How to Keep Your Crypto Wallet Safe: Tips to Know in 2024

Securing your crypto wallet is crucial, especially considering the irreversible nature of cryptocurrency transactions on the blockchain networks. Once you make a transaction, it's set in stone – there's no undo button. This irreversibility puts the spotlight on wallet security, underscoring the need to protect your digital funds from any unauthorized access. Losing cryptocurrencies can be a permanent misfortune, as retrieving them is often impossible.

But it's not just about keeping your coins safe. Wallet security is also crucial for keeping your transactions private and ensuring they're carried out correctly. In the realm of digital currencies, privacy matters a lot. Users want to know that their transactions are their own business and no one else's. Plus, for the whole system to work smoothly, each transaction needs to be reliable and trustworthy. In short, securing a cryptocurrency wallet is about more than just protecting your investment; it's about ensuring every move you make is confidential and accurate.

Dive deep into what a crypto wallet is and how it works. 

In this guide, we're going to bring you up to speed on everything you need to know about keeping your crypto wallet safe in 2024. We'll start with the basics, explaining how different types of wallets work and how they cater to various needs. Then, we'll guide you through the latest security tips, showing you how to shield your crypto assets from prying eyes and potential threats. 

Between 2011 and 2019, a total of $2.71 billion was lost due to hacks of crypto exchanges, wallets, and marketplaces globally. This figure skyrocketed to $3.8 billion in 2022 alone, although it dipped to around $1.8 billion worth of losses due to hacks, scams, exploits, rug pulls, etc, in 2023. 

Mt. Gox - 2014 

Mt. Gox, once the largest Bitcoin exchange, suffered a massive breach resulting in the loss of 850,000 bitcoins (worth over $450 million at the time). 

Poor security practices, including keeping bitcoins in a hot wallet connected to the internet, made it an attractive target for hackers. Additionally, years of mismanagement and operational issues played a role.

Bitfinex - 2016 

Bitfinex, a prominent cryptocurrency exchange, was hacked for approximately 120,000 bitcoins (equivalent to $72 million). 

Bitfinex's security measures were not robust enough to prevent the breach. A weakness in its multi-signature security model was exploited by attackers, revealing vulnerabilities in the platform's security infrastructure.

Coincheck - 2018

Coincheck, a Japanese cryptocurrency exchange, was hacked for over 500 million NEM tokens, valued at approximately $530 million.

Coincheck, a Japanese cryptocurrency exchange, was hacked for over 500 million NEM tokens, valued at approximately $530 million.

Safeguarding your digital assets starts with choosing the right crypto wallet. There are several types of wallets available, each with its own set of pros and cons in terms of security. Let's explore the most common types:

1. Hot Wallets

Hot wallets are cryptocurrency wallets that are connected to the internet. They provide easy accessibility for managing and transacting with cryptocurrencies. Examples of hot wallets include custodial wallets such as KuCoin Exchange or self-custodial wallets like Trust Wallet and MetaMask.

Pros:

• Convenient and user-friendly for quick and frequent transactions.

• Instant access to funds for trading or spending.

• Can be used across multiple devices.

Cons:

• More susceptible to hacking and malware attacks due to online connectivity.

• Risk of theft if the device or platform is compromised.

• Reliance on the security measures and protocols of the wallet provider.

Ideal for: Convenient and frequent cryptocurrency transactions for users who prioritize accessibility over maximum security.

Find out all the latest security measures we undertake to keep your crypto safe on KuCoin’s hot wallets. 

2. Cold Wallets

Cold wallets are cryptocurrency wallets that are offline and not connected to the internet. They prioritize security by keeping the private keys offline and away from potential online threats. Examples of cold wallets include Ledger Nano X, Trezor Model T, and KeepKey.

Pros:

• High level of security as private keys are stored offline and protected from online threats.

• Protection against hacking and malware attacks targeting online wallets.

• Control over private keys and funds.

Cons:

• Less convenient for frequent transactions as they require manual syncing with online services.

• Additional technical steps are required to access and transfer funds compared to hot wallets.

• Possibility of loss or damage to the physical device.

Ideal for: Long-term storage of large sums of cryptocurrencies, offering enhanced security by keeping keys offline.

3. Hardware Wallets

Hardware wallets are physical devices designed specifically for securely storing cryptocurrencies. They store private keys offline on a physical device, offering enhanced security compared to software wallets, which store keys on a computer or mobile device and are more susceptible to online threats.

Hardware or cold wallets provide an extra layer of security by keeping the private keys offline and requiring physical authentication to access funds. Examples of hardware wallets include Ledger Nano S, Trezor One, and KeepKey.

Pros:

• Excellent security through offline storage of private keys and hardware encryption.

• User-friendly interfaces for managing cryptocurrencies.

• Protection against hacking, malware, and physical attacks.

Cons:

• High costs associated with purchasing a hardware wallet.

• Possibility of loss or damage to the physical device, which can result in a loss of access to funds if not backed up properly.

• Some technical knowledge is required for initial setup and ongoing use.

Ideal for: Individuals who prioritize the highest level of security for their crypto assets through offline storage and specialized hardware.

