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How to Secure Your Crypto Wallet in 2024: 5 Expert Tips

How to Secure Your Crypto Wallet in 2024: 5 Expert Tips

In 2023, the value of stolen and hacked cryptocurrencies significantly decreased when compared to data from past years, a report by Chainalysis concluded.

Illicit revenue for crypto scamming fell by 29.2% and by 54.3% for hacking, aided by a sharp dropoff in decentralized finance (DeFi) hacking, which could signify that DeFi systems are improving their security practices.

However, cryptocurrency holders must also remain vigilant and proactive in securing their assets.

Here are some of the best ways how to protect your crypto wallet in 2024.

Key Takeaways

  • In 2023, crypto scamming fell by around 30% and crypto hacking by more than 50%. However, due to evolving scams and hacking techniques, individual users’ wallets are still at risk.
  • Choosing cold/hardware wallets offers users higher security measures through the offline storage of private keys, though they may be less user-friendly.
  • Keeping wallet software updated is vital for security.
  • Users should scrutinize transactions for potential scams like approval phishing.
  • Double-checking destination addresses, handling links cautiously, and verifying website domains can mitigate the risk of falling victim to scams.
  • Emerging trends like advanced encryption, biometric authentication, and smart contract integration are shaping the future of wallet security.

How to Secure Your Crypto Wallet: Experts Define 5 Crucial Steps

Despite an overall decline in cryptocurrency criminal activities, the ever-evolving nature of scams and hacking techniques means that the cryptocurrency wallets of individual users may still be at risk.

Adopting strong security measures, staying informed about the latest trends, and continuously monitoring wallets for any suspicious activity are some of the most crucial steps that digital asset holders must take to secure their cryptocurrency.

1. Choose a Cryptocurrency Wallet Wisely

Selecting the right cryptocurrency wallet is one of the most crucial steps to keep owned digital assets safe, Jeff Owens, the CEO and co-founder of Haven1, a Layer 1 blockchain engineered to address Web3 security and liquidity challenges, told Techopedia.

According to Owens, a cold/hardware wallet, similar to Ledger, is one of the most secure options users can opt for due to its feature of storing private keys offline. Additionally, such wallet types feature PIN protection and recovery seed phrases but could be a little more challenging for beginner investors to navigate.

However, other experts note that each wallet type tends to balance convenience and security differently, allowing users to choose the best wallet for them based on their security needs and abilities.

Anndy Lian, an inter-governmental blockchain expert, explained:

“Hardware wallets are generally considered more secure but less convenient, while software wallets offer ease of use but are more vulnerable to online threats. Paper wallets, while not susceptible to cyber-attacks, carry the risk of being physically damaged or lost.”

Lian added that users holding large sums of cryptocurrencies could consider cold storage wallets as they are not connected to the internet and are less susceptible to hacking.

2. Pay Extra Attention to Your Passwords and Private Keys

Experts note that setting up a strong password is perhaps the first step in securing users’ cryptocurrency wallets.

According to Haven1’s Owens, some of the biggest mistakes crypto holders make when securing their wallets are weak passwords and the lack of two-factor authentication (2FA).

Additionally, users must also pay extra attention to where they store their private keys.

According to Alvin Kan, the COO of Bitget Wallet, keeping private keys offline as much as possible through hardware or paper wallets prevents hackers from gaining access to them via the internet.

Kan added:

“Pay attention to password security by creating complex and unique passwords, avoiding easily guessed combinations (e.g., birthdays, sequential numbers). Regularly change your passwords and avoid using the same password across multiple platforms. Consider enabling two-factor authentication (2FA) for an added layer of security.”

3. Store Passwords Offline

The more information users store online, the easier it is for hackers to get ahold of it, which is why going back to the old-fashioned pen-and-paper days could keep digital assets held in cryptocurrency wallets safe.

Haven1’s Ownes noted:

“In general, the more information you keep offline, the more secure it will be. If you don’t like the idea of paper, encrypted digital backup held on a physical device, like a USB, is also an option.”

Bitget Wallet’s Kan added that the backup process for hardware wallets often includes managing a recovery seed phase. For heightened security measures, it is recommended that users write the recovery seed phrase on paper and store it offline.

4. Regularly Update Software

Failing to update the firmware of hardware wallets is another issue that may leave certain users more susceptible to hacking attacks.

Updates often include bug fixes and stricter security measures, making them an integral part of securing your cryptocurrency wallet.

5. Be Wary of All Transactions

According to Chainalysis’ report, while scam revenue in 2023 was down, approval phishing scams became more prominent last year. In approval phishing, scammers trick users into signing a malicious blockchain transaction that gives the scammer access to the victim’s wallet.

The report highlighted that in 2023, approval phishing scammers stole $374.6 million from cryptocurrency wallets.

Value in $ stolen through approval phishing scams May 2021 – November 2023. Source: Chainalysis 

Haven1’s Ownes noted that it is important for users to double the destinations of transactions several times before approval.

