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