How to Secure Your Cryptocurrency While Gambling Online

Crypto Gambling – Benefits and Risks

Crypto casinos offer many advantages over traditional online gambling sites, including more privacy, probably fair games, lower fees, and faster transactions. However, while the decentralized nature of blockchain technology allows you to bypass middlemen and enjoy more control over your funds, it also places more responsibility on your shoulders. To stay safe, it is important to understand potential risks and take the appropriate precautions to proactively secure your cryptocurrency.

The most critical thing to understand is that cryptocurrency transactions are, by their very nature, irreversible. This means that both human error and malicious attacks can lead to permanent losses. Unfortunately, hackers frequently take advantage of this to exploit personal crypto wallets, exchanges, and gambling platforms. At the same time, scammers are constantly upping their game with increasingly sophisticated fraudulent websites, phishing schemes, and fake promotions – all designed to trick unsuspecting users out of their crypto funds.

In this original CoinBets guide, I’ll explain how you can take some simple steps to help secure your cryptocurrency while enjoying online gambling. Specifically, I’ll look at the importance of choosing the right wallet (or wallets), being aware of red flags associated with scams, and following an overall strategy to minimize your risk exposure.

Understanding the Risks

While the transparency of the blockchain allows anyone to see transactions, identifying the individual parties involved is difficult. Yes, it can be done, and agencies like the FBI frequently work with blockchain forensic companies to identify serious crimes, but it is slow, resource-intensive, and expensive. So, for most people, if you lose crypto to crime, it’s most likely gone forever.

Ironically, this pseudonymous quality is exactly what makes crypto so attractive to both security-conscious players and hackers. The key to staying safe is understanding the risks and avoiding being hacked or tricked in the first place. Think of it like flying – statistically, it is the safest form of transport, but if something does go wrong, it’s likely to be disastrous. So, the importance of identifying and understanding the specific risks associated with using crypto is hard to overstate. Here’s a quick overview of the main threats:

Hacking and Cyberattacks

These have been issues since the early days of the internet, but are becoming increasingly sophisticated. Even security-conscious, tech-savvy individuals can fall victim, so it’s critical to remain on your guard.

• Malware: Malicious software installed on your device to spy on your activity. Tools like keyloggers can record what you type – including sensitive information like your passwords and recovery phrases.
• Phishing: This technique involves creating fake websites, apps, and marketing communications (including emails, SMS, WhatsApp messages, and phone calls) to convince people to hand over sensitive information.
• Exchange Breaches: If you have funds sitting in a cryptocurrency exchange wallet, their safety depends on whoever is operating the exchange. Even large exchanges, notably Mt. Gox and Bitfinex, have been hacked, resulting in the loss of billions of dollars worth of cryptocurrency.

Scams and Fraudulent Sites

Instead of targeting or mimicking legitimate crypto projects, exchanges, and online casinos, some criminals just set up completely fraudulent platforms and schemes.

• Fake Crypto Gambling Sites: On the surface, these look like legitimate online casinos and sportsbooks, but if you try to withdraw winnings, you’ll find you can’t. They often lure players in with huge bonuses and promos but will disappear into the night at some point – taking your funds with them.
• Phishing Emails and URLs: Phishing emails and messages will often contain malicious links. These will direct you to fake or scam sites, which are designed to harvest your credentials and sensitive info like private keys.
• Scam ICOs, Tokens, and Ponzi Schemes: These are often highly sophisticated scams that promise unrealistic returns on investments in gambling-related projects. They will usually have detailed whitepapers, native crypto tokens, and an extensive social media presence.

Human Error

Although crypto and Web3 projects are gradually becoming more user-friendly, they can still be relatively complicated and new users can face a steep learning curve. Compared to traditional online casinos and financial projects, using crypto casinos and DeFi (Decentralized Finance) platforms requires a much greater degree of responsibility – simply put, there’s little help available if things go wrong.

• Lost Private Keys: This is probably the most well-known issue with cryptocurrency and can be catastrophic. For example, in 2019, crypto exchange QuadrigaCX collapsed when CEO Gerry Cotton died unexpectedly – taking the company’s crypto keys, and around $190m worth of assets, with him to the grave. Another famous example is James Howells, a Brit trying to retrieve his keys, and Bitcoin worth around half a million pounds, from a council-owned rubbish dump after his girlfriend threw away the hard drive containing his private keys.
• Sending Funds to the Wrong Address: Crypto addresses are usually long strings of alphanumeric characters – not exactly easy to remember – but it pays to double-check them because if you send funds to the wrong address, there’s no way to get them back.
• No Backups: Okay, we’ve all been guilty of failing to save documents here and there – and in a world of autosaves and cloud backups, it’s easy to become complacent. But, when it comes to your crypto funds, you need to have robust backups of your wallet data – preferably in several locations and stored in a resilient and secure format.

Wallet Security: Your First Line of Defense

At the heart of your crypto security strategy should be a suitable wallet (or wallets). Remember, if your wallet is compromised in any way, you will almost certainly lose all of the crypto associated with it.

Choosing the Right Wallet

Making a smart choice early on can make your crypto life much easier and more secure later on, so it’s worth taking the time to analyze your specific requirements and assess the options. Each type of cryptocurrency wallet has its pros and cons depending on your specific circumstances and needs.

