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Blockchain Security Practices

Cryptocurrency Tax Accounting

Blockchain Security Practices

There are have been many hacks, exploits, and security breaches in crypto. It’s easy to group them all together as being unsafe, and a novice user may be concerned. Understanding which parts of the tech stack is vulnerable, and implementing a few security habits will keep you from becoming a victim of Blockchain.

Smart contract code is publicly published and is accessible by all to interact with. Contracts that have been used for many months, attracting capital, which makes it a target and yet endured attacks, can be relied on for its strong code. Its new contracts that have yet to be stress tested, may have weaknesses in it’s code, and suffer exploitation. A great defense for this situation, is to use a dummy wallet to interact with the contract. Anything in the wallet is potentially at risk depending on what is signed, and exploited. If the worst were to happen, your other assets in other wallets are not affected Blockchain.

Lately, bridges have become victims to hacks. A bridge can operate from Layer 1 to Blockchain a layer 2 scaling solution, or from layer 1 to another layer 1. When using a bridge to a layer 2, once it is settled, security for the token reverts back to its native bridge, for example the arbitrum bridge, and not the Hop Protocol or any other bridge application. As for bridges, this tech stack presents the least amount of vulnerabilities and have not been victim to hacks. A bridge from layer 1 to another layer 1 continuously relies on the bridges security, which could be a concern, as it present more vulnerabilities in Blockchain.

 

Blockchain

 

Another good practice, is to pay close attention to the contract you are about to sign. It may look gibberish, but becoming familiar with the layout and forcing yourself to be present, can protect you from mistakes. Signing many transactions a day, can become second nature, and lead to an accidental transaction. If you encounter a contract that your unsure about, the network explorer search engine can be used to gain insight. When a contract only has a a few transactions or very few people hold its token, its a red flag Blockchain.

If you no longer trust a contract, you will want to revoke token approval right away. This will prevent the contract from accessing your token in an exploit. On the blockchain explorer there is a tool called token approvals. Paste your wallet address and find the application/ contract you don’t trust and remove approval. This will require some gas to process. you can filter it by each token. Additionally, when signing a contract you can change the spend limit from unlimited to a set amount, this will prevent an exploit from draining your tokens entirely. Revoke.cash is website tool which makes revoking easier.

Another smart practice is not to place all your eggs in one basket. Split assets amongst multiple wallets controlled by different seed phrases, so in the event one seed phrase is compromised, only a portion of your assets are at risk. This could be annoying to keep track, and may only make sense for large value assets.

At OnChain Accounting (OCA), we prioritize security and privacy in our cryptocurrency accounting services. We understand the critical nature of protecting digital assets and maintaining confidentiality in all transactions. Our team stays abreast of the latest security threats and tools in the crypto landscape, ensuring our clients are well-informed and safeguarded against potential vulnerabilities. This vigilance extends to our use of cryptocurrency tax software and crypto tax calculators, tools essential for accurate and secure crypto accounting. By integrating robust crypto tax software and utilizing a comprehensive cryptocurrency tax calculator, we provide a secure framework for managing crypto taxes. Our commitment to security is integral to our service, offering peace of mind to our clients in an ever-evolving digital financial world.

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