Hello dear readers, today’s topic will be very informative, both for beginners in the crypto industry and for experienced crypto holders. Many people who deal with cryptocurrencies do not think about the security of their funds. This is fundamentally wrong. There are a lot of intruders on the Internet who will stop at nothing to gain access to your funds. Protecting your cryptocurrency assets is essential to ensure that you do not become a victim of cybercriminals. Therefore, read this article very carefully and use the recommendations from CryptoBeliever to protect your funds.
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Security measures for your crypto assets
The safety of private keys is the main concern of cryptocurrency security, which is a significant component of digital assets. An individual code known as a private key gives its owner access to and management over their cryptocurrency holdings. Private keys must be kept safe because they are the key to a person’s digital wealth. An individual’s possessions risk being taken or permanently lost if the private key ends up in the wrong hands.
We’ll examine the following factors in this article to help you safeguard your money:
1. Don’t store all your coins on an exchange. Leave on the stock exchange only that part that you do not mind, for example, for trading on the stock exchange. (Keep the rest of the coins in your personal offline wallet “Cold Wallet” that part so as not to lose).
2. Always keep a copy of your private keys (seed phrases). If you lose them, then you will not be able to access your funds.
3. Use two-factor authentication to increase the security of your transactions, or use the multi-signature that is on the NEM and Symbol blockchain.
4. Don’t use the same password for all your accounts.
5. Phishing sites, you should always check the URL of the site you are visiting and be suspicious of unexpected emails or messages and avoid clicking on links from unknown sources.
If you take all the necessary precautions into account, you will be able to ensure the safety of your digital assets.
Types of crypto wallets
✅ Cold (paper) wallet – it is a way to store cryptocurrencies (like NEM/SYMBOL) offline and only connect to the internet to make a transaction. A cold wallet cannot be hacked because it is not connected to the internet. Unlike online wallets, you cannot access your cold wallet over the Internet. This means that your cold wallet is very difficult to hack.
🛑 Hot wallets or online wallets – these are cryptocurrency wallets with a permanent connection to the Internet and the blockchain. Accordingly, when using a hot wallet, your private keys for accessing cryptocurrencies are stored in an application with an Internet connection. Using a hot wallet can be insecure.
Custodial wallets do not provide full control over and ownership of your money, so interacting with them is like keeping your car in someone else’s garage. Yes, the car does belong to you, but the keys to the garage are still in the owner’s pocket. And if the latter one day suddenly does not want to give you the key, you will not be able to drive your favorite car. And all this – even despite the availability of documents for the vehicle.
Interview with CryptoBeliever
SymbolTimes: Tell us what exactly you do in the NEM & SYMBOL community?
CryptoBeliever: My history with NEM and later also Symbol lasts almost six years. I first became interested in cryptocurrencies in 2017 during the cryptocurrency boom, when I speculatively bought some Bitcoin. I also decided to explore the altcoins world, and thanks in part to Tomasz Sanak (Tony), who promoted NEM in Poland, I decided to take a closer look to this blockchain. I joined the Telegram community and the NEM forum (https://forum.nem.io/u/cryptobeliever/summary), where I was active until it was closed (as I can see now, I created 5700 posts). I tried to learn what NEM offers and understand how it works, and answering community questions was an excellent way to do so. I liked the delegated harvesting mechanism, on-chain support for multi-sig accounts, and the ability to create non-programmable tokens (mosaics) directly in the wallet. Projects could use token creation functionality to develop ICOs, which were popular then. Unfortunately, as it looks, this potential was not realized.
While trying to understand how NEM transactions work, I found a critical bug in deposits in most big exchanges that had support for XEM at the time. I informed Jeff McDonald about this issue, and thanks to his direct contacts with the cryptocurrency exchanges, allowed me to notify them more efficiently. Unfortunately, at the time, crypto exchanges (except one) were unwilling to pay bounties for finding bugs. 🙂 Jeff offered me (as well as Anatoly, who detected the same vulnerability at a similar time) to join the NEM Foundation. My role at the NEM Foundation from 2018 to mid-2020 was to help the community answer their questions, find/report bugs in wallets, and communicate with exchanges regarding XEM integration. Among other things, I also participated in communication during the Coincheck hack.
In mid-2020, NEM Group Limited was formed, and the team offered to continue my role. I continued to answer questions from the community, exchanges regarding the integration of XEM (and later also XYM), and testing the old and new, i.e., wallets for Symbol (mobile and desktop). In the NGL times, I could also directly participate in the development process (like helping with the opt-in process).
