This new thing called cryptocurrency is on the rise, but what does it mean? Is it safe, and more importantly as an investor, how can you invest in cryptocurrency security? Here, we kick off our newest blog series on cryptocurrency and how data backup can protect your crypto wallet.
You might’ve seen the recent boom of cryptocurrencies from Bitcoin to Dogecoin to the Bored Ape NFTs being purchased by celebrities for their Twitter profile pictures. So, what exactly is cryptocurrency, and what is the blockchain?
Well, cryptocurrency is a new form of decentralized, digital currency that allows individuals to interact on the blockchain to perform transactions, and the blockchain technology employed by crypto is exactly what makes the currency decentralized.
Cryptocurrency is not fully under the purview of a regulatory authority, and since its exchange is conducted through person-to-person interactions on the blockchain, no banks or other centralized authorities are involved in the transaction (think DeFi!).
But with no bank and no well-established regulatory authority through which transactions are conducted, it begs the question: who’s providing for cryptocurrency security?
Source: PwC
As we pull back the curtain and begin to question who and what is ensuring the safety and security of your cryptocurrency, virtual wallets, keys, NFTs (and the list goes on), we start to see stories on crypto hacks and lost keys dominate the media landscape around cryptocurrency.
In June 2022, hackers stole over $100 million in cryptocurrency from Horizon, a blockchain bridge. These new “bridges” that allow the transfer of crypto tokens from one blockchain to another are particularly vulnerable to hacking and ransomware attacks: previous 2022 attacks on blockchain bridges saw in excess of $900 million stolen.
One of the more common themes dominating the news is the nature of crypto wallets and the keys to unlock them.
According to the New York Times, about 20% of the Bitcoin in circulation today is stored in lost wallets. That’s over $76 billion dollars!
You may be asking how you just misplace $76 billion, but it’s actually quite frequent and easy to do with a crypto wallet.
A cryptocurrency wallet is some sort of system or software that keeps your keys (i.e. the passwords to access your crypto) all together in one place.
Coinbase, who operates their own cryptocurrency trading platform and mobile crypto wallet, explains that these wallets are important because “Unlike a normal wallet, which can hold actual cash, crypto wallets technically don’t store your crypto. Your holdings live on the blockchain, but can only be accessed using a private key.”
These “wallets” come in three main forms, but with so many vendors offering their own versions, it can be hard to know if your method is the best for a secure crypto wallet.
The easiest and cheapest way to store your cryptocurrency keys is to simply write them down on a piece of paper or any other physical source, but with cryptocurrency and any other kind of data, we strongly advise that you not rely solely on a physical means of storage.
Hardware wallets are usually specially designed hard drives and flash drives for storing your crypto keys. Often, they have limited password attempts to unlock them, so you have to resort then to physical storage anyway for the hardware password–seems like a physical wallet with extra steps, right?
Just like a physical wallet, you can easily lose the hardware with your keys stored on it or forget your actual passwords. One unlucky investor lost the password to his IronKey wallet and thus lost out on $165 million.
Not to mention they can also be hacked rather easily, as shown by this video where Joe Grand hacks 2 million worth of crypto off of a hard drive in just 30 minutes!
The last way to store your keys is through mobile wallets like Coinbase Wallet or Gemini, and while these vendors may employ strategies like two-factor authentication, there’s no guarantee that their systems won’t be hacked and your keys stolen.
Source: Business Tech Weekly
Like your own personal wallet of cash and cards, no one is following you around, protecting it from being stolen–and the same goes for your crypto wallet. It’s up to you to implement safety measures to preserve and protect your newly acquired virtual assets.
That’s where data backup comes in.
Data backup is the process of transferring copies of your data to a secondary location for easy access, especially in the case of a business interruption, data disaster, or ransomware attack.
With cryptocurrency, not just your information but your money is on the line, and with data backup, you don’t have to rely on an external marketplace’s security systems or risk losing a physical piece of paper.
Everything is stored and protected in the cloud for easy access anytime and anywhere.
At Central Data Storage, we don’t know what the future holds, but we do know that the need for security and data protection will never go away.
You need a solution that is built to protect your digital assets for the future, and UnisonBDR is our purpose-built solution ready to guard cryptocurrency, keys, NFTs, and all the rest of your MBs, GBs, and TBs.
UnisonBDR automates backups daily (no need to manually input new keys after trading), and with being hosted in Central Data Storage’s data center, no third party will ever touch your crypto or anything else.
Like we said, we don’t know what the financial future holds, but if crypto is a part of it, then so are we.
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