Monthly Archives: February 2024

Cryptocurrency Security Protocols: 3 Things to Note

Cryptocurrency is here to stay and so getting a handle on things on that side of things, especially security, is prudent. 

Here are 3 security tips for you. 

Cold Storage Strategies

Opting to store private keys offline is crucial because online environments, where cyber threats are prevalent, are not where you want your sensitive information. Cold storage ensures that even in the event of a compromised computer or network, your private keys are not exposed.

So you want to consider employing hardware wallets, compact physical devices explicitly designed for securely generating and storing private keys. These devices often feature secure elements and cryptographic protections. Alternatively, an air-gapped computer, disconnected from the internet, is a means to exclusively handle key management and transaction signing.

Imagine possessing a hardware wallet and in the unfortunate event of a compromised computer, it prevents the hacker from gaining access to your private key with money you’ve put away for a cozy retirement

This physical separation is a measure you really want to take to reduce the risk of unauthorized access.

Multi-Signature Wallets

Implementing multi-signature wallets is an approach you want to adopt, adding an extra layer of security by necessitating multiple private keys to authorize a transaction. This mitigates the risk associated with a single point of failure, such as a compromised or lost key. For instance, consider a 2-of-3 multi-signature wallet, where two out of three private keys are required to validate and execute a transaction. These keys can be held by different individuals, or devices, or stored in separate physical locations.

Suppose you and two business partners each hold a private key for a 2-of-3 multi-signature wallet so that when it comes to initiating a transaction, you ensure that at least two out of these three keys are required. This way the chances of a single compromised key granting unauthorized access to the wallet become slim to none. 

Smart Contract Audits

Conducting smart contract audits is a step you want to undertake, given that these contracts execute predefined rules on blockchain networks, and flaws in their code can lead to vulnerabilities, financial losses, or exploitation. Auditing smart contracts is a means to identify and rectify potential issues before deployment.

Engage third-party security firms or blockchain experts specializing in smart contract audits. They will conduct a thorough review of the code, employing automated tools, manual code reviews, and extensive testing to identify vulnerabilities, potential exploits, or unintended consequences.

Imagine a startup developing a decentralized application (DApp) with associated smart contracts for a new token. Before the token’s launch, they contract a reputable security firm to audit the smart contract code and discover a flaw that may very well have cost a considerable amount of money to fix.

Protecting your cryptocurrency is a big part of owning the coins and luckily there are plenty of measures that work. And taking note of these security protocols is a great place to start.