Cryptocurrency security: how to protect assets from hacks, fraudsters, and scams

According to Chainalysis, in 2025, the total damage from crypto theft exceeded $3.4 billion. Nearly 160,000 cases of crypto wallet compromise* were recorded.

* Crypto wallet compromise is a situation in which third parties gain unauthorized access to a user's cryptocurrency wallet (or to their private keys/seed phrase), allowing them to control assets and perform transactions without the owner's consent.

Ensuring cryptocurrency security is a critical skill for any digital asset user, since, in most cases, personal competence determines whether someone becomes a victim. According to analysts, social engineering* is most often involved in criminal schemes related to cryptocurrency, targeting users directly.

* Social engineering is a set of psychological influence and manipulation techniques whereby attackers persuade users to voluntarily disclose confidential information (for example, seed phrases, private keys, access codes) or perform actions that lead to the loss of cryptocurrency assets.

In 2025, the number of crypto fraud incidents increased by 30%, including phishing* and scam projects*, making adherence to cryptocurrency security recommendations increasingly important.

* Phishing is a type of fraud in which attackers, posing as legitimate services, deceive users into disclosing confidential data (logins, passwords, seed phrases, private keys) or clicking malicious links.

* Scam projects are deliberately fraudulent cryptocurrency projects or schemes created to steal users' funds under the guise of investments, airdrops, staking, trading, or participation in "exclusive" opportunities, after which the organizers disappear or stop fulfilling their obligations.

How cold Wallets Ensure Cryptocurrency Security

There are two types of crypto wallets: "hot" and "cold."

"Hot" wallets include software wallets installed on well-known platforms, whether mobile or desktop. These also include browser-based or online wallets and extensions.

"Hot" wallets are considered more convenient to use but offer weaker security for cryptocurrencies than "cold" wallets, as they are more vulnerable to online threats.

Threats to cryptocurrency security arise from the constant internet connectivity of "hot" wallets, which significantly increases the likelihood of attacks on users of software clients. "Hot" wallets are most vulnerable to hacker attacks, malware, and phishing. In addition, using software wallets involves the risk of private key leakage, which hackers can intercept using keyloggers* and other spyware.

* Keyloggers are malicious programs or hardware devices designed to covertly record keystrokes on a user's device in order to intercept confidential information, including passwords, private keys, and seed phrases from crypto wallets.

"Cold" hardware wallets offer the highest level of cryptocurrency security by eliminating the risk of remote theft of private keys. Hardware wallets are called "cold" because they do not require a constant internet connection, which increases cryptocurrency security.

The user connects the device to an online environment only when a transaction is required. Moreover, transaction confirmation can only be done on the device itself, which enhances cryptocurrency security.

Cold wallets use next-generation security chips (Secure Element or SE) that isolate private keys from the external environment. Private keys never leave the SE chip, and hacking a cold wallet is practically impossible without physical access.

Hardware wallets are less suitable for everyday transactions because they are less convenient than "hot" wallets; however, they are the best option for ensuring cryptocurrency security.

Non-custodial storage for cryptocurrency security

The listed crypto wallet types the non-custodial, meaning users retain full control over their private keys. There are also custodial wallets that do not give users access to their private keys.

When cryptocurrency is stored in a custodial wallet, a third—party provider is responsible for managing the private keys and ensuring the security of the user's digital assets. This role is most often performed by cryptocurrency exchanges that provide built-in wallets for clients, as well as by dedicated custodial services that professionally store crypto assets for private individuals and institutional investors. As a result, the user delegates control over private keys to the company, and the security of the cryptocurrency depends directly on the technical, organizational, and legal protections implemented by the provider.

In the event of a custodial wallet hack, users may suffer losses. However, large providers often compensate for damages. For example, in February 2025, hackers breached the major cryptocurrency exchange Bybit and stole $1.4 billion worth of ETH, marking the largest incident in the history of digital assets. Despite the scale of the hack, the exchange managed to restore the assets, meaning the incident had virtually no impact on users.

