The use and recognition of cryptocurrencies increase day by day. For this reason, in this article, we have listed the possible dangers in buying cryptocurrency and measures that can be taken for the people who cannot create enough time to search or who are new in cryptocurrency.
In our article, you will first see brief information regarding the types of popular attacks on the internet and how and on where you might encounter such threats. Then you will obtain the required information regarding the dangers that cryptocurrency exchanges use to buy cryptocurrencies and cryptocurrency wallets, which are used to store those currencies, bear and the counter-measures.
Popular Attack Types
In this type of attack, the attacker tries to deceive the targeted user with various imitation methods. These imitation types might involve a fake e-mail account or web site. Via this method, data of the targeted user is stolen and serious harm is done. Such imitations generally occur via imitation of well-known and confiding companies. For instance, the attacker might imitate the e-mail address of a bank or exchange and redirect you to a fake web site. When you enter the fake web site, the ‘user name’ and ‘password’ information you will type to access your account will be directly captured by the attacker. In such fake web sites, the web site name might also be very similar with the original one. Let’s say the name of the web site you will enter is “www.ethereum.com.” The attacker might open a web site with a similar name such as “www.etheryum.com”, use your negligence in her/his favor and steal your data. You should also be careful about such web sites while searching in search engines such as Google. Because the attackers might advertise in Google and be priorly shown above the original web site in the Google search results.
This method is actually similar to phishing, but it is typically different. The attacker aims to deceive the targeted user through fake e-mail account or web site but uses fear and panic.
In such fake e-mails and web sites, it is generally aimed to cause panic and redirect the selected person(s) to the fake addresses created by the attacker via texts such as “YOUR ACCOUNT IS IN DANGER !!!!”. The data that you will provide in the addresses you navigate without checking, which are almost the same with the original web site, will be captured by the attacker. It should be noted that none of the exchanges or digital wallet web sites will send you e-mails requesting your password or private data.
This method triggers the user’s instinct of earning easy money. The attacker promises various campaigns and prizes to the targeted user. When the user clicks on this link, she/he might be directly exposed to the harmful software and these links might redirect the user to fake web sites. Redirected web site requests user data to give the prize or include you in the campaign. When the data is entered, the attacker achieves her/his goal.
We can say that the most widely used application stores are “Google Play” and “App Store.” Although these stores perform various controls on the applications they publish, some of the fraud applications can still pass muster.
Fake exchange applications are the applications designed in a similar way with the exchange web sites to deceive the exchange users. When you try to access your account through these applications, your data is stolen and your account security is lost.
2. Wallet Applications
Similar to the fake exchange applications, there are also fake the wallet service applications used to store the cryptocurrency. You might be exposed to various attacks through these applications.
3. Mining Applications and Cryptojacking
The attackers, who would like to earn money via cryptocurrency mining, aim to obtain the processor power they need through your computer or mobile phone. This way, your device runs the applications in the background without your notice and serves for attacker’s mining operations.
4. Address Change
Since cryptocurrency transfers cannot be withdrawn, they are risky. Therefore, you need to make sure that your cryptocurrency is not transferred to a wrong address.
In addition to the fake applications mentioned above, certain software can change the receiver address while transferring the cryptocurrency. For this reason, for eliminating the typing errors and possibility of having a device infected with such harmful software while transferring cryptocurrency, it is recommended to check the receiver address at every stage and at least twice.
5. SMS and 2FA Attacks
In general, exchanges use SMS and 2FA features for security of your account and make it difficult for others to capture your account. However, there are certain points to pay attention while using these methods.
6. Wifi Dangers
Although the free wifi services provided in public places such as airport, restaurant, coffee shop are very useful, they pose many risks. Using these networks, attackers can obtain your data through various ways. Therefore, it is recommended not to login to any account while being connected to these networks.
We reviewed the types of attacks and the possible environments where we can encounter these attacks under 6 items. In general, to protect from such attacks and risks, it is recommended that you use a separate e-mail address for each exchange and each of your wallet accounts. If you create e-mail addresses specifically for each account and do not use them anywhere else, you will not receive e-mails from undesired addresses and have a straightforward, reliable communication. For this reason, you should not sign up to forums, social media networks etc. with the e-mail you signed up to exchange or wallet web sites. Having unique passwords for these web sites will also increase your security level.
After providing a general information regarding the dangers and measures, we will detail these processes separately for exchanges and wallets.
Cryptocurrency exchanges are the places where the majority of the cryptocurrency in cryptocurrency economy is collected. We can describe these companies as a sort of junction point. If you are making any transactions related to cryptocurrency, you will contact with the exchange directly or indirectly. For this reason, it will be advantageous to review the points that you need to pay attention while using the exchanges.
Finally, the legal regulations covering the cryptocurrency exchanges are developing day by day and becoming more secure. However, in case of any aggrievement and loss of right in international cryptocurrency exchanges, you may still not be able to claim your rights by applying to the court. Since exchanges do not offer any insurance service, in case of possible aggrievements, you are the sole responsible. Because of all these reasons, it is recommended to select the exchange you use taking the above-mentioned matters into account.
There are two types of wallets: online and offline (cold) wallets. The wallets that are directly connected or were previously connected to the web are called online wallets. These wallets can be created through a web site or mobile application, and your hardware wallets, which you connect to the web, also become online wallets.
Offline wallets are not connected to web and work with a multiple verification system. Offline wallets offer a higher security service comparing to the online wallets.
The wallets generally have 2 keys. One of them is a secret key special for you and allow you to login to your account. And the other one is the general key. The general key act as IBAN and allows you to share your wallet address with others.
Since they provide high security, offline wallets cost more. Cold wallets of the exchanges are an example of offline wallets. For transferring money from these wallets to another wallet, multiple verification is required. Let’s review a wallet requiring 2 verifications as an example. One of these verifications is required to be performed through a computer which has not connected to the internet before. The user takes the verification from the wallet application installed on this computer and transfers it via USB to a second computer with internet connection. Then the required second verification can be performed in the online environment. After getting 2 verifications, it is possible to perform the transfer from this wallet to another wallet. This way, even if the attacker hacks the computer connected to the internet and captures the wallet information, she/he cannot access the balance in the wallet. To steal the balance in the wallet, the attacker also needs the verification on the other computer, which is not connected to the internet.
Similarly the hardware wallets and the paper wallets, where the wallet information is printed on the paper and kept in physical environment, have an offline characteristic until connecting to the internet.
After above information, we can continue with the possible dangers and measures.
Even if the investor, who would like to invest on cryptocurrencies, is experienced, she/he encounters many security risks. As mentioned above, as a result of several dangers and scenarios, many losses were experienced in the past and are being experienced now. And it is highly possible that these dangers diversify and develop. Besides the above technical dangers, the project/company preference of the investors is also very important. Because another danger is the fraud projects/companies. This type of danger poses a great risk especially for the inexperienced investors that are new in the market.
To determine the projects that are technologically advanced, reliable and have return potential among more than 5.000 cryptocurrencies, position properly against high volatility and minimize risks; a certain investment experience and research is required.
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