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Cryptogambling / Turn Your Crypto Wallet into Fort Knox With these Expert Tips

Turn Your Crypto Wallet into Fort Knox With these Expert Tips

Publish Date: 28/12/2022

In recent years, the cryptocurrency investors have lost an astonishing amount of digital assets to the growing spate of thefts and scams. These incidents have underlined the need for investors, traders, users and other crypto holders to fortify their digital asset wallets with enhanced security measures as they navigate the nascent world of decentralized finance (DeFi), Metaverse, and Non-fungible tokens (NFTs).

To put things in a relatable perspective, a report by blockchain security firm CipherTrace, showed that losses from cryptocurrency thefts and scams reached $4.5 billion in 2019. Fast forward to January 2023, Chainalysis published the latest Crypto Crime Report which showed that the figure has now quadrupled to surpass $20 billion.

Crypto crime report, January 2023

Crypto crime report, January 2023. Source: Chainalysis.

So, if you didn’t have a reason to build your own Crypto Fort Knox, here you have it —at the current loss rate, cryptocurrency users around the world are losing approximately $70 million to crypto theft every day. And the majority of these losses are primarily due to hacking, fraud, and other types of cybercrime targeted at exchanges, wallets, and other storage platforms.

In this article, we will provide you a comprehensive guide to help you take proactive steps to protect your crypto investments, by creating your own private Fort Knox.

We take you through the industry-standard best practices to enhance the security of your crypto storage —including, identifying reputable wallets, deploying strong passwords, and avoiding suspicious links and offers.

Let’s delve right into it.

What is Crypto Fort Knox?

The term “Crypto Fort Knox” refers to a high-security storage solution for cryptocurrencies that is designed to provide maximum protection against theft, hacking, and other forms of unauthorized access.

United States “Fort Knox” Bullion Depository

United States “Fort Knox” Bullion Depository. Source: USMint.gov

The name Crypto Fort Knox is inspired by the United States Bullion Depository at Fort Knox, which is widely recognized as one of the most secure storage facilities in the world for precious metals. In place of reinforced steel fences, a Crypto Fort Knox would typically use a combination of military-grade physical safe locks and high-tech cryptographic digital security methods to safeguard its clients’ cryptocurrency holdings.

Physical security measures might include off-site storage in a secure facility with 24/7 surveillance, armed guards, and other measures to prevent physical theft or tampering.

Digital security measures might include advanced encryption and multi-factor authentication, as well as state-of-the-art intrusion detection and prevention systems to protect against hacking and other forms of cybercrime.

Other features that might be associated with a Crypto Fort Knox include regular security audits and assessments, insurance coverage for any losses that occur, and a high level of transparency and accountability in all aspects.

Essentially, the importance of having your own Crypto Fort Knox is to create the highest level of protection possible for cryptocurrency holdings, akin to how the real Fort Knox is designed to safeguard the nation’s gold reserves.

6 Steps: How to Build Your Own Crypto Fort Knox.

Having explained the concept, here are 6 non-exhaustive steps to creating your own Crypto Fort Knox to protect your digital assets.

  1. Picking the Right Storage Option
  2. Identifying Reputable Exchanges & Trading Platforms
  3. Finding Secure DeFi Protocols & Applications
  4. Prevent Unauthorized Access
  5. How to Avoid Getting Hacked
  6. Avoiding Losses Even If You Get Hacked

1. Pick the Right Crypto Storage Option

Selecting a secure location was arguably the most important step in constructing Fort Knox. Because, even when you have the most sophisticated security system in place, the safety of your fortress is no good if it is built on quicksand. / still depends largely on the site that is located.

Crypto Wallet User Interface

Crypto Wallet User Interface. Source: Ledger

So, to build your own crypto Fort Knox, the first step is to pick the storage option that best suits your needs. Start by asking yourself the following about how you interact with cryptocurrencies.

  • Are you planning to lock away your crypto assets long-term?
  • Are you an active trader who needs to move your cryptocurrency around frequently?
  • Do you use cryptocurrencies for everyday transactions and payments?
  • Do you interact with DApps across different blockchain networks on a daily basis?

By asking the aforementioned questions, you are able to assess the potential risk factors. There are 4 broad classes of crypto storage options available today. Hot Wallets, Cold Wallets, Paper Wallets, and institutional Custodian services. Each has its own unique advantages and disadvantages, so it’s important to understand them before choosing the best option for your specific needs.

