Security of tokens should be the number one priority of all crypto users. Recent incidents such as the DEXX security incident where at least $21 million worth of user funds was lost, are evidence of the inherent risks of the crypto world. In this scenario, attackers compromised over 1000 users by simply taking advantage of the existing shortcomings of the platform’s private key management.

The One Golden Rule of Crypto: Not Your Keys, Not Your Coins

Begin by choosing the right wallet and using the best security practices on offer. There are two types of crypto wallets – Hot wallets, which have internet connectivity and cold wallets, which are stored offline. Apart from these two, there are smart contract wallets which can be programmed.

Now let’s examine BNB Chain and Trust Wallet’s opinion on crypto wallet safety and how users can make informed decisions based on them.

Lessons learnt from the DEXX security Issue.

Before we dive into what crypto wallet security implies, it is necessary that we understand more about the recent security incident mentioned before.

DEXX, which is a reputed on-chain trading terminal platform, experienced an attack on November 16th, 2024, which primarily affected Solana funds. As a result of this attack over $21 million worth of user funds were lost, with about 1000 victim addresses.

The community is concerned after finding out that more than 9000 unauthorized transactions were used in the attack. Subsequent investigations into several compromised addresses found out that the stolen funds remain in the hacker’s possession. This points to the fact that a single offender perpetrated the incident.

The root cause of the incident was identified as vulnerability in the private key storage of the platform’s server. The API for exporting wallets from DEXX returned private, unencrypted keys. This reveals that DEXX stored private keys on its servers. All this, despite branding itself as a non-custodial wallet – what an irony.

Several measures can be taken to prevent this sort of breach.

Avoiding Storage of Private Keys: Private keys should never have been stored on DEXX’s servers, as this practice directly contradicts its non-custodial claims.
Encryption: Sensitive data should be encrypted during transmission and storage to protect delicate user information.
Regular Security Audits: Regular security audits should have been conducted to identify vulnerabilities before they were exploited.

Checking whether selected wallets have gone through proper audits is key for  users. When investing a substantial amount of funds, it’s better to choose reputed and time-tested platforms to decrease the chances of loss.

What to Look for in a Secure Wallet?

Consider the following features when looking for a secure cryptocurrency wallet.

Secure Key Management

Reliable wallets should commit to secure key management. They should ensure that all private keys are generated, stored and managed in the most secure manner possible. Some of the key aspects of secure key management include:

Backup and Recovery: Users should be provided with secure backup options. They should also have the ability to recover private keys or seed phrases when needed.

Seed Phrase Encryption: Ensure that the wallet has strong encryption measures for seed phrases.

Non-custodial design: Go for wallets that do not store their private keys on centralized servers. User should have full control over their private keys.

Wallet History and Security Licenses

Selecting a secure wallet is undoubtedly the most challenging thing a new Web3 user has to do. Many users face difficulties in determining whether a wallet is secure and follows the best practices and protocols.

With that being said, follow these steps to choose a secure wallet.

Begin by checking the past records of the wallet and opting for one with a proven history and good reputation. These are likely to follow strict security protocols.
Check whether the wallet has passed multiple audits and holds a valid security license.

Follow these above steps to make informed decisions.

Security Scanners and Alerts

Users seldom understand the full implication of a transaction when performing them or exploring dApps. When receiving a given message or prompted transaction from a dApp, it requires a lot of trust from the user’s end. Why? – because its almost impossible to know the full extent of the transaction’s consequences, just by looking at the on-screen prompt.

Fortunately, Trust Wallet’s Security Scanner feature solves this problem. This feature is responsible for analyzing transactions and identifying suspicious patterns, even before the funds are sent. This reduces the chances of users accepting or signing fraudulent or unwanted transactions. This feature alone has safeguarded $450 million from being stolen.

Wallets with this feature simulate the transaction. They then provide the results to the users instead of just displaying the message or the transaction the DApp requests. This ensures that the client’s action is the same as their expectations.

Crypto wallets are known as the gateway to interacting with dApps. But since the users do not fully understand the imitations of transactions, the security scanner feature should be used.

Step-by-Step Guide for Choosing a Wallet

The main tool for interacting with the crypto ecosystem is the crypto wallet. It functions as the gateway to dApps and blockchain networks. This makes choosing the right wallet very important, even if one is trying to play blockchain games as opposed to storing assets or executing transactions.

Before you select a wallet, ask these questions to yourself.

Do you want to hold assets long-term or are you simply a day trader?
What is the maximum amount of risk you can take?
Do you want to engage with dApps, or do you need basic storage or transaction capabilities?

Crypto Wallet Types

Crypto wallets can come in two forms – software wallets and hardware wallets.

Software wallets have to be accessed using smartphones, browsers or computers. Users can conveniently connect with Web3 decentralized applications or get access to their digital assets simply by clicking.

This feature makes them popular among crypto traders. The main advantage of software wallets is the level of functionality and immediate accessibility they provide. They are versatile, capable of connecting to dApps seamlessly and be used for use cases such as crypto payments and digital IDs.

A good example of a software wallet is Trust Wallet. It is compatible with both desktops and mobile devices. 

When using a hot wallet on your PC or mobile, it’s crucial to install antivirus software for malware protection to ensure the security of your personal computer or phone. Hardware wallets on the other hand are physical devices used to store private keys in an offline environment. They are considered the safest option for crypto management and storage for this reason. It stores private keys away from internet connectivity.

Hardware wallets are ideal for users who prefer an extra layer of physical security or wish to store their crypto assets without frequent transactions. They are also suited for those who like to store their crypto long-term. However, the trade-off is not convenient, as things like transaction execution can take longer.

Can hardware and software wallets be used simultaneously?

It is possible to use hardware and software wallets at the same time. You can connect Ledger, which is a hardware wallet to Trust Wallet’s( software wallet) browser extension feature.

Are smart contract wallets safe?

Smart contract wallets use smart contracts that can function as wallets and provide features such as signature validation, asset ownership, and execution. Most use the ERC-4337 industry standard to develop a smart contract wallet even though other methods exist.

Smart contract wallets can bolster security and usability compared to traditional wallets. With smart contract wallets, users can get multi-owner accounts, flexible key management, token gas payments, account recovery, batch transactions, and advanced UX with security audits.

Conclusion

The world of cryptocurrency has both potential rewards and inherent risks. The key here is to stay informed and secure. Prioritize security by choosing wallets that can provide the above-mentioned features. Remember, it’s essential to make well-informed decisions and understand your needs before you choose a particular type of wallet.

Lastly, security is a personal thing. Stay vigilant, avoid sharing personal information and use different storage methods.

The post Insights from Trust Wallet and BNB Chain on Crypto Wallet Security appeared first on CoinGape.

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Filed under: News - @ December 19, 2024 7:22 am