wallet can be bought with a wireless mini printer.
Here’s how the iCoin wallet works: After setting a security pin to access the device, the user can restore an existing wallet or create a new wallet on the device. All transactions that the user enters using their iCoin Wallet are completed using QR codes or secure Bluetooth communication with the iCoin smartphone app. The smartphone app is where users’ transactions are sent to the network. And because the iCoin hardware wallet is a cold device, the wallet holding the user’s funds never connects to the internet – not even for a split second – and your private keys never leave the wallet.
There’s no sign that exchange-side hackers are going away any time soon, so users need to take a few extra precautions to keep their deposits safe. Fortunately, the new generation of hardware wallets is making those precautions much easier for the average crypto user.
To find out more, visit iCoin’s website and follow them on Instagram @icoin_crypto.
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