2. Keeping Good Company —Identify Reputable Exchanges & Trading Platforms

No matter how secure your Crypto Fort Knox is, it is important to only deal with reputable exchanges and trading protocols.

This is because some of the most catastrophic crypto thefts have occurred on exchanges and trading platforms. From the infamous 850,000 BTC (approx. $3.1bn) Mt. Gox exchange hack that occurred back in 2014, to QuadrigaCX where the exchange founder allegedly faked his own death to cart away nearly $190 million of user’s funds. You can catch up on the details of this hack on the Netflix show titled Trust No One: The Hunt for the Crypto King

Crypto Exchange

The importance of identifying reputable exchanges and trading platforms cannot be overstated. Using a platform with a poor reputation or lax security measures can result in loss of funds or personal information.

Reputable exchanges are more likely to provide a secure and reliable trading environment, while also ensuring regulatory compliance and protection of user funds.

Stress tests, Proof of Reserve, Proof of Fiduciary, Operating Licenses, healthy trading volume and an active Customer support are some of the key indicators of a reputable crypto exchange.

3. Avoid Dirty Cops — Find Safe DeFi Protocols & Applications

One of the major reasons why cryptocurrencies have gained popularity in recent years is the competitive yield available in Decentralized Finance. But it comes with a new wave of inherent risks.

If you hand over your details of your identity and private keys to the wrong protocol, you risk losing your funds. So, a major part of securing your crypto assets is to have a framework to assess the safety and sustainability of each protocol that you interact with.

Handshake in cuffs

Here are some expert tips for finding safe DeFi protocols and applications:

  • Choose Non-Custodial Protocols: Wherever you can, always choose non-custody DeFi protocols over those that require you to give up your private keys to access yield-bearing products and other features.
  • Conduct thorough research: Before using a DeFi protocol or application, conduct thorough research on the team behind the project, its security measures, and any previous security incidents or hacks. Check online forums and social media to see what other users are saying about the platform.
  • Look for audits and security assessments: Reputable DeFi protocols and applications should have regular security audits and assessments conducted by third-party security firms. Look for evidence of these assessments on the project’s website, whitepaper or social media channels.
  • Check the code: DeFi protocols and applications are built on blockchain technology, which means their code is often open source and publicly available. Check the code for any vulnerabilities or weaknesses that could be exploited by attackers.
  • Consider the user interface: A user-friendly interface does not necessarily indicate a safe platform. Be cautious of DeFi protocols and applications that require extensive permissions or access to your personal information.
  • Be cautious of high-risk protocols: Some DeFi protocols and applications may offer high returns but also come with high risks. Be cautious of these platforms and do not invest more than you can afford to lose.

It’s important to note that no DeFi protocol or application is completely risk-free. However, by cautiously carrying out the steps listed above, you can increase your chances of finding safe and reliable DeFi protocols and applications.

4. Putting the “Fort” into Fort Knox — Prevent Unauthorized Access with Enhanced Password Encryption

Storing your cryptocurrency without proper password encryption is like building Fort Knox and keeping the front door wide open. And since Crypto wallets are the integral part of owning digital assets and transacting in cryptocurrency, fortifying your wallet against unauthorized access is highly critical.

Illustration with a laptop with a login screen on it and a fishing hook grabbing the credentials in an attempt of phishing

Here are some ways to prevent unauthorized access to your crypto wallet:

  • Strong Password: Set a strong password for your crypto wallet and never share it with anyone. Use a combination of uppercase and lowercase letters, numbers, and special characters. Avoid using personal information, such as your name or birthdate, as part of your password.
  • Two-Factor Authentication (2FA): Enable 2FA on your wallet account, which requires a secondary method of authentication, such as a code sent to your mobile phone, email address or authenticator apps —to access your wallet. This adds an extra layer of security to your account and prevents unauthorized access even if your password is compromised.
  • Keep Your Firmware Up to Date: Ensure that you have the latest version of your digital wallet software installed, as updates often include security patches that address vulnerabilities.
  • Be Cautious with Public Wi-Fi: Avoid using public Wi-Fi networks when accessing your wallet, as these networks can be insecure and leave you vulnerable to hacking.
  • Backup Your Wallet: Regularly backup your wallet to ensure that you can recover your funds in the event of loss or theft. Store your backups in a secure location, such as a fireproof safe or safety deposit box.

