13 Common Crypto Security Mistakes And How To Avoid Them

According to the report made by Kraken in October 2025, while 95% users admit that they use at least one safety measure to protect their crypto assets, “many still reuse passwords or store seed phrases insecurely.”

In a recent article, we explored how Web3 founders can protect their Web3 startups from crypto scams and fake investors. However, security risks don’t end with founders and teams.

Together with our partners from Hashlock, Kerberus, and NOMINIS, we broke down the 13 most common mistakes regular crypto users make – and how to avoid them before it is too late.

Mistake #1. Storing Seed Phrases on Phones or Cloud Storage

Many crypto holders save their seed phrases in the easiest yet insecure way – in screenshots, notes apps, or cloud backups, assuming personal devices are “safe enough.” Is it familiar to you, too?

In reality, these locations are the first places malware and phishing tools look for sensitive data.
Besides, for attackers, compromising a Google account or iCloud login is far easier than breaching a hardware wallet.

Not only do regular crypto users suffer from unsuspecting attackers in this way, even Web3 founders of crypto infrastructures have also been caught out. Our partners at Nominis shared an interesting use case that explicitly reflects the major consequences of such a mistake.  In September 2025, THORChain founder JP Thorbjornson experienced a $1.3 million theft from his personal wallet when attackers gained access to and drained a forgotten Metamask wallet. Thorbjornson believes the attackers were able to gain this access to his encrypted iCloud or Keychain profile after receiving a phishing link from a ‘friend’. The founder was left offering the attackers, believed to be funded by North Korea, a bounty on chain, in an attempt to gain back the stolen funds.

The safest approach is to leverage offline storage. Write your seed phrase on paper or a metal backup and keep it in a controlled, private location. Never store your seed phrase or passwords on a device connected to the Internet.

Mistake #2. Signing Blind Transactions

When it comes to a crypto transaction signing, some crypto users quickly hit “Sign” as if they’re approving a basic app permission. However, they tend to forget that on-chain, a signature can authorize far more.  A single signature can grant sweeping permissions: spending rights, token approvals, contract access, or even the ability for an attacker to drain your wallet later without any further action from you.

The solution is a no-brainer. Always simulate before signing. Tools like Tenderly, Fire, and DeBank let you preview what a transaction actually does – which smart contracts are touched, which tokens move, and what permissions you’re granting.

Remember: if something looks off, or you simply don’t understand the action, don’t sign.

Mistake #3. Not Using Hardware Wallets

Hot wallets are convenient, but they also come with significant security risks. Because they run in your browser or on your phone, they’re constantly exposed to malware, keyloggers, and malicious websites that can compromise your keys.

Hardware wallets solve this by adding a layer of protection – the physical one. Even if your computer is compromised, an attacker still can’t sign a transaction without your hardware wallet device in hand.

The best decision to avoid big crypto losses is to use hot wallets only for small, everyday crypto transactions and leverage a cold wallet for big amounts of money. 

Mistake #4. Using the Same Wallet Everywhere

Does it sound like you? Many users rely on a single wallet for NFTs, airdrops, cold storage, and basically any transaction they make. It feels convenient (fewer chances to forget your seed phrase, right?), but it creates a single point of catastrophic failure. If a user signs a malicious transaction on one platform, everything tied to that wallet becomes vulnerable.

Smart users segment. Create different crypto wallets for different purposes: active trading, airdrop rewards collecting, long-term cold storage, and anything that involves higher risk. This way, even if one wallet is compromised, the damage is contained.

Mistake #5. Not Checking Domain Names Carefully (URL Spoofing)

Fake websites are still one of the most successful attack vectors in Web3. Scammers register domains that look almost identical to the real ones, sometimes changing just one letter or symbol. An inattentive crypto user gets caught by these tiny differences.

Most phishing attempts begin with a link: a DM, a fake support message, a Google ad, or a post from a compromised X/Telegram account. One click is often all it takes.

The safe habit is simple: never trust links – always verify URLs manually. Ofir Eliasi, the Chief Blockchain Officer of Kerberus, adds: “In Web3, habits alone aren’t enough. With over 250,000 users and zero losses, we’ve learned that the best way to operate without anxiety is to automate protection – and that’s exactly what Kerberus is built for.“

Mistake #6. Sharing Private Keys

Crypto newbies often confuse seed phrases, private keys, and wallet addresses. This misunderstanding leads to disastrous outcomes if someone requests a “verification key” to finalize a crypto transaction process.

 Always remember that no legitimate support team, platform, official social media account, or team member will ever ask for your private keys or seed phrase.

If anyone does, consider the interaction already a scam, end it immediately, and report it to the company’s official account.

Mistake #7. Using Public Wi-Fi for Wallet Interactions

We often forget that public Wi-Fi that we use in cafés, hotels, airports, and co-working spaces is one of the easiest places for attackers to compromise crypto users. On these networks, hackers can intercept your traffic or redirect you to spoofed versions of Web3 apps.

