5.6 Security Hygiene & Troubleshooting

What you'll learn: How to protect your stablecoins from theft and loss, plus solutions to common problems you'll likely encounter.

In cryptocurrency, you are your own bank [1]. No fraud department handles problems and no insurance covers losses. If you lose crypto, it's usually gone forever. However, following basic security practices makes your funds safer than many assume.

The Three Rules That Matter Most

These prevent 95% of losses.

Rule 1: Your Recovery Phrase is Everything

Your 12 or 24-word recovery phrase can restore your wallet anywhere [2]. Anyone with these words owns your funds.

Physical storage only: Write it on paper. Store that paper like cash. Never create digital copies, including photos, text files, password managers, or cloud storage.

Never share it: No legitimate support, wallet developer, or official will ask for your phrase. Anyone who asks is a scammer.

Rule 2: Hot Wallets for Spending, Cold for Saving

Like keeping $100 in your pocket but $10,000 in a safe:

  • Hot wallet (MetaMask, Trust Wallet): Daily transaction amounts only [3]

  • Cold wallet (Ledger, Trezor): Main holdings stored offline [4]

If your phone gets malware, you lose only the hot wallet balance.

Rule 3: Verify Everything Twice

The blockchain doesn't forgive mistakes. Every action deserves verification:

  • Website URLs (metamask.io, not metamask-wallet.io)

  • Wallet addresses (first 4, last 4 characters minimum)

  • Transaction amounts and networks

  • Smart contract permissions before connecting

Thirty seconds of checking prevents permanent loss.

Daily Security Practices

Passwords and Authentication

Use unique, strong passwords for each wallet and exchange. Enable two-factor authentication using authenticator apps (Google Authenticator, Authy), not SMS which can be hijacked [5].

2FA setup:

  1. Go to security settings

  2. Choose "Authenticator App"

  3. Scan QR code

  4. Save backup codes offline

  5. Test with generated code

Software and Connection Security

Keep wallet apps, browsers, and operating systems updated. These patches fix vulnerabilities hackers exploit [6].

Avoid accessing wallets on public WiFi. If necessary, use a VPN to encrypt your connection.

Recognizing Common Scams

Fake Support

You ask for help in Discord. Someone messages privately claiming to be "support" [7].

Reality: Official support never initiates private messages. They'll direct you to fake sites stealing recovery phrases.

Phishing Sites

Search results show "metamask-wallet.io" instead of "metamask.io" [8]. The site looks perfect but steals everything you enter.

Defense: Bookmark official sites. Check URLs character by character.

Investment Schemes

"Send 1 ETH, receive 2 ETH back!" Or someone builds an online relationship then suggests crypto investing on unknown platforms [9].

Defense: Nobody doubles your money for free. Verify all platforms independently.

Solving Common Problems

Lost Password (Have Recovery Phrase)

  1. Reinstall wallet software

  2. Choose "Import existing wallet"

  3. Enter recovery phrase

  4. Set new password

  5. Access restored

The phrase regenerates your keys; the password only protects local access.

Lost Recovery Phrase (Wallet Still Works)

Act immediately:

  1. Create new wallet with new phrase

  2. Write down new phrase properly

  3. Transfer all funds to new wallet

  4. Abandon old wallet permanently

Never continue using a wallet without backup.

Wallet Won't Connect to Websites

  1. Clear browser cache

  2. Disable conflicting wallet extensions

  3. Try different browser

  4. Verify site URL

  5. Update wallet software

Usually clearing cache resolves connection issues.

Sent to Exchange's Old Address

Most exchanges reuse addresses. Check your balance first. If missing:

  1. Find transaction hash

  2. Contact exchange support

  3. Provide transaction details

  4. Wait (recovery takes time)

Exchanges can usually recover funds sent to their addresses.

Emergency Response

Confirmed Compromise

If someone has your phrase or you clicked a malicious link:

  1. Immediately transfer everything to a new secure wallet

  2. Consider compromised wallet permanently burned

  3. Never reuse that recovery phrase

  4. Revoke all connected site permissions

Speed matters. Act within minutes.

Suspected Malware

If unsure about device security:

  1. Stop using device for crypto

  2. Create new wallet on clean device

  3. Transfer funds immediately

  4. Clean or replace infected device

  5. Never restore from potentially compromised phrase

Overcaution costs little compared to total loss.

Hardware Wallet Additional Security

For hardware wallet users, know these extra layers:

  • PIN codes: Protect physical device access [10]

  • Passphrases: Optional 25th word creating hidden wallets [11]]

  • Firmware updates: Install only from manufacturer's official software

These features add security but also complexity. Master basics before enabling advanced options.

Building Security Habits

Monthly checkups: Review connected sites in wallet settings. Revoke unused permissions.

Practice recovery: Test your phrase by importing into a different wallet app (then delete).

Stay informed: Follow official channels for security updates.

Document safely: Keep transaction records for taxes but never store sensitive information digitally.

Your Security Checklist

Before holding significant amounts:

The Security Mindset

Treat digital money with the same respect as physical cash. Start small while learning. Build habits before holding significant value. Take your time with every transaction.

Perfect security doesn't exist, but good security prevents most problems. Follow these practices and your funds will be well-protected.

Key Takeaways:

  • Three core rules prevent 95% of losses: protect recovery phrases, use hot wallets for spending/cold for saving, verify everything twice

  • Recovery phrases must be stored physically on paper, never digitally, and never shared with anyone

  • Enable 2FA with authenticator apps (not SMS) and maintain unique passwords for each service

  • Act within minutes if wallet is compromised; transfer funds immediately to new secure wallet

References

[1] Evaluating Security in Cryptocurrency Wallets - https://repository.stcloudstate.edu/msia_etds/115/

[2] Everything you need to know about your 12-word secret recovery phrase - https://support.exodus.com/support/en/articles/8598627-everything-you-need-to-know-about-your-12-word-secret-recovery-phrase

[3] Security of Cryptocurrencies: A View on the State-of-the-Art - https://pmc.ncbi.nlm.nih.gov/articles/PMC10051655/

[4] Hot and Cold Wallet Storage – Blockchain Patterns - https://research.csiro.au/blockchainpatterns/general-patterns/self-sovereign-identity-patterns/hot-and-cold-wallet-storage/

[5] 2FA for Crypto: Enhance Security with Two-Factor Authentication - https://vault12.com/learn/crypto-security-basics/2fa-crypto/

[6] Banking on Stablecoins: A Risk Mitigation Blueprint for Financial Institutions - https://www.trmlabs.com/resources/blog/banking-on-stablecoins-a-risk-mitigation-blueprint-for-financial-institutions

[7] Investigating Scam Crypto Investment Platforms Using Pyramid - https://unit42.paloaltonetworks.com/fraud-crypto-platforms-campaign/

[8] Security Risks of Stablecoins - https://www.chainalysis.com/blog/stablecoin-security-risks/

[9] A Study on the Scams of Cryptocurrency - https://ijhssm.org/issue_dcp/A%20Study%20on%20the%20Scams%20of%20Cryptocurrency.pdf

[10] Why Secure Elements make a crucial difference to Hardware Wallet Security - https://www.ledger.com/th/why-secure-elements-make-a-crucial-difference-to-hardware-wallet-security

[11] Software attacks on hardware wallets - https://i.blackhat.com/us-18/Wed-August-8/us-18-Volokitin-Software-Attacks-On-Hardware-Wallets-wp.pdf

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