5. Double lock the backdoor — How to Avoid Getting Hacked

According to crypto-media sources, the $600 million Axie Infinity hack all started with a fake Linkedin job offer. The hackers, identified as the notorious North Korea based Lazarus Group, had targeted key employees of Sky Mavis, the parent company/developer of Axie Infinity.

The hack was set in motion when one Sky Mavis senior engineer clicked a malware-laced PDF document disguised as the official offer letter.

Illustration of Thief with bag full of data running out of laptop screen.

This underlines that every security system in the world has a back door and it’s important to have that covered as well. When it comes to your crypto fort knox, hackers, identity thieves are always lurking in the shadows to take advantage of small slip ups to get into your crypto storage vaults.

Safe browsing and standard Internet hygiene are essential measures to protect yourself and your devices from these online threats such as malware, phishing, and hacking.

Here are some best practices to follow for safe browsing:

  • Use a Secure Browser: Choose a secure web browser that provides built-in protection against malicious sites and phishing attempts. Popular options include Google Chrome, Mozilla Firefox, and Microsoft Edge. Also, ensure that your browser is updated to the latest version, as updates often include security patches that address vulnerabilities.
  • Install a Security Software: Use a reputable antivirus and anti-malware software to protect your device from malware and other online threats. Keep the software up to date and run regular scans.
  • Avoid Suspicious Links: Do not click on links from suspicious or unknown sources. Always verify the authenticity of links by hovering over them to see the destination URL before clicking. Only enter sensitive information on websites with a secure connection (HTTPS) to ensure that your data is encrypted.
  • Use Strong Passwords: Use strong, unique passwords for each account and consider using a password manager to help generate and store them securely.
  • Be Cautious with Public Wi-Fi: Avoid using public Wi-Fi networks when accessing sensitive information, as these networks can be insecure and leave you vulnerable to hacking.Lastly, the crypto world is very dynamic, so you must stay up to date on the latest online threats and best practices for digital security. By following these best practices, you can protect yourself and your devices from online threats and make your crypto storage foolproof.

6. Call in the cavalry — Avoiding Losses Even If You get Hacked

If all security efforts fail, due to an act of God or any other aggravating circumstances, the next step is to usually call in Insurance.

Sword Fight between two business men. One with a red shield with an X, the other one a shield with a green checkmark

Crypto insurance is a type of insurance policy designed to protect cryptocurrency investors and businesses from potential losses resulting from non-negligent theft, hacking, or other security breaches.

For instance when TerraLuna crashed in June 2022, many investors got rekt. But a few of them who bought stablecoin insurance covers were able to receive full compensation for their losses from DeFi insurance platforms like Unslashed Finance and InsurAce,

Here are some basic types of Insurance covers that you can get to beef up your Crypto Fort Knox:

  • Custodial Wallet Insurance: Custodial wallet insurance protects against losses due to theft or hacking of funds held in a custodial wallet. This type of insurance is typically purchased by exchanges and other businesses that hold cryptocurrency on behalf of their customers.
  • Stablecoin Insurance: Stablecoin insurance is a type of insurance policy designed to protect investors who hold stablecoins against the risks of a stablecoin losing its peg to its underlying asset or currency. This type of insurance helps ensure that the value of the stablecoin remains stable and provides a layer of protection against potential losses.
  • Smart Contract Cover: Smart contract cover is a type of insurance policy designed to protect against losses resulting from smart contract failures and vulnerabilities. This type of insurance is typically purchased by investors who rely on DeFi protocols for the execution of financial transactions or other functions.
  • Mining Pool Insurance: Mining pool insurance protects against losses resulting from the failure or hacking of a mining pool, which is a group of miners who pool their resources together to mine cryptocurrencies.

In summary, crypto insurance is essential for protecting cryptocurrency investors and businesses against risks associated with the cryptocurrency market. It promotes increased security measures, increases investor confidence, supports growth, and provides peace of mind. As the cryptocurrency market continues to grow, the importance of crypto insurance is likely to increase as well.

Final Words

Building your crypto fort knox is a lot more than just finding a secure wallet to store your crypto. It is an all-encompassing multi-layer effort that requires “Picking the Right Storage Option”, “Identifying Reputable Exchanges”, “Finding safe dApps”, “Preventing Unauthorized Access” and “Calling up Insurance” if all else fails.

Stay tuned for our next series of articles for more expert tips on how to keep your crypto assets SAFU.

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