The solution? Avoid managing your crypto, signing transactions, or logging into exchanges on any public Wi-Fi connection. And if you are in the airport and have no way out, use a trusted VPN and rely on a hardware wallet so that no transaction can be signed without your physical confirmation.

Mistake #8. Storing Large Amounts on Exchanges

Centralized exchanges like Binance are one of the crypto users’ favorite places to store large amounts of funds. For a crypto newbie who follows what their fellows do, a reputable CEX seems to be the only trusted place.

 However, as history shows, even reputable centralized exchanges are not immune to breaches. The core issue is custody – when you deposit crypto assets on an exchange, you’re no longer in full control of your funds. The exchange holds them on your behalf, and that custody layer becomes a single point of failure.

“Not your keys, not your coins” is not a slogan – it’s a security rule. Store only active trading balances on crypto exchanges. Everything else should go to self-custody.

Mistake #9. Ignoring Security Features Like 2FA

Two-factor authentication (2FA) is one of the highest-impact, lowest-effort security upgrades available – yet countless users still rely on nothing more than a password or an email login. 

Enable 2FA everywhere: across exchanges, your Gmail, password managers, TG or X, and any service touching your private data. Use an authenticator app (Authy, Aegis, Google Authenticator) instead of SMS, which can be intercepted or SIM-swapped.

A few seconds of friction when logging in is nothing compared to the hours or months spent recovering from an account breach. In Web3, strong 2FA isn’t optional – it’s your first real line of defense.

Mistake #10. Not Rotating Passwords Regularly

Most crypto users set a strong password once and never think about it again. The problem? Password leaks don’t always happen instantly. A password exposed in a data breach months or even years ago can still be valid today – and attackers know this.

The Hashlock team adds: “If a compromised password is reused across crypto wallets, exchanges, or email accounts connected to your crypto activity, it becomes an open door for unauthorized access.”

The fix is simple: rotate passwords every 3 to 6 months, especially on accounts tied to exchanges, email, password managers, and any Web3 tool that touches your identity. Combine this with strong 2FA and unique passwords for each service. Even if an old credential surfaces online, it won’t put your assets at risk.

Mistake #11. Falling for “Get Rich Quick” Schemes and Unrealistic Yields

Every bull run brings a wave of scams disguised as “innovative DeFi protocols” offering absurd yields – 50x, 90x, or “guaranteed” returns. These promises prey on FOMO and are designed to lure users into depositing funds into contracts controlled by attackers. Once the liquidity flows in, the team disappears, the token crashes, or a hidden function drains the pool.

Legitimate on-chain protocols never promise overnight wealth. Sustainable yields are proportional to real economic activity, not magic multipliers.

“If a blockchain project markets impossible returns, lacks transparency, or pressures you to ‘get in fast,’ treat it as a scam and walk away. In a Web3 ecosystem, skepticism is a security skill – and unrealistic rewards are one of the biggest red flags,” says the Hashlock team.

Mistake #12. Never Revoking Old Token Approvals

Very often, crypto users assume that once they stop using a dApp, the connection “ends.” The Hashlock team admits that “in reality, any time you grant a contract permission to spend your tokens, that approval usually remains active indefinitely – even years later”.

Over time, this creates a hidden attack surface: dozens of old approvals linked to projects you no longer use or barely remember. If any one of those smart contracts gets exploited, an attacker could drain assets from your wallet without needing a new signature.

The fix is simple but powerful. Once a month, review and revoke outdated approvals using tools like Revoke.cash, DeBank, Fire, or your crypto wallet’s built-in permissions dashboard.

Mistake #13. Having No Recovery or Backup Plan

Many crypto enthusiasts focus heavily on preventing hacks but ignore the more common failure modes: lost devices, accidental damage, or family members needing access in an emergency.

If your seed phrase exists in only one location, or if no trusted person knows how to recover your assets when something happens to you, simple life events can result in the same irreversible outcome as a hack.

A healthy security routine includes resilience planning. Every few months, imagine losing access to your PC or phone and test whether your backup strategy holds up. Store duplicate seed phrase backups (paper or metal) in two secure, geographically separate places, such as a home safe and a bank deposit box.

The Hashlock team adds:  “For larger portfolios, consider a structured inheritance plan – multi-sig with a trusted family member, legal will instructions, or reputable custody services – so your assets remain accessible even if you can’t personally sign”.

Final Words

Experience shows that most crypto losses don’t come from complex technical exploits but from simple, human-level mistakes. The good news is that in blockchain, you don’t need to be a cybersecurity expert to stay safe. What matters is avoiding the predictable, preventable errors that scammers rely on every day.

By understanding the most common user risks and applying a few consistent habits, anyone can secure their digital assets in Web3. Security isn’t about perfection – it’s about making yourself a harder target.