In the Crypto-economy, we need to implement security to safeguard our digital assets. Wallets are primarily just an interface to access the blockchain where the assets are stored. The wallet just provides the balance to the user, as well as allow users to send and receive tokens. It does not actually store the cryptocurrency. Instead, the wallet stores the private key which is what proves the user’s ownership of the assets. This must definitely be kept secured because if someone else were to gain access to the private key they can take ownership of your assets. This is why wallets, whether online or offline, use various authentication schemes.
Passwords are the most common way to access a wallet. The problem with this is that once a password is guessed or cracked, there is no other layer of security. This is why users are recommended to store their private key in hardware wallets e.g. Ledger Nano or Trezor. This stores the private key offline so only the user will have physical access. It cannot be hacked from the Internet or anywhere else since the hardware wallet uses cold offline storage. For everybody else, how can security be increased or improved?
A solution to this is called MFA or Multi-Factor Authentication. MFA uses multiple types of authentication to verify a user. In MFA you can use 3 methods to secure your authentication.
- What You Know – This involves the password, the most common form of authentication. Only the user should know this. The problem here is password sharing among users. Some family members openly share their password and that can lead others to learn this thru eavesdropping and more nefarious ways like password cracking.
- What You Own – Most users have a smartphone, and this can be included for verification. In this method an app is installed on the smartphone that generates a code that syncs with a server over the network. It will only work from this smartphone and not any other device.
- Who You Are – Your biometric information, like fingerprints, retina scan or face can be used to further confirm your identity for verification. This is something that physically verifies who you are. This is actually a very effective method that Apple uses for authentication on iPhones using Face ID. The possibility of 2 or more people having the same exact biometric traits is zero to extremely rare.
2FA or Two-Factor Authentication is one of the most common implementations of MFA using just 2 of the 3 methods mentioned. In the cryptocurrency world, digital exchanges implement 2FA to gain access to your cryptocurrency portfolio. Coinbase, Binance and Blockchain.Info require 2FA as a stronger authentication method compared to a simple password. 2FA can be enabled on many apps. Just check to make sure that the app login you are using allows 2FA support. If it is available, enable it to give you more security.
One example of using 2FA is when you login to your Binance account. Binance uses a combination of password and security codes. You create your password during the account creation process. With 2FA enabled, you now need to add a security code to further authenticate your access to your account. By installing Google Authenticator, you can add this additional security layer. With Google Authenticator, you scan the QR code from Binance when enabling 2FA. Once that code is scanned, Google Authenticator creates a profile for you. The next time you login to Binance, you will now need to check Google Authenticator app which is installed on your smartphone. Binance will request the code in order to continue your login.
2FA and other MFA implementations help to increase security, which allows you to better protect your cryptocurrency assets. Even if a hacker is able to intercept your password, if they don’t have what you own (e.g. smartphone) or what you are (e.g. face or fingerprint), they will be denied from the system.