Importance of Security (MFA, cold wallets, custody)

Introduction 

When it comes to cryptocurrencies, security is everything. Unlike traditional bank accounts, there are no customer service lines to call if your crypto is stolen. This makes it crucial to have good security measures in place, like using MFA and cold wallets. By securing your assets effectively, you reduce the risk of losing your investments to hackers or scammers. 

The Importance of Crypto Security 

Cryptocurrencies operate on a decentralised network, meaning there isn’t a central authority like a bank that can help recover lost or stolen funds. Once a crypto transaction is made, it’s irreversible. Because of this, keeping your private keys (the key that gives you access to your funds) secure is incredibly important. If someone gains access to your wallet, they can easily transfer your assets to their own account, and there’s virtually no way to get them back. 

As of 2024, the amount of different attack vectors has only grown as time has progressed – there are phishing links to fraudulent websites in a lot of places. 

Multifactor Authentication (MFA)  

MFA is one of the simplest ways to add an extra layer of security to your wallet or exchange account. Typically, 2FA involves two steps: 

1. Password: The first layer is your usual password. 
2. Verification Code: The second layer involves something you physically have, like your phone. When you log in, you receive a code via an app (like Google Authenticator) or a text message, and you need to enter this code along with your password. 

Using MFA means that even if someone guesses your password, they still need access to your phone to log in. This additional layer significantly reduces the risk of someone hacking into your account. 

Cold Wallets vs. Hot Wallets 

• Hot Wallets 
  These are connected to the internet, like mobile or web wallets. They are convenient for frequent transactions but are more vulnerable to hacks. If you're trading daily or making small transactions, a hot wallet is often enough, but it should be secured with strong passwords and 2FA. 
• Cold Wallets 
  Cold wallets are offline storage solutions, such as hardware wallets (like Ledger or Trezor) or even paper wallets. Since they’re not connected to the internet, they are far less vulnerable to hacking. Cold wallets are ideal for storing large amounts of cryptocurrency that you don’t need to access regularly, making them one of the safest options for long-term storage. 
  
  

Setting Up a Wallet & Basic Transactions

Additional Security Measures 

Apart from MFA and cold wallets, there are other security practices you can use: 

• Strong Passwords: Use unique, complex passwords for each wallet or exchange account. Avoid reusing passwords from other sites. 
• Backup Your Seed Phrase: When you create a wallet, you’ll receive a "seed phrase," which is a backup to recover your wallet if something happens to your device. Write it down on paper (never store it digitally) and keep it somewhere safe. If someone gets hold of your seed phrase, they can access your funds. 
• Phishing Awareness: Be cautious of phishing attempts—these are scams that trick you into entering your private information on fake websites or links. Always double-check the website URL before entering your credentials, especially when dealing with exchanges.  

Another form of phishing is social phishing, where malicious actors find personal information about you online to aid in recovering your account, or pretending to be you and calling your email or phone service provider to gain access to your account. 

Custody 

Crypto custody refers to the storage and management of digital assets, ensuring that your cryptocurrencies are protected from theft, loss or hacking. For users, using a custody service means your private keys—the credentials needed to access and manage your assets—are securely stored by professionals, reducing the risks associated with managing them yourself. 

Archax provides a custody platform built with institutional-grade technology, in collaboration with Fireblocks, METACO (Ripple Custody) and IBM, offering the same high level of security and controls expected by institutions.

To Sum It Up 

Crypto security is crucial because if you lose your assets, they’re nearly impossible to recover. Using Multifactor Authentication and storing assets in cold wallets can greatly reduce security risks. Keeping private keys safe, using strong passwords, and being aware of phishing scams are all important practices for protecting your crypto.