General measures to improve cryptocurrency security when using custodial and non-custodial wallets

Use two-factor (2FA)* or multi-factor authentication (MFA)* to access wallets. This helps protect assets if the software client or device password is compromised.
Enable additional protection using a PIN code or biometrics, if the wallet supports these features;
Use strong passwords. The longer and more complex the password, the harder it is to crack. It is also recommended to periodically update passwords to improve cryptocurrency security.
Timely software updates. Updates may include critical security fixes, so software should be updated regularly. This applies not only to wallet clients but also to operating systems on mobile and desktop devices.
Install software only from official sources. Even app stores may contain malicious software that threatens the security of cryptocurrencies.
If possible, the best practice is to use a separate mobile or desktop device for crypto wallets. Frequently used personal devices are more likely to be infected with malware.
Store backup copies in a secure place. The worst option for cryptocurrency security is storing private keys in digital form, such as favorites, notes, or photo galleries. Malware can easily scan user devices and find unencrypted private keys.
Use crypto wallets only with a secure internet connection. Public networks without encryption keys pose a high risk to cryptocurrency security.
Keep primary transaction addresses saved separately. Copying addresses from transaction history carries the risk of sending assets to a scammer's wallet.
Important pages and websites should be saved as bookmarks in the browser to reduce the risk of phishing attacks.
Never enter private keys on suspicious websites or in questionable applications. A private key is required only in one case: restoring access to a cryptocurrency wallet.

* Two-factor (2FA) and multi-factor authentication (MFA) are account protection methods that require identity confirmation using two or more independent factors. These include knowledge (password or PIN), possession (smartphone, hardware token, authenticator app), and biometric data.

Cryptocurrency security during exchange

The risk of cryptocurrency theft exists at every step, including during exchange operations, so using only trusted platforms is essential for cryptocurrency security. There are several exchange methods:

On an exchange;
Through online and offline exchangers;
P2P trading;
Direct exchange between individuals.

Each method has its advantages and disadvantages. For example, exchanges, including P2P platforms, require storing cryptocurrency in company wallets, which implies trust in third parties. Moreover, exchange users are not insured against platform hacks.

In direct exchanges with individuals, there is a high risk of encountering fraudsters. The same applies to P2P exchanges, where scammers may forge payment documents or lure clients off-platform to steal their assets.

The simplest and fastest way to buy or sell cryptocurrency is through online exchanges. After purchase, cryptocurrency is immediately credited to the user's personal (non-custodial) wallet, with no additional steps required. In addition, users do not incur extra withdrawal fees after purchase, unlike traditional exchanges.

Safe exchange rules

Prefer trusted exchangers. These can be found, for example, using BestChange, which provides lists of reliable exchangers for specific buy and sell directions.
Before a transaction, conduct an AML check of the address to avoid receiving "tainted" coins involved in illegal schemes. Such checks can also be done using BestChange.
Do not transfer funds until the user is sure they have received payment from the counterparty.
In case of any problems or suspicions, contact the platform's support service immediately.
Verify the legal documentation of exchange platforms and the authenticity of their websites.
Legitimate platforms usually require identity verification to comply with KYC/AML (Know Your Customer/Anti-Money Laundering) requirements. Platforms offering anonymous exchanges may potentially be fraudulent.

How to protect cryptocurrency from scams?

One of the most important skills for ensuring cryptocurrency security is the ability to recognize signs of fraud when interacting with financial applications and other users.

Common signs of scam schemes

Promises of guaranteed profit. Investments always involve risks, so guarantees of quick profits are a common scam tactic. The higher the promised return, the higher the likelihood of a scam.
Lack of project documentation and team anonymity. Scammers often hide or provide fake information about themselves.
Pressure on users. Scammers often rush victims to prevent careful consideration, sometimes using intimidation and exploiting FOMO (fear of missing out).
Absence of the project token on major exchanges. Scam tokens usually appear only on decentralized exchanges and require manual addition to wallets.
Difficulty finding information about the project. Legitimate new projects are usually mentioned on forums, in the media, and in niche blogs. A lack of information is a red flag.

Protection measures

Do not click suspicious links in private (and sometimes public) chats or emails. Clicking sponsored ads in search results is also unsafe.
For large transactions, multisignature (Multisig)* can significantly enhance cryptocurrency security. In this case, a transaction requires multiple private keys, and if any of them are compromised, attackers cannot steal the funds.
If there are any doubts about a service, use a separate wallet to interact with it. If the service turns out to be fraudulent, the main wallet remains safe.
Study the project's legal documents, such as the user agreement and privacy policy, to assess whether it is legitimate.
Learning about scam schemes through specialized blogs and authors reduces the likelihood of becoming a victim.
Additionally, crypto projects can be checked using specialized tools such as CertiK, TokenSniffer, and RugDoc.

* Multisignature (Multisig) is a security mechanism requiring multiple private key signatures to approve and execute a transaction instead of just one. This approach distributes control over assets across multiple participants or devices, significantly reducing theft risk: even if one key is compromised, attackers cannot unilaterally access the funds.