Bitcoin has proven to be a secure and cyberattack resistant network. However, the storage of cryptocurrencies in virtual wallets and exchanges might become vulnerable. In 2021 alone, the theft of cryptocurrencies resulted in a loss of $14 billion for millions of users worldwide.
Bitcoin’s blockchain technology has never been hacked and has emerged as one of the world’s most secure technologies. However, this does not mean that holding bitcoin is risk-free. In fact, unless you have adequate security in place, your wallet could potentially be breached and your cryptocurrency stolen.
One aspect is the functioning of the Bitcoin network, which has never been hacked, and another is the storage of cryptocurrencies. When we acquire a token of Bitcoin, Ethereum or any other cryptocurrency, we store it in a virtual (or hot) wallet, or in an exchange or a highly secure digital wallet that does not require an internet connection (a cold wallet). It is precisely in the way we store our cryptocurrencies where vulnerabilities can arise, allowing hackers to access our accounts and steal the cryptocurrencies we have purchased.
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The best ways to protect yourself
One of the most widespread ways to steal cryptocurrency is through phishing (identity theft), a technique also used for traditional bank accounts. Hackers send an e-mail posing as our exchange platform and request our personal data. If we share these details, we might lose our cryptocurrencies. But this is not the only technique they use. They have also been known to deploy Trojan malware, keyloggers and bugs in smart contracts, among other dark arts.
There are several ways to store cryptocurrency, as outlined in the academic paper Wallet key management in blockchain technology. “There are online wallets, which are connected to the internet and include online web wallets and mobile app wallets, and unconnected wallets, which remain disconnected and include paper wallets, hardware wallets and mental wallets”, explain Dominic Bucerzan and Crina Anina Bejan.
The first are known as hot wallets, while the second are known as cold wallets.However, there is another type of wallet known as warm wallets. Hot wallets and warm wallets are the most commonly used, as they are the ones we use by default when we buy a cryptocurrency and leave it stored in a bank or exchange wallet. Meanwhile, in the case of cold wallets, we would send the cryptocurrencies to a wallet that is not connected to the internet and which is also physical and very similar to a pendrive.
To be well protected, the first thing is to look for authorized and regulated providers that inspire trust, in addition to being supervised.The International Security League states that, in 2021, password theft and therefore cryptocurrency theft reached $14 billion. Experts strongly recommend activating two-factor authentication, rather than just a password to access the wallet. Similarly, it is advisable not to use the same password as other platforms, as well as to use a complicated password that is not easy to guess.
How does the BBVA Switzerland custody service work?
In this regard, at BBVA in Switzerland we understand that the depository and custody of these assets is the cornerstone of trust in this revolution, and our mission as a bank is to play an absolutely critical role, facilitating liquidity with full guarantees, storing our clients’ digital assets off the company’s balance sheet and ensuring a clear system of convergence between both worlds.
By promoting our goal of leading the banking transformation at a global level, we manage to give everyone access to the opportunities of this new era. Thus, a few months ago we integrated Gas Station into our operating system, an innovative digital service that allows our customers to bank securely with digital assets 24/7 (bitcoin and ether) without worrying about the counterparty risks or the gas/mining costs of Blockchain.
