Safeguarding Bitcoin: Cybersecurity measures to undertake to ensure wallet safety

By Mr. Roshan Aslam, CEO & Co-founder of GoSats: When blockchain was first used with the public release of Bitcoin, it was perceived as impregnable. However, that bubble seems to have been lost in the subsequent years with massive cyberattacks taking place on Bitcoin exchanges, as well as retail and institutional wallets.

In 2024, one of the world’s leading exchanges fell victim to a cyberattack that led to the loss of approximately INR 2,000 Crore of investor funds.

However, this attack was neither the first of its kind nor the last, as 2024 alone cost global investors north of $2.2 billion owing to cyberattacks. With Bitcoin soaring to unprecedented heights, this unwelcome emergence of cyberattacks as a concern has led investors to look for new and improved cybersecurity measures to ensure wallet safety.

While global stakeholders are putting in significant efforts to ensure wallet security, several trends have been witnessed in these cyberattacks. For instance, decentralized finance (DeFi) organizations were the most affected by cyberattacks between 2021 and 2023.

While no particular reason has been singled out, it is believed that these organizations were vulnerable since growth and GTM were prioritised over security measures, leading Hacker Central to take note. However, 2024 saw the picture change completely with centralized platforms falling victim.

Cyberattack pattern on Bitcoin

When malicious attempts shifted from DeFi to centralized platforms, it reflected the growing emphasis on security mechanisms like private keys. In 2024, almost 44% of attempts on Bitcoin wallets happened through private keys.

This emphasises the importance of centralized platforms where utmost priority is extended to securing private keys since they are the one point of contact for accessing the assets.

At the same time, if private keys are compromised in centralized platforms, it leads to considerable consequences — an example of which could be the May 2024 attack on a Japanese Bitcoin exchange that led to a loss of $305 million. It was one of the largest cyberattacks on Bitcoin of all time and investigations hinted that it likely took place because of lack of security measures.

While we have already discussed private key security as one of the most important aspects, other aspects such as device security, human error, insecure connections and third-party dependency are just as relevant in terms of securing wallets.

Basic practices for securing wallets

To begin with this, investors must understand that all security measures fall short if there is a lack of protection of private keys, or insecure connections and compromised devices. These are the primary causes of concern for Bitcoin investors through which cyberattacks are generated, and addressing these challenges mitigates the overall risk to a larger extent.

While many would argue that cyberattacks on devices happen unintentionally, and even experts could make these errors — we need to understand that most malicious attack vectors use these as funnels.

For instance, in case of theft of the device where the wallet application is installed, the stored data within the application comes in direct contact with the thief. This is why industry experts emphasise encryption and backup, helping users to restore the data on another device in case of theft.

Also, Phishing is one of the major concerns of cyberattacks when it comes to Bitcoin. Phishing websites often ask investors to share their private keys or approve transfers of assets — all in the guise of official platforms.

This is why wallets must integrate warning labels before sharing private keys, while also integrating a verified database of trustworthy websites. This will help investors to become alert to fake websites and avoid malicious attacks.

Furthermore, Bitcoin investors must make it a habit to avoid connecting to public networks, opening their investment data to be intercepted by hackers while being transferred between the wallet and the blockchain.

By using a trusted and secure connection, Bitcoin investors significantly enhance the safety of their wallets, especially during transactions or approval periods.

Technical Practices for Wallet Security

Recent cases of cyberattacks on Bitcoin wallets highlight the importance of implementing anti-malware measures irrespective of DeFi or centralised platforms. By accounting for malware or potential threats to wallets through them, platform-specific cybersecurity protocols can be developed that considerably reduce vulnerability and enhance security aspects.

Additionally, by integrating proactive and protective safeguarding measures such as clipboard monitoring, malicious attempts including unauthorized changes could be stopped. Other measures like encrypting sensitive data, session timeouts and sandboxing could also help to boost wallet security and prevent cyberattacks.

At the same time, significant emphasis must be extended to safeguard private keys through hardware security, encryption protocols like AES, RSA, ECC and Argon2 as well as multifactor access.

Furthermore, the security of crypto wallets is extended by adapting to diverse blockchain models. By using decentralized apps, making manual approval mandatory and mitigating spam attempts through a comprehensive check could also be helpful in protecting wallets from malicious hacking attempts.

Disclaimer: The information provided in this article is for general informational purposes only. It does not constitute financial, investment, or trading advice. We strongly recommend that individuals conduct their own research and seek advice from qualified professionals before making any investment decisions.

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