“For example, even if the first and last digits of an address look right, it could be subject to a mirroring (or “address poisoning”) scam, where scammers trick users into sending funds to a fake address that closely resembles the real one. Last month, a crypto user lost $69 million worth of wrapped Bitcoin to such a scam.”

Additionally, Bitget Wallet’s Kan said users should handle links and file downloads with extra caution and always double-check website domains to avoid phishing sites disguised as official websites.

Future of Crypto Wallet Security

Advanced encryption, biometric authentication, and smart contract integration are some of the first steps in emerging trends that aim to protect digital assets stored in wallets.

Lian noted that integrating biometric data for user authentication provides a more secure and personalized way for users to access their wallets. Meanwhile, using smart contracts to automate security protocols reduces the risk of human error, thus further boosting security measures.

Kan explained that Bitget Wallet is already implementing some new security measures, such as MPC and AA wallets that divide private keys into multiple parts or execute transactions automatically through smart contracts in order to offer users an extra degree of security.

He added that secure multiparty computation (SMPC) is another emerging trend that works to boost the security of cryptocurrency wallets by enabling multiple parties to jointly compute a function while keeping their own inputs private.

“Within the context of encrypted wallets, SMPC can facilitate secure distributed key generation and management functions without exposing individual keys to risks,” he explained.

The development of decentralized identity solutions (DID) also strives to make the authentication process more secure by letting users verify their identity without having to expose their personal information. Integrating DID into encrypted wallets can help prevent identity theft and fraud.

The Bottom Line

Despite a recent decline in crypto crimes, securing your cryptocurrency wallet remains crucial in ensuring your digital assets’ safety. New scams and hacking techniques continuously threaten individual users.

Key steps to enhance security include choosing the right wallet type, using strong passwords, enabling two-factor authentication, keeping private keys offline, and regularly updating software.

Additionally, as the industry evolves, new advancements in crypto wallet security offer more robust ways to safeguard investments, including the emergence of biometric authentication, secure multiparty computation (SMPC), and decentralized identity solutions.

 

Source: https://www.techopedia.com/how-to-secure-your-crypto-wallet

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
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How to Avoid Paying Taxes On Your Crypto

How to Avoid Paying Taxes On Your Crypto

Cryptocurrencies have become a popular and lucrative form of investment for many people around the world. However, they also come with tax implications that vary depending on the jurisdiction and the type of crypto activity undertaken. Here, we’re going to explore how to avoid unnecessary taxes and how to remain compliant in your country.

Method 1: Hold Your Crypto for More Than a Year

One of the simplest ways to avoid paying taxes on your crypto gains is to hold your crypto for more than a year before selling or exchanging it. This is because most countries treat cryptocurrencies as capital assets, and apply different tax rates depending on how long you hold them.

In the US, if you hold your crypto for more than a year, you will pay long-term capital gains tax, which ranges from 0% to 20%, depending on your income level. However, if you hold your crypto for less than a year, you will pay short-term capital gains tax, which is the same as your ordinary income tax rate, which can go up to 37%.

By holding your crypto for more than a year, you can significantly reduce your tax liability. However, this method also has some drawbacks. First, you will have to deal with the volatility and risk of the crypto market, which can affect the value of your investment. Second, you will have to keep track of the cost basis and holding period of each crypto transaction, which can be complicated and time-consuming.

Method 2: Use Tax-Advantaged Accounts

Another way to avoid paying taxes on your crypto gains is to use tax-advantaged accounts, such as Individual Retirement Accounts (IRAs) or Roth IRAs in the US, or Self-Invested Personal Pensions (SIPPs) or Individual Savings Accounts (ISAs) in the UK. These accounts allow you to invest your money without having to pay taxes on the gains until you withdraw them, or not at all.

For instance, if you use a traditional IRA in the US, you can contribute up to $6,000 per year (or $7,000 if you are 50 or older) with pre-tax dollars. This means that you can reduce your taxable income by the amount of your contribution. Then, you can invest your money in cryptocurrencies or other assets within the IRA account without paying any taxes on the gains. However, when you withdraw your money from the IRA account after reaching the age of 59.5, you will have to pay income tax on the withdrawals.

Alternatively, if you use a Roth IRA in the US, you can contribute up to $6,000 per year (or $7,000 if you are 50 or older) with after-tax dollars. This means that you cannot deduct your contribution from your taxable income. However, you can invest your money in cryptocurrencies or other assets within the Roth IRA account without paying any taxes on the gains. Moreover, when you withdraw your money from the Roth IRA account after reaching the age of 59.5 and holding the account for at least five years, you will not have to pay any taxes on the withdrawals.

However, this method also has some limitations. First, you will have to follow the rules and regulations of the account provider and the relevant tax authority regarding contribution limits, withdrawal rules, and eligible investments. Second, you will have to lock your money in the account until you reach a certain age or face penalties for early withdrawal. Third, you will have to find a reliable and reputable custodian that offers cryptocurrency investment options within these accounts.

