Can a Digital Wallet be Hacked?
The use of digital wallets has been spreading faster than ever since the COVID-19 pandemic. One of the reasons for this trend is that many people now prefer safer methods that allow them to make contactless payments since more contact with people and objects could pose health risks. Despite the impressive help that digital wallets have brought to sellers, buyers, and remitters, these apps are also a topic of concern when it comes to cybersecurity. Are digital wallets safe? Can your crypto wallet be hacked? Read on to find out.
What is a Digital Wallet?
A digital wallet is an application that is used to electronically store information on different types of payment cards. It is also known as an electronic wallet (e-wallet). Digital wallets allow customers to make payments or send and receive money using their smartphones, tablets, or personal computers.
Having an e-wallet helps you avoid carrying cash and cards around. It provides easy access to your account. When you save the details of your bank card on an e-wallet, it becomes useful for making payments directly from the balance in your bank account. There are also digital wallets for storing your cryptocurrency cards and central bank digital currencies.
What is a Cryptocurrency Wallet?
A cryptocurrency wallet, or crypto wallet, is a tool that allows you to store the keys to your cryptocurrencies. It can be in the form of an online-based app (hot wallet) or an offline-based hardware device (cold wallet). No matter the form, a cryptocurrency wallet helps keep your Bitcoin, Ether, and other tokens safe and accessible. You can also use a crypto wallet to send, receive, and spend cryptocurrencies.
A physical wallet can hold actual cash, while a digital wallet can store electronic money and digital currencies. However, a crypto wallet does not actually store your tokens or cryptocurrencies. Why? Your Bitcoin or any other cryptocurrency lives on the blockchain. The only way to access it is by using a private key, which proves that you are the owner of the unit of cryptocurrency and gives you the right to make blockchain-based transactions. So, crypto wallets are used to store cryptographic keys so that the owners will not lose access to them.
Are Digital Wallets Safe and Secure?
One of the frequently asked questions about digital wallets is whether they are safe. Another one is if they are secure. Generally, digital wallets are safe and secure thanks to their use of tokenization, passwords, 3D Secure, and other modern security technologies.
A digital wallet encodes the user’s personal information and banking details during transactions. In that way, it prevents unauthorised third parties from being able to read and understand them.
In addition, there are many layers of security connected to a digital wallet; it gets stronger when 3D Secure is enabled for two-factor authentication of every transaction. Below are the common levels of security on most top digital wallets:
- The app itself provides some protection through one or more of the following security features: PIN code, password, facial recognition, fingerprint scanning, and voice commands.
- The credit card company has put some security features on your cards, such as tokenization, card verification value (CVV) or card verification code (CVC), fraud monitoring, and chargebacks. These features are available on most cards by Visa and Mastercard.
- The financial institution, bank, credit union, or FinTech company that issued your card also adds to the protection of your digital wallet. For example, if enabled, your financial institution will send a one-time password (OTP) to your registered mobile number to confirm your payment. So, if a fraudster tries to use your account, their transaction request will be unsuccessful when they cannot get the OTP.
Nonetheless, how you use your e-wallet can reduce its security, and hackers are constantly looking for new ways to break into your account. So, it is important to be conscious of the safety and security of your digital wallet.
Has a Bitcoin Wallet Ever Been Hacked?
Today, many long-term investment platforms allow you to invest in Bitcoin and other highly rewarding assets. However, some investors and crypto enthusiasts are not sure about the security of Bitcoin and crypto-wallets. Hence, they ask whether Bitcoin can be traced or hacked.
You can use cryptocurrency wallets for anonymous payments, but they do not guarantee 100% privacy of your transactions. That is because desperate hackers can trace Bitcoin transactions even though it is difficult to hack due to blockchain technology.
Private keys are assigned to Bitcoin users so that they can access their crypto assets. But when hackers discover the private keys by any means, they can use them to gain access to the users’ cryptocurrency wallets and steal Bitcoins. There are many reports of successful hacks of crypto exchanges and the cracking of a crypto wallet with US$2 million worth of Bitcoin.
Hacker Techniques Used to Access Crypto Wallets
How do hackers gain access to people’s crypto wallets? The following are the common ways they do it:
- Phishing attacks: Hackers use phishing attacks to steal information. They create misleading websites that are imitations of real cryptocurrency platforms and use them to defraud ignorant people. For instance, the original website of Binance is “www.binance.com,” but hackers may use a fake one like “www.binance.co.” When people input their correct login details on the cloned website, the data is instantly transferred to the hackers, who then use them to access the victim’s account on the original website of the crypto exchange.
- Malware: Popular operating systems like macOS and Windows are being targeted by hackers through numerous malware versions. Malware is malicious software that was created to gain illegal control over a computer system. Hackers use malware to detect and copy cryptocurrency addresses on users’ computers so that they can access their wallets.
- SMS 2FA verification exploits: One of the most popular verification methods for account security today is two-factor authentication (2FA) through short message service (SMS). However, cybercriminals sometimes use it to exploit their victims. They use SIM swapping techniques to intercept SMS verification messages. They trick employees of telecom companies into giving them control of people’s SIM card numbers so that they can receive 2FA messages sent to the actual owners and be able to access the users’ crypto wallets.
- Fake hardware wallets: Hackers provide fake hardware wallets to crypto account holders in exchange for their real wallets. They send them the fake wallets with a warning message that they need to replace their current ones with the newly delivered copies in an attempt to gain access to their accounts.
Note: Hardware wallet providers never ask for their customers' recovery keys. Furthermore, they never provide replacements until you specifically request one.
Safeguarding Your Crypto Wallet
Having learnt how hackers break into cryptocurrency wallets, you should try your best to safeguard yours. But how do you protect your wallet?