Here’s more information on how you can use hardware wallets when trading or investing in crypto. 

4. Software Wallets

Software wallets are applications or programs installed on computers, smartphones, or other devices. They provide a digital interface for managing and transacting with cryptocurrencies. Examples of software wallets include Halo Wallet, Exodus, Jaxx Liberty, and Coinomi.

Pros:

• Accessibility and availability for various operating systems.

• Can be free or lower cost compared to hardware wallets.

• User-friendly interfaces and features.

Cons:

• Vulnerable to malware and hacking if the device or platform is compromised.

• Reliance on the security practices and updates of the software provider.

• Risk of loss if the device or storage medium is damaged or lost without proper backups.

Ideal for: Users who seek flexibility and accessibility across multiple devices for managing and transacting cryptocurrencies.

Learn more about KuCoin’s decentralized crypto wallet, Halo. 

5. Custodial Wallets

Custodial wallets are wallets provided by third-party service providers where the provider holds the private keys. Users rely on the provider to secure and manage their funds. Examples of custodial wallets include the KuCoin Exchange wallet, Binance Wallet, and Kraken Wallet.

Pros:

• Convenient for beginners and those who prefer to delegate security responsibilities.

• Potential additional security measures provided by the custodial service.

• Support and assistance from the wallet provider.

Cons:

• Reliance on the custodial service for security and access to funds.

• Possibility of the custodial service being compromised or experiencing a security breach.

• Limited control over funds and private keys. 

Ideal for: Newcomers to the crypto space who prefer to rely on the security and convenience provided by third-party wallet providers.

6. Non-custodial Wallets/Self-custody Wallets

Non-custodial wallets, or self-custody wallets, are wallets where users have full control over their private keys. They are responsible for the security and management of their funds. Examples of non-custodial wallets include Halo Wallet, MetaMask, MyEtherWallet, and Trust Wallet.

Pros:

• Full control and ownership of private keys and funds.

• Increased privacy and security through self-custody.

• Flexibility to switch between different platforms and services.

Cons:

• User responsibility for securely managing and backing up private keys.

• Risk of loss if private keys are lost, forgotten, or not properly backed up.

• Limited support or assistance compared to custodial wallets.

Ideal for: Users who prioritize maintaining full control of their private keys and value self-custody above all else.

Here’s more information on the difference between custodial and non-custodial wallets. 

7. Paper Wallets

Paper wallets are physical copies or printouts of public and private keys. They are typically generated offline for enhanced security. Examples of paper wallets include Bitaddress.org and WalletGenerator.net.

Pros:

• High level of security as private keys are kept offline and away from digital threats.

• Relatively low cost and easy to create.

• Protection against hacking and malware attacks.

Cons:

• Vulnerable to physical damage, theft, or loss.

• Requires proper storage and protection to prevent unauthorized access.

• Less convenient for frequent transactions and can be cumbersome to use.

Ideal for: Individuals who seek the most offline and physical storage solution, generating cryptocurrency keys on paper for long-term storage.  

Each type of wallet has its own trade-offs between convenience and security. Choosing the right wallet depends on your individual needs, risk tolerance, and storage preferences. Evaluate these factors and consider multiple wallet options before making a decision.  

Check out more on how you can find the safest way to store your crypto assets. 

Here are some common security measures for safeguarding your crypto wallet and assets: 

1. Safeguard Your Private Keys

The private key is a critical piece of information of your custodial wallet used to authorize outgoing transactions on the blockchain network. It's essential to safeguard your private keys in a secure, offline environment to prevent unauthorized access. Hardware wallets, such as Trezor or Ledger, offer excellent protection as they store your private keys offline, making them immune to online hacks.

2. Use Strong Encryption Measures

Encryption is a method of converting data into a code to prevent unauthorized access. Using strong encryption to protect your wallet data is crucial in maintaining the security of your digital assets. Ensure that the wallet you choose uses robust encryption standards to secure your data. This is important for all kinds of wallets, including hardware, software, and paper wallets. 

3. Enable Multi-Factor Authentication (MFA) in Wallet

MFA adds an extra layer of security by requiring users to provide two or more verification factors to gain access to a resource, such as an application, online account, or VPN. Enabling MFA in your crypto wallet can significantly enhance its security, making it harder for unauthorized users to gain access to your digital assets. This feature is especially important for software wallets, such as exchange wallets and web3 wallets. 

Here’s how you can enable Google 2FA on your KuCoin hot wallet. 

4. Install Regular Updates

Keeping your wallet software up-to-date is crucial to maintaining security. Developers regularly release updates to patch vulnerabilities and improve functionality. Ensure you regularly update your wallet software to benefit from these enhancements and protect your assets. 

5. HODL Your Cryptos in Cold Storage 

Cold storage involves storing cryptocurrencies offline. This method is typically used to store a significant portion of one's assets, protecting them from online threats. Consider using cold storage if you have a large amount of cryptocurrency you don't intend to trade frequently. Use hardware wallets for cold storage of your crypto holdings. 