At the end of 2021, NGL time ended, and I became a member of Symbol Syndicate, where my new (and current) role is Ecosystem coordinator. I am the eyes and the ears of the users. I was tasked with scouting out those who use our products and protocols; collecting their feedback; and guiding our internal teams to address critical, time-sensitive issues. I’m also the conduit between service providers (exchanges, third-party wallets), client developers, and the community. I help prioritize bugs/changes and help users understand the protocol’s nuances. Because of my Java/Kotlin developer background, I’m also sometimes helpful as a developer, e.g., when adding support for revocation transactions to the Symbol Java SDK or preparing a small tool that will allow the user to export their harvesting history (http://harvesting-report.cryptobeliever.net/).
SymbolTimes: What is the significance of multi-sig wallets and how do they add an additional layer of security for private keys and seed keys?
CryptoBeliever: On-chain multi-signature support available directly in the wallet was one of the features I liked when I started learning about NEM. In Symbol, it’s additionally improved to add the possibility to define multi-level multi-sigs. A traditional cryptocurrency wallet typically requires just one signature (private key) to authorize a transaction. Multi-sig wallets are different (as the name suggests), and the user can define how many signatures are required to perform a transaction. This security feature in NEM & Symbol is available and supported on-chain without any development or other third-party applications.
By requiring more than one signature to authorize transactions, multi-sig wallets can help prevent unauthorized access to funds even if one of the private keys/devices is compromised. In that case, the attacker has to access more keys (depending on the wallet definition), which is more complicated. Of course, this is only true when we don’t keep all keys backup in one place.
Multisig wallets should be most popular when dealing with large sums of cryptocurrencies managed by exchanges (here, unfortunately, this is only sometimes true), funds (like protocol funds), and organizations. In that case, it is safer if access is shared among several signatories. Multi-sig accounts not only increase security and resistance to hacking. They also improve safety when one of the signatories loses the key. For example, when we have defined multi-sig 3 of 5, and one (even two) signatories lose the key rest of the signatories can still move funds (they can also remove the old signatory and add a new one if needed).
One person can also use multi-sigs on multiple devices. The user can define a 2 of 3 wallet (two signatures required to approve) and keep each signatory key in three different places, for example, on two computers and a third safe offline. In that case, a hacker would need to access two computers to gain access to the coins. As always, I recommend you familiarize yourself with how the NEM & Symbol multi-sig wallet mechanism works first on the Testnet before using it. There have been known cases in the past of NEM when someone without an understanding multi-sig feature converted his million of XEM worth Mainnet account and not backup cosignatories keys. So before using them, always understand how they work (https://docs.symbol.dev/concepts/multisig-account.html).
SymbolTimes: Can you explain how private keys are generated and why they are essential for accessing and controlling one’s cryptocurrency assets?
CryptoBeliever: Private keys are a long string of random characters that serve as a digital signature. The key is generated using mathematical algorithms (e.g., elliptic curve), which provide uniqueness to each individual that owns cryptocurrency. Private keys are mostly presented as long (64 for NEM and Symbol) random hexadecimal strings. Because of that, sometimes it is easy to make mistakes when doing a backup of them. That’s why seed phrases were introduced from which private keys are directly derived using derivation pathes. Seed word phrases are way simpler to back up. Those are used in Symbol wallets and hardware wallets like Trezor or Ledger.
Private keys are essential for accessing and controlling cryptocurrency. It’s key to your cryptocurrency wallets. Nobody can help you access your coins if you lose access to them. If someone steals them, they will grant access to your coins. This is why it is extremely important to back up keys/seeds and protect them.
SymbolTimes: What is your favorite feature in Symbol or NEM ? Tell us why?
CryptoBeliever: Symbol and NEM have many exciting features like delegated harvesting, multi-sig accounts, mosaics, metadata, etc. However, what sets it apart the most (In my opinion) and adds value is how simple it is to use and integrate with it. A developer who wants to get started and use it doesn’t have to learn a new programming language and can integrate with the blockchain directly using the REST API that node is exposing. Combined with the fact that all functions can be used directly through the API, it gives a low entry barrier for developers that can almost instantly start using it to query data and announce transactions.That is why every developer, even with little knowledge about cryptocurrencies and blockchain, can start working with them very quickly.
SymbolTimes: How would you recommend that readers store their private keys (seed phrases)? Tips from a professional.
