One of the biggest problems plaguing the cryptocurrency world is a surge in scams, with US government figures showing 46,000 Americans lost $1 billion to criminals last year.
Between pump and dump schemes, romance scams, and “rug pulls,” crypto scams are getting more and more brazen and sophisticated. Perhaps even more worrying is the eruption of major break-ins, in which hackers were able tocrypto value from people’s digital accounts.
But good cybersecurity habits can minimize risk, experts say. Here are three mistakes to avoid when buying cryptocurrency.
Receive your login credentials by SMS
Some cryptocurrency exchanges use two-factor authentication for online accounts. This requires users to first enter their username and password, then enter a numeric code usually sent to their cell phone via text message.
The problem? Hackers can use what’s known as a “SIM swap” scam to intercept your incoming text messages, investigator Joe McGill has warned. He recommends using a third-party service like Google Authenticator or Okta Verify; better yet, buy a “YubiKey”, which must be plugged into your computer to unlock your account.
“A YubiKey is just a small USB drive that you plug into a USB port,” McGill said.
Bypass Allow List
One step in setting up a crypto account is something called an “allowlist”. This is where a user can enter a list of IP addresses and designate which computers someone can use to withdraw funds from the account.
But users often bypass the list because they’re in a rush to set up their account and focus on other steps in the process. But it’s an easy way to implement an extra layer of security, said McGill, who runs the crypto scam-reporting website Chainabuse. Don’t skip the allow list.
“All of these big exchanges now have all the security measures, from the simplest options to the most paranoid,” McGill said. So use them all.
Storing your “seed phrase” carelessly
For crypto buyers using a digital wallet, protecting your “seed phrase” is key. A seed phrase is a random set of words generated once a digital wallet is created. It allows the user to recover their crypto assets in case something goes wrong.
Too often, people store their seed phrase in their email, on a Google Drive, or in an online note, said Paul Sibenik, senior case manager for blockchain investigative firm CipherBlade. This makes it an easy target for hackers.
Instead, hide the seed phrase somewhere secure that isn’t connected to the internet. If you write it down somewhere, make sure you don’t lose it – it can also be a big headache.
“If another party goes to the seed phrase, your funds are exhausted,” Sibenik said. “It takes some planning. You have to think about it meticulously.”
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3 Mistakes to Avoid When Buying Cryptocurrency
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