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Crypto Wallet Security: What Security Features Matters Most?

Michiel Mulders
November 1, 2020
a picture of a lock symbolizes crypto wallet security

Deciding where to store your crypto funds safely can be an exhaustive search. What security features should you look for? This article provides you with a crypto wallet security checklist to decide which security features you need and how to use them on YouHodler. 

In this article, we’ll cover the following crypto wallet security features.

  1. Trusted devices
  2. Whitelist withdrawal addresses
  3. Whitelist IP addresses
  4. Real-time login notifications
  5. Transaction confirmation
  6. Two-factor authentication
  7. Use a VPN to hide network activity
  8. Complete KYC requirements
  9. Mind your digital hygiene
  10. Separate your funds

1. List of Trusted Devices 

When we want to secure our crypto wallet, we can use a list of trusted devices. Now, your wallet knows which devices it should grant access to. If a device isn’t whitelisted in the list of your trusted devices, the device has to identify itself.

In other words, you can still add new devices to your list after verifying them. Verification can happen via email for laptops or via SMS codes for phones. 

If you are worried about the time it requires to whitelist a device, we can whitelist a device in a matter of one to three minutes.

2. Whitelist Withdrawal Addresses 

It’s a significant surplus when an exchange or crypto wallet offers us the ability to whitelist withdrawal addresses. Now, you can whitelist addresses to which you want to transfer crypto funds.

It’s a great security feature that protects you from account hacks. Whenever a hacker gains access to your wallet or exchange account, the attacker can’t add new withdrawal addresses as they need access to your phone or laptop to whitelist new addresses. 

Therefore, the attacker can only withdraw crypto funds to already whitelisted addresses, which are most likely not useful for hackers.

3. Whitelist IP Addresses

The third item in this crypto wallet security list again features a whitelisting security feature. Now, we want to whitelist IP addresses. 

An IP address acts as a virtual numerical address that allows you to communicate with other servers or websites over the internet. Here’s how an IP address looks like “62.23.230.205”. Each device that connects to a network receives an IP address. 

Whitelisting IP addresses allow you to control which devices from which networks can access your crypto wallet. It’s a powerful security feature.

For example, you are using your laptop at home to connect to your crypto wallet. You’ve already whitelisted this IP address so you can directly connect to your wallet. Next, you decide to go to a coffee shop and use a VPN to connect to your wallet again. As you are using a different network, your laptop has received a different IP address that needs to be verified. 

In other words, your IP address can change depending on the network your device is connected to. 

4. Login Notifications

Each time you log in, we want to receive an email or mobile notification to alert you that someone has accessed your account. If a hacker gains access to your account, you’re able to react quickly. 

However, you can implement different types of real-time notifications to enhance security. Here’s a list of possible security notifications for high-value account actions:

  • Withdrawal requests
  • Newly whitelisted addresses
  • Newly whitelisted devices
  • Password reset

5. Transaction Confirmation 

Let’s say you want to send one Ether to your friend. You hit the submit button and realize you’ve made a mistake. You’ve sent the funds to an old, non-existing address as your friend uses a new Ethereum address. Luckily, you’ve to confirm each transaction via a clickable link from your email client. 

However, transaction confirmation functionality helps you prevent mistakes and helps you in case a hacker takes over your account. When hackers want to send your funds to one of their wallets, they have to verify the transaction via the email address attached to your crypto wallet. Transaction confirmation prevents hackers from stealing your funds.

6. Enable Two-Factor Authentication (2FA) 

Nowadays, two-factor authentication has become an industry standard to protect crypto wallets or any other high-value accounts containing funds or sensitive personal information.

With two-factor authentication enabled, you can first log in using your username and password combination. Next, as a second security layer, you’ve to submit a 6-digit security code that changes every 10 seconds. We can access this security code via a mobile app such as Google Authenticator. A hacker needs to gain access to both your crypto wallet and mobile phone to gain access to your wallet - which is very unlikely.

7. Use a VPN to Hide Network Activity

A VPN allows you to hide both your network activity and your IP address. This way, attackers can’t track your online behavior. Using a VPN prevents them from gaining extra info about your identity. Often, they use personal information to attempt a phishing attack, such as an email address.

8. Complete KYC Requirements

Yes, completing your KYC requirements enhances security. But why?

Not every user wants to complete their KYC requirements. However, this has proven useful for many Binance users. Binance insists users complete their KYC verification so that they can quickly claim back ownership over an account if attackers claim ownership over your account.

Note that this only applies to hot wallets and not crypto wallets.

9. Mind Your Digital Hygiene

Your crypto wallet security strongly depends on your digital hygiene. Do you use insecure, open networks to access your crypto wallet? If yes, a hacker might already have recorded your crypto wallet private key. 

Your digital security hygiene matters! 

Therefore, let’s take a look at some powerful tips to improve your digital security hygiene.

  • Install antivirus software
  • Enable your firewall
  • Use a plugin to detect unsafe websites or phishing emails
  • Never transfer your private key via digital services or store it in an accessible location
  • Don’t execute insecure apps or programs on your computer

Want to learn more about digital security? Take a look at UpGuard’s home security tips.

10. Separate Your Funds 

Lastly, I want to provide you with a useful tip regarding how you store your crypto funds. Many users still prefer to keep their funds in exchange for wallets so they can quickly trade. However, often they don’t use all of their funds to trade. 

Therefore, consider separating your funds between your exchange wallet and a more secure offline storage medium, such as a hardware wallet. Please don’t leave your funds exposed when they are inactive. 

How to practice good crypto wallet security on YouHodler

By default, YouHodler uses only the best industry practices when it comes to cryptocurrency security and storage. We make sure to never keep funds fully in hot wallets. Instead, we prefer to use a mixture of both hot wallets and cold wallet storage which are secured to protect funds. If users want to take their crypto wallet security to the next level, then YouHoder has 2-factor authentication (2FA) and even three-factor authentication (3FA) as an option.

To enable 2FA, simply log in, click “profile” and scroll down to the security tab where you will see an option to engage 2FA with either Google Authenticator or SMS. For owners with accounts over 100,000 USD (or its equivalent in any other currency). users can request to disable all withdrawal options as an additional security layer. With this, we will only enable withdrawal if the account owner personally requests it along with an additional payer of personal verification of identity. Just contact us at support@youhodler.com to get started with 3FA.

→ Try out YouHodler’s savings account to safely store your crypto funds. When holding your funds with YouHodler, you enjoy the benefits of Ledger Vault’s crypto-insurance up to $150 million in case of theft or breach. 

On top of that, YouHodler offers crypto loans with the highest loan to value ratio of up to 90%!

About the Author
Contributor

Michiel Mulders is a blockchain developer with a passion for the crypto space. His interests include blockchain, entrepreneurship, marketing, and carefully crafted beers. Cheers!

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