CryptoBeliever: First, it is essential to remember here a vital rule regarding cryptocurrencies: “Not your keys, not your coins”. If you hold cryptocurrencies on a centralized exchange or another service, you should be aware that you are not in direct control of your funds. If you do it consciously, e.g., because you plan to trade soon these funds, there is no problem – you take the risk. But if you don’t plan to sell them right away, moving the funds to your personal wallet (to which you own private key/seed phrases) is much safer (if done correctly).
So how to store access to your private key/seed phrases? The most straightforward answer is to do it so that no one else but you can access them! So offline, protected from destroyed backup, is the best choice. Of course, you still need to do transactions (so also import keys/seed phrases). Luckily NEM and Symbol wallets support Ledger hardware wallet integration. Additionally, NEM also supports Trezor integration. Hardware wallets allow you to keep your private keys offline (keys never leak outside the hardware wallet because the device sign transaction), which provides an additional layer of security (you can sign the transaction without exposing keys). Even if someone hacks your computer, it will not be able to steal coins because it will not grant access to the hardware wallet.
Of course, even if you use a hardware wallet, you must back up the seed phrases in case the device is damaged or lost. What I would avoid for the cost is taking a photo of your seed or storing a backup online – that’s never a good idea. Make sure you store seed phrases in a secure location. Paper may not be the best solution in such cases because you can damage it by fire or water. To protect backup from external factors on the Internet, you can find more durable solutions from steel.
To increase the security of backing up original phrases and protect against thieves, you can add an extra layer of protection using passphrases that are supported by both Trezor and Ledger. Passphrases are extra password/seed words you must enter to access your hidden wallets. Thus, in addition to the initial seed phrases (and also you) you must know the passphrase, because without it there will be no access to your wallets. You can save such a backup copy of the passphrase elsewhere and/or remember it.
Even if you decide to use a regular, non-hardware wallet, remember that you can still increase safety by choosing a strong password (which the wallet uses to encrypt your keys) and always doing a backup of your key/seed phrases. Remember, keep your keys safe 🙂
SymbolTimes: How do you see cryptocurrencies and blockchain technology evolving over the next 5-10 years, and what impact will they have on traditional financial systems?
CryptoBeliever: The cryptocurrency and blockchain space has developed a lot over the past decade and will continue in the coming years. It’s difficult to predict precisely how cryptocurrencies and blockchain technology will evolve over the next 5-10 years. However, it’s clear to me that they will continue to play an essential role in shaping the future of finance and technology.
Blockchain technology is used and researched in multiple areas e.g., used in health care, supply chains, and the game industry. These ( and not only ) areas will use blockchain technology more widely in the coming years. Increased adoption and mainstream acceptance will cause cryptocurrency to be even more widely accepted as a payment method. In the future, countries may want to develop their blockchain systems (national digital currencies), which will not necessarily be consistent with the original idea of Satoshi because it may lead to more control instead of financial freedom.
SymbolTimes: How does the POS+ algorithm help to prevent centralization and promote decentralization in the cryptocurrency ecosystem, and what role do validators play in the process?
CryptoBeliever: One of the main disadvantages of the POS consensus algorithm is that the rich become even richer. POS+ takes into account, in addition to the account balance itself, other factors such as activity in sending transactions (fees paid) over a certain period of time. By simplifying the calculation of account activity, POS+ is solving one of the significant issues that the NEM POI consensus algorithm had with NEM: the lack of scalability and high computational complexity. I encourage everyone to read about the Symbol consensus algorithm in docs or tech reference. What I like most about decentralization in Symbol is that anyone (even if you don’t have any coins yet) can run a Symbol node. Moreover, if you are active and provide additional value to the community, people will connect to your node as delegated harvesters to support you. Each node operator can define a beneficiary address where 25% of rewards for each block harvested by delegated harvester on his node is sent. We have around 1000 nodes, which is rare in public blockchains; also, the relation between node operators and delegated harvesters developed.
SymbolTimes: What are your favorite hobbies?
CryptoBeliever: I like mountain hiking, especially hiking marathons organized in the mountains. My personal best was to do 150 kilometers in less than 40 hours during one event (after that I slept for 20 hours 🙂). Unfortunately, I recently had to give up this type of activity partly due to a lack of time and partly due to health issues. So my other hobbies remained, namely reading detective books.
(Interview checked and edited by SymbolTimes)
In conclusion, protecting your crypto assets is vital in today’s digital age when cyber threats are becoming more sophisticated and widespread. Thank you for reading our article to the end, you can support us. Therefore, be careful and use the tips that we have given above.
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