Cryptocurrencies like Bitcoin and Ethereum have exploded in popularity in recent years. With this growth, crypto wallets that store your digital assets have also increased. This raises an important question – can these wallets be hacked and your crypto stolen?
What is a crypto wallet?
A crypto wallet is a software program or hardware device that allows you to store, receive and send cryptocurrencies. Wallets keep your public and private keys which are needed to interact with the blockchain. Public keys allow others to send you crypto. Private keys prove you own the crypto and allow you to send it to others.
There are several types of crypto wallets:
- Software wallets – These wallets run on your computer, smartphone or web browser. Examples are Exodus, Electrum and Mycelium.
- Hardware wallets – These are physical devices like Ledger and Trezor that store your private keys offline for added security.
- Paper wallets – Your keys are printed out on paper. Simple but if paper is lost, crypto is gone.
- Custodial wallets – Your keys are held by a third party like an exchange. Convenient but you lose control over the crypto.
So in summary, a crypto wallet gives you access to your coins and secures your private keys. Now let’s look at the security of these wallets.
Can crypto wallets be hacked?
Yes, crypto wallets can be potentially hacked in certain situations:
- Compromised software wallet: If your computer or smartphone has malware, your software wallet can be hacked and coins stolen. Always use updated anti-virus software.
- Phishing attacks: Fake wallet apps can trick users into entering their secret phrase. Only download wallets from official stores like Google Play.
- Weak passwords: Using simple passwords makes it easier for hackers to access web-based and software wallets. Use strong unique passwords.
- Physical theft: If someone gains physical access to your computer or hardware wallet, they could access your crypto. Keep devices safe and use PIN codes.
- Clipboard hijacking: Malware that swaps addresses when you copy/paste. Double check addresses before sending.
- Keylogger software: Records your keystrokes and can steal private keys and passwords.
So in summary, crypto wallets are vulnerable if you don’t take proper security precautions. But if you use strong passwords, updated software, and hardware wallets, the risk is greatly reduced.
How hackers steal cryptocurrency from wallets
If hackers compromise your wallet, here are some of the ways they can steal your crypto:
- Transfer coins to their own wallet address
- Change wallet settings to lock you out
- Access your exchange account if linked to wallet
- Initiate fake transactions that drain your coins
- Disable security features like 2FA
- Spy on your transactions to steal at opportune times
Once a hacker has control of your wallet, they can quickly drain your funds. Most crypto transactions are irreversible.
Biggest crypto wallet hacks
Here are some of the biggest crypto wallet and exchange hacks over the years and the amount stolen:
| Hack | Amount Stolen | Year |
|---|---|---|
| Mt Gox Exchange | $460 million | 2014 |
| Coincheck Exchange | $534 million | 2018 |
| Zaif Exchange | $60 million | 2018 |
| Bitpoint Exchange | $32 million | 2019 |
| Kucoin Exchange | $281 million | 2020 |
As you can see, billions have been stolen from crypto exchanges and wallets over the years. The Mt Gox hack in 2014 was the first major attack that led to the company going bankrupt.
How to keep your crypto wallet secure
Here are some tips to keep your crypto wallet secure against hackers and theft:
Use hardware wallets
Hardware wallets like Ledger and Trezor offer the best security by storing keys offline. Without physical access, they are unhackable.
Enable 2FA
Two-factor authentication adds an extra layer of security to wallets and exchanges. It requires you to enter a code from your phone when logging in.
Unique strong passwords
Always use randomized, unique passwords for each exchange and wallet. Password managers help create and store secure passwords.
Be vigilant of phishing
Look out for phishing emails, fake wallet apps, and shady links. Verify domains and only download wallets from official stores.
Use cold storage
Keep the bulk of your crypto in cold storage wallets that are not connected online. Transfer only what you need to hot wallets.
Encrypt devices
Encrypt your smartphone, laptop, and USB drives to prevent physical access to wallet files and keys if devices are lost or stolen.
Multi-signature wallets
These wallets require multiple signatures to authorize transactions, providing enhanced security. Useful for businesses and groups.
Be careful of public WIFI
Never access your wallet or exchange accounts over public WIFI. Hackers can intercept traffic on insecure networks.
Keep software updated
Always run the latest versions of wallet apps and security software. Updates often patch vulnerabilities.
Recovering stolen cryptocurrency
Recovering stolen crypto is very difficult:
- Contact wallet provider or exchange – Report hack and freeze account
- Work with law enforcement – File police report about stolen funds
- Hire cybersecurity firm – Help track stolen coins and identify hacker
- Consult blockchain analysis firms – Trace flow of transactions on blockchain
- Legal action – Sue exchange or wallet provider if hack due to negligence
Even with help, recovering stolen crypto is challenging. The best option is preventing the hack in the first place by taking adequate security measures.
Conclusion
Crypto wallets are vulnerable to hacking if proper opsec (operational security) procedures are not followed. Using malware infected devices, weak passwords, and insecure networks to access wallets raises the risk of theft.
However, by using hardware wallets, encryption, cold storage and other security best practices, crypto holders can greatly reduce the chances of being hacked. Being vigilant and following security guidelines is crucial to keeping your digital assets safe in the crypto space.