Method 3: Harvest Your Losses

Try to avoid paying taxes on your crypto gains by harvesting your losses. This means selling or exchanging crypto that has decreased in value since you acquired it and using the losses to offset your gains from other crypto transactions or other sources of income.

For example, in the US, if you sell or exchange your crypto at a loss, you can use the loss to reduce your taxable income by up to $3,000 per year. If your net loss exceeds this amount, you can carry forward the excess loss into future tax years until it is fully used up. This way, you can lower your tax bill and also reduce your exposure to the crypto market.

Unsurprisngly, this method also has some challenges. First, you will have to keep track of the cost basis and holding period of each crypto transaction, this can be a complex task. Second, you will have to be careful not to trigger the wash sale rule, which prevents you from claiming a loss if you buy back the same or substantially identical crypto within 30 days before or after the sale. Third, you will have to accept the fact that you are realizing a loss on your investment.

Method 4: Donate Your Crypto

You can avoiding paying taxes on your crypto gains by donating your crypto to a qualified charitable organization. This means that you transfer your crypto directly to the charity without selling or exchanging it first. This way, you can avoid triggering a taxable event and also claim a tax deduction for the fair market value of your donation.

In the US, if you donate crypto that you have held for more than a year to a qualified charity, you can deduct the full market value of your donation from your taxable income, up to 30% of your adjusted gross income. However, if you donate crypto that you have held for less than a year or to a non-qualified charity, you can only deduct the lesser of the cost basis or the market value of your donation, up to 50% of your adjusted gross income.

As with the others, this method also has some issues. First, you will have to find a charity that accepts cryptocurrency donations and verify its tax-exempt status. Second, you will have to obtain a written acknowledgment from the charity that states the amount and date of your donation and whether you received any goods or services in return. Third, you will have to report your donation on your tax return.

Method 5: Move to a Tax-Friendly Jurisdiction

Another possible route to avoid paying taxes on your crypto gains is to move to a tax-friendly jurisdiction. This means that you could relocate to a country or region that has low or no taxes on cryptocurrency or income in general. This way, you can reduce or eliminate your tax liability on your crypto profits and also enjoy other benefits of living somewhere new.

Some of the countries or regions that are known for their favorable tax treatment of cryptocurrency include Singapore, Portugal, Malta and Germany.

Obviously, this method also has some drawbacks, such as uprooting your life, applying for residency and visas and having to deal with double the amount of financial paperwork.

Summing Up

Cryptocurrencies offer many opportunities for investors who want to diversify their portfolio and increase their wealth. However, they also come with tax implications that vary depending on the jurisdiction and the type of crypto activity. There are ways to overcome these obstacles, but before you embark on any of them, do your research, weigh up the pros and cons and act according to the law.

Be sure to check out our regular postings on crypto tax to stay up to date.

 

Source: https://www.financemagnates.com/cryptocurrency/how-to-avoid-paying-taxes-on-your-crypto/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
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Forkast Interviews Anndy Lian Book Author of “NFT: From Zero to Hero”: Was your NFT price unfairly pumped

Forkast Interviews Anndy Lian Book Author of “NFT: From Zero to Hero”: Was your NFT price unfairly pumped

How can you spot when an NFT’s price is being artificially inflated? Anndy Lian joins us to talk more about the history of and the problems with wash trading in today’s NFT market.

Wash trading is not a new word for people in the financial world. You probably have heard from friends that cryptocurrencies are highly “washed” and round-tripping with the same buy and systematically sell price.

In a nutshell, wash trading makes it difficult for non-fungible token enthusiasts to gauge genuine market interest in NFT collections. It also inflates and skews the amount of trading in marketplaces, misleading analysts about what’s going on on trading platforms.

“Even though total volume is down by a substantial amount from January highs, the percentage of wash trading volume in the NFT market remains similar every month. This underscores how disruptive wash trading is to having accurate NFT transaction data and the importance of filtering out wash trading for any meaningful NFT data analysis. I hope to see the real sales volume for NFT. This will allow us to project and make relevant changes to grow this industry.” Anndy Lian added.

Forkast.News covers blockchain, DLT, cryptocurrency and other emerging technologies in a way that anyone can understand. From NFTs to enterprise blockchain platforms, smart contracts to altcoins, Bitcoin to DeFI and beyond; Forkast’s blend of insight, analysis & daily blockchain news keeps you on the cutting edge of the digital asset revolution and the wider digital economy it both supports and disrupts.

Anndy Lian is an all-rounded business strategist in Asia. He has provided advisory across a variety of industries for local, international, public listed companies and governments. He is an early blockchain adopter and experienced serial entrepreneur, book author, investor, board member and keynote speaker. NFT: From Zero to Hero is his latest book. Zero to Hero is a call to anyone and everyone excited about the prospect of the world of NFT. Bound by imagination only, the NFT space is still in its early days and early adopters can be a “hero” in their search for new possibilities. The book is available on Amazon and Bybit. More than 8,000 copies were sold.

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j