Here are some tips for the safety of your crypto wallet:
Use a non-custodial wallet: To get full control of your crypto wallet keys, use a non-custodial wallet. You can also add a backup strategy like writing down your keys on a piece of paper or using a hardware wallet. This system will protect you from phishing sites, malware, and cyber-attacks. An example of a non-custodial wallet is the Coinbase Wallet.
Avoid unregulated crypto exchanges: Unregulated exchanges lack standard security measures. Hence, you should avoid them. They are not under any obligation to help you when you have any problems with your account. So, it is better to stick with regulated crypto exchanges, know their original websites, and watch out for cloned websites to avoid them.
Avoid reusing passwords: Some people use the same password across multiple platforms. This is an unsafe practice. It exposes your accounts to more risks as it makes it easy for hackers to access your online accounts. Therefore, you should use special passwords that are difficult for anyone to guess or memorise for each account/wallet. You can write the passwords on a piece of paper or jotter that you keep somewhere safe.
Use app-based two-factor authentication: In addition to SMS verification, you should use app-based two-factor authentication to safeguard your crypto on a regulated exchange. This will enhance the security of your wallet by requesting a password and one-time access code through a time-based OTP system.
Safest Crypto Wallets
What is the safest online wallet? There are many safe online wallets to choose from on the market. While it is good to try to find the safest, that alone is not enough. You need to ensure that you are using a safe wallet that meets your financial and digital currency needs.
Below are our top picks of digital wallets that are very safe, have high-security features, and support crypto transactions. We have listed them according to their user ratings on our website.
Binance, which is one of the best crypto exchanges in the world, offers two crypto wallets that come with high-security features. You can download its Trust Wallet or its Binance Chain Wallet. While allowing you to manage more than 600 cryptocurrencies and a wide variety of other products, they keep your funds safe and never collect your personal data. Binance charges a 1% card transaction fee.
Trust Wallet is the official mobile wallet of the Binance crypto exchange. You can use it to buy, store, exchange, and earn cryptocurrencies. You can also use it to view the market prices of cryptocurrencies. Millions of people trust this m-wallet. You can use the Binance app to make instant crypto transfers to non-Binance users. It is available for download for free on the App Store and Google Play.
If you prefer to use the digital wallet of Binance on your personal computer, then you can download the Binance Chain Wallet, which is a browser extension that works on Chrome, Firefox, and Brave. It allows you to store your crypto securely and find thousands of projects on different blockchains. It supports Binance Smart Chain, Binance Chain, Ethereum, and NFTs.
The Wirex Wallet is a cross-chain digital wallet for cryptocurrencies, NFTs, and decentralised finance (DeFi), which are all based on blockchain technologies. It is a keyless non-custodial wallet that you can use to store and grow your digital assets by earning rewards. It uses advanced Secure Multi-party Computation (SMPC) encryption to ensure that your data remains protected against hackers. Wirex offers many free services but charges a fee of 1% for card transactions. You can download it from the Apple Store and Google Play.
TTM Wallet allows you to hold and manage your digital assets. It is a non-custodial wallet that assures you that your private key is only yours. It protects your private key with biometric technology and a PIN or password. However, it charges a 1% fee for card top-up and a monthly service fee of €2 per card.
Have you been looking for an affordable hardware wallet to store your Bitcoin safely? Then use the TMM KEYWALLET. It lets you store your Bitcoin in a stylishly sleek card that you can carry with you. In that way, it protects you against hackers while you maintain full control over your funds. It is a non-custodial wallet that uses advanced security features such as Evaluation Assurance Level Six Plus (EAL6+) SecureCore microchip from Samsung. In simple words, this feature is for high-security quality assurance.
The Crypterium wallet allows you to use a phone number or wallet address to securely transfer your digital coins for free. It holds fiat money and many cryptocurrencies, including BTC, ETH, and its own native utility token called CRPT. It does not charge you any fees for crypto-to-crypto transactions. Crypterium lets you earn up to 15.6% annual interest on your crypto investments.
OWNR Wallet is a secure place where you can manage all your digital currencies and enjoy some free services. You can use it to receive, send, buy, and sell tokens. It has mobile and desktop versions that can be downloaded from its website or third-party app stores. It does not store your private data, and this is because it is a non-custodial wallet.
Unbanked offers a crypto-based mobile wallet which helps you securely store your digital coins. It is one of the easiest ways to purchase, hold, sell, and exchange cryptocurrencies. It is based in the United States of America but is available to customers worldwide.
The Nuri wallet can be used to store Bitcoin, Ether, and other tokens securely. Nuri allows you to choose between a beginner wallet (Nuri-held keys) and an advanced wallet (User-held keys), which are a custodian and non-custodian wallets, respectively.
The Crypto.com DeFi Wallet allows you to earn rewards for storing and trading crypto assets. It gives you full control over your encrypted private keys and allows you to swap DeFi tokens. You can use it to manage over 100 digital coins and earn interest on more than 35 of them.
Coinbase is a regulated cryptocurrency exchange that has a non-custodial wallet called the Coinbase Wallet. You can use its digital wallet to safely keep your crypto assets (cryptocurrencies and NFTs) and manage your private keys outside of its centralised exchange. It allows you to trade in more than 500 assets and earn interest. The Coinbase Wallet can be downloaded from the Chrome Web Store, Google Play, and App Store.
Protect Yourself from Hackers!
In conclusion, the safety and security of your crypto wallet should always be a top priority for you. When using it or making a choice from the options available and accessible to you, do your best to protect yourself from hackers. In this article, we have shown you the common tactics that hackers use to break into people’s digital wallets and how you can safeguard yourself from them. We also listed the best cryptocurrency wallets on the market today. Try to remember these tips as you go about investing in digital currencies.