6. Implement Strong Passwords

Using complex, unique passwords can significantly enhance the security of your crypto wallet. Avoid using easily guessable passwords, and consider using a password manager to generate and store strong passwords. A strong password should include a mix of uppercase and lowercase letters, numbers, and special characters. Use strong passwords on all kinds of crypto wallets. 

Implementing these measures can help you significantly reduce the risk of crypto theft and unauthorized access to your funds. 

While the above section detailed the basic security measures you can take to secure your crypto wallet and digital assets, here are some advanced steps that you can consider to secure your digital wallet further:  

1. Use Multi-signature Wallets

Multi-signature (multi-sig) wallets provide an additional layer of security by requiring multiple private key signatures to authorize transactions. This means that multiple parties need to approve a transaction, reducing the risk of unauthorized access or fraudulent activity. 

Multi-signature wallets can be implemented using different combinations of private keys, such as 2-of-3 or 3-of-5 signatures. This feature is particularly beneficial for businesses or individuals who want to share control of their funds while maintaining a higher level of security.

2. Maintain Dedicated Devices for Crypto Transactions

Using dedicated devices, such as hardware wallets, for crypto transactions is a recommended security measure. These devices are specifically designed to securely store private keys offline and provide an isolated environment for transaction signing. 

By keeping the private keys separate from internet-connected devices like smartphones or computers, the risk of malware or hacking attacks is significantly reduced. Dedicated devices utilize encryption and offer features like PIN code protection and secure element chips to enhance security.

3. Understand and Use Smart Contract Wallets

Smart contract wallets leverage the power of blockchain technology to introduce advanced security features. Smart contracts are self-executing contracts with predefined conditions that automatically trigger actions upon fulfillment. 

Smart contract wallets can add an extra layer of security by allowing users to set rules and conditions for their transactions. For example, users can require additional authorizations, time locks, or multi-factor authentication for specific actions. By utilizing smart contract wallets, users can customize and enhance the security of their transactions based on their specific needs.

As a crypto investor, you must take an active role in securing your crypto wallet and assets. While crypto wallets and platforms employ security measures, personal vigilance plays a crucial role in protecting your funds. By following best practices and being aware of potential threats, you can significantly reduce the risk of unauthorized access and mitigate potential security breaches. Here’s what you can do to protect your digital wallet and assets: 

1. Recognize Phishing Attempts

Phishing attempts are deceptive tactics used by cybercriminals to trick individuals into revealing their sensitive information, such as login credentials or private keys. These attempts often come in the form of fraudulent emails, websites, or messages that mimic legitimate platforms or services. To protect yourself, be cautious and follow these guidelines:

• Double-check the authenticity of the sender or website by carefully reviewing the URL, domain, and email address.

• Avoid clicking on suspicious links or attachments in emails or messages, especially if they are unexpected or ask for personal information.

• Never share your wallet's private keys, seed phrases, or login credentials with anyone.

• Enable two-factor authentication (2FA) for your wallet and other crypto-related accounts to provide an extra layer of security.

Read more on how you can recognize and avoid crypto phishing scams. 

2. Avoid Public Wi-Fi for Transactions

When conducting crypto transactions, it's important to avoid using public Wi-Fi networks. Public Wi-Fi networks can be susceptible to hackers and eavesdroppers who can intercept your data and potentially access your wallet. To protect your transactions:

• Use a secure and private internet connection, such as a password-protected home network or a trusted mobile data plan.

• If you must use public Wi-Fi, consider using a virtual private network (VPN) to encrypt your internet connection and add an extra layer of security.

3. Regularly Monitor Your Wallet Transactions

Keeping a close eye on your wallet transactions is crucial to detect and address any suspicious activity promptly. Regularly monitor your wallet's transaction history:

• Set up notifications or alerts for transactions, balance changes, or login attempts if supported by your wallet provider.

• Review your wallet transactions for any unauthorized or unfamiliar activity.

• Report any suspicious or fraudulent transactions to your wallet provider or relevant authorities immediately.

As we conclude, it is crucial to emphasize that the responsibility of securing crypto wallets and assets lies not only on wallet providers but also on the individuals themselves. By taking proactive steps to protect their digital assets, employing personal vigilance in detecting phishing attempts, avoiding public Wi-Fi for transactions, and regularly monitoring wallet transactions, users can become the first line of defense against potential attacks.

Remember, the security of your crypto wallet is in your hands. By prioritizing security, staying informed, and taking proactive steps, you can enjoy the benefits of cryptocurrencies while safeguarding your financial future. Stay secure, remain vigilant, and enjoy your journey in the world of crypto with peace of mind.  

We encourage you to continuously learn and adapt to new security measures as the crypto industry and. associated security measures evolve. Stay informed about the latest security best practices, follow reputable sources within the crypto community, and remain vigilant in the face of ever-changing threats. 

1. What Is a Crypto Wallet, and How to Choose the Best One for You

2. A Guide to Top Web3 Wallets of the New Decentralized Internet Era

3. What Is a Multi-Sig Wallet, and How Does It Work?

4. The Use of Hardware Wallets in Crypto Investing and Trading

5. The Difference Between Custodial and Non-Custodial Crypto Wallets

6. How to Set Up a MetaMask Wallet in a Few Minutes