From top retail chains to telecom majors, almost all industries are now accepting cryptocurrency as a form of payment for their goods and services sold to customers. This is certainly a viable and feasible alternative to regular currencies. Therefore, the time is conducive for all companies to adopt crypto payments, and know how to receive, process and convert cryptocurrency payments into fiat currencies, as per the exchange rate.
But, there are some questions regarding security challenges that still need to be answered. For example, what are the security risks associated with crypto? How safely can customers pay with Bitcoin (BTC), Ethereum (ETH), USDT Tether, and other digital currencies? Let’s understand in this article.
Risks Associated with Crypto Wallets
A crypto wallet is just like a tangible wallet, except that it is in a virtual or digital form that enables customers and merchants to store and receive all their cryptocurrency, and also make payments from it to vendors, suppliers or service providers. Here, you can make cryptocurrency payments through QR code and accept payments in the wallet, by providing the sender with the unique cryptographic address issued to your wallet. The potential security issues related to crypto wallets can be:
- Unable to remember passwords and seed phrases can potentially wipe out all your funds from the wallet.
- The risk of theft, fraud, hacking and data breaches of crypto wallets or devices with the wallet software can result in complete loss of money.
- Even though it is tough, wallets are vulnerable to hacking and unauthorized infiltration, by breaking into hardware crypto wallets.
- Every transaction and payment in crypto remains anonymous, as the process occurs on blockchain.
- Of late, phishing attacks are tricking merchants into giving up their vital information and credentials on fake sites related to software wallets. When you plug-in a hardware wallet, the compromised credentials can lead to theft of cryptocurrencies.
- A potential malware attack can track and detect the address of a cryptocurrency wallet on a device, and replace it with a fake wallet address of the attacker. This automatically results in diversion of funds to the attacker’s wallet. This is why it is always suggested to partner with a premier crypto payment gateway or service provider like “UniPayment” for performing all kinds of digital transactions.
Seed Phrase Security Risks
This is a big security challenge and concern. Imagine having millions of dollars’ worth of cryptocurrencies stored in your wallet, and everything being wiped out in a wink of eye, if your seed phrase is stolen or breached. Therefore, crypto experts suggest writing your seed phrase in a piece of paper, and storing it safely in a locker. Whereas, some experts are of the opinion to store seed phrases in encrypted format in online or virtual files in Cloud. However, a hacker can infiltrate your virtual files, if they get access to your vital information and credentials. The best solution is to set up a crypto burner wallet. It can be used for a cluster of transactions. Even though it is a less technical App, yet a functional digital wallet with no seed phrase. From a burner wallet, the fund can be transferred to your main wallet, and you can discard the former at the end of the day.
Crypto Payment Gateway Security Risks
A crypto exchange or a payment gateway is a platform that enables users, merchants, traders and investors to buy and sell digital assets using cryptocurrencies, and also help convert digital currencies into fiat money like USD, GBP, AUD, EUR, etc. But here too, there are system security risks & challenges. Let’s understand.
- In case the crypto exchange is infected with malware, the hacker potentially gets easy access to all the digital wallets on the said payment gateway or exchange.
- Cryptocurrency exchanges have a bigger potential for phishing and malware attacks. It is because if an employee gets access to the vital credentials, the entire exchange can be at risk, as it is fully exposed.
- The online and virtual space is lurking with certain unethical actors posing as customer service representatives that lure crypto account holders into sharing their wallet access, in the hope of getting better functionality and transaction speed.
- The US federal government may impose sanctions on the cyber currency exchange, if found linked to ransomware payments.
- Almost all cryptocurrency exchanges or payment gateways are prone to software vulnerabilities that lay hidden in their APIs and integrations. This is a major crypto payment security challenge, which is being sorted out by software engineers and solution architect designers.
- In what seems to be original and legitimate looking Apps, crypto Trojans which lay embedded in them allow hackers to steal critical cryptocurrency information of users/merchants, including current balance, personal information and user credentials.
The possibility of data loss and cryptocurrency theft is among the biggest concerns. Crypto wallets where digital currencies are stored are always prone to phishing attacks, hacking and other cyber-attacks. Then comes phony websites and copied or duplicate wallet sites, which look absolutely identical to the original ones. Therefore, the best way to prevent such attacks is by using cryptocurrency payment gateways that are licensed and regulated by concerned authorities.
As a crypto trader or merchant, you need to use a reputable digital wallet that offers robust security features like two-factor authentication (2FA), one-time password, facial recognition, fingerprint or biometric authentication. This is only possible when you use a secure payment gateway like “UniPayment” that helps prevent hacking, phishing and malware attacks. The said exchange or crypto payment gateway must possess a history of safe and reliable service. You can also think of adopting a hardware wallet that provides another level of protection from cyber threats.
Conclusion
All cryptocurrency investors and merchants should use diverse payment methods to serve customers in the best possible way. At the same time, one needs to invest in new technologies that help ensure fraud protection and threat prevention. For example, by incorporating multi-party computation, the said parties involved in a transaction can jointly verify the legitimacy and authenticity of a transaction. Moreover, the ongoing development in government regulations are also working in a way to identify and punish cyber currency threat entities and actors.