• Hardware Wallets: These are highly secure because they store your private keys offline (i.e., they are “cold wallets”), making them virtually immune to typical online hacking attempts and ideal for storing large amounts of crypto. However, they aren’t as convenient as software wallets. The most popular hardware crypto wallets are made by Ledger and Trezor.
• Software Wallets:There are many crypto software wallets available, including apps like MetaMask, Trust Wallet, and Exodus. They are usually free, extremely easy to use, and can be integrated with Web3 platforms, including crypto casinos. This makes them excellent for daily transactions. However, because they are “hot wallets” (connected to the internet), they are much more susceptible to hacking. This is especially true of browser-based wallets like MetaMask. So, using them requires a lot of caution.
• Paper Wallets: You can simply print your private keys on paper and store them securely. This makes them immune from online threats but does expose them to other risks. These include physical theft, and both man-made and natural disasters like fire, floods, earthquakes, and storms. Therefore, they should be stored in fireproof boxes within safes wherever possible. Several companies, like ColdTi and CryptoTag, also offer titanium cold storage wallets for ultimate durability.

Keeping Private Keys Secure

Whichever type of crypto wallet you choose, you need to keep your private keys secure at all times. If they are lost, there is no way to recover them, and if they are stolen, you will probably lose all your funds. To keep safe:

1. Avoid Cloud Storage: Never store private keys or recovery phrases on cloud services – they are just too vulnerable to hacking.
2. Create Secure Backups: Always ensure you have at least one backup of your recovery phrase, stored in a safe location, like a fireproof safe. If you have a large amount of crypto, you may want to consider a bank safety deposit box or specialist vault storage provider.
3. Use Password Managers: If you do need to store crypto wallet passwords digitally, use reputable password managers with strong, certified encryption.

Using Multi-Signature Wallets

You can further reduce the risk of unauthorized access by using multi-signature wallets. For example, you can set up a wallet that requires two different devices, like your hardware wallet and your phone, to approve a single transaction.

If you are using cryptocurrency for business purposes, you should always use multi-signature wallets. This will reduce the risk of any employee “going rogue” and stealing funds, and make it more difficult for criminals to use “$5 wrench attacks” – for example, forcing an employee to hand over company funds under the threat of violence to themselves or loved ones.

Two-Factor Authentication (2FA)

Many apps and web-based platforms, including crypto casinos, now offer two-factor authentication (2FA) for extra security. 2FA requires a second verification step to be completed in addition to providing your password and can be facilitated in several ways.

Types of 2FA

1. SMS-Based 2FA: Although convenient and commonly used, this method can be vulnerable to SIM-swapping attacks. This is when hackers gain control of your phone number so that they can receive SMS messages continuing your verification codes.
2. Authenticator Apps: Apps like Google Authenticator and Authy generate unique time-sensitive codes, providing a more secure option than SMS.
3. Hardware Keys: Devices like YubiKey offer the highest level of protection by requiring physical access to the key. However, this does mean you need to also consider keeping the key device itself safe and secure.

Implementing 2FA on Gambling Sites

Many of the best crypto casinos now offer 2FA, however you will usually have to manually switch it on.
1. Log into your account settings and find the security section.
2. Choose an authenticator app or hardware key as your 2FA method.
3. Follow the setup instructions and save your backup codes securely.
Just like your crypto wallet keys, your 2FA app backup codes are critical pieces of information and should be stored somewhere safe and secure.

Avoiding Scams and Fraudulent Sites

The best way to secure your crypto when engaging in online gambling is to avoid falling for scams or providing information to fraudulent sites in the first place. Of course, given the increasing sophistication of crypto criminals, this can be easier said than done. Still, there are some key things you can do.

Identifying Reputable Gambling Sites

• Licensing and Regulation: Choose crypto casinos with valid gambling licenses issued by reputable regulatory bodies. Some regulators, like the UK Gambling Commission (UKGC) and Malta Gaming Authority (MGA), do not currently allow crypto gambling, but many crypto casinos are licensed by established regulators like the Curaçao Gaming Control Board and the Kahnawake Gaming Commission.

• User Reviews: Research crypto casinos on reputable forums or review sites like CoinBets to accurately gauge a platform’s reputation. However, keep in mind that many “reviews” lack objectivity because they are published by affiliate marketers driven by financial incentives. For more about this, check out our exclusive guide to Spotting Fake or Dodgy Crypto Casino Reviews.

• Security Features: Before using any online casino, check the site is secure. It should have a valid security certificate, be using HTTPS encryption, 2FA, and ideally, provably fair technology to enhance transparency. To learn more about the latter, be sure to check out our Introduction to Provably Fair Gaming.

Avoiding Phishing Scams

To avoid becoming the victim of a phishing scam, always:

1. Double-check URLs: check the spelling and structure of the URL, and make sure they match the official site.
2. Be Cautious of Links: Never click on links in unsolicited emails or messages. Even if they appear to come from a known sender, they can still be dangerous – the sender’s email account or phone number may have been hijacked or spoofed.
3. Be Careful When Providing Information: Never provide sensitive information via email or any other messaging platform, unless you are 100% sure you can trust the sender. In the case of crypto casinos, any documents required by the operator can normally be uploaded directly via the website.
4. Look for Red Flags in Texts: Phishing emails and spoof sites will often contain grammatical errors, or just won’t “feel right”. Listen to your intuition – if something “feels off”, use extra caution.
5. Use Trusted Web Security Tools: Use anti-phishing browser extensions for added protection. Most online security subscriptions now include these. They will warn you and/or block suspicious content.
6. Avoid Public WiFi Networks & Charging Points: As a rule, you should avoid using public WiFi networks to access anything sensitive, because they may not be secure and your information may be visible to others. Also, you should refrain from using public chargers, especially those at airports and hotels, to charge your devices whenever possible because of so-called “Juice Jacking.”

Avoiding Scam ICOs and Token Projects

Although scam ICOs (Initial Coin Offerings) and token projects are nowhere near as common as they were a few years ago, they are still a problem, including in the crypto-gambling world. Unfortunately, because of the unregulated nature of these projects and the rapidly evolving technological landscape, it’s not always easy to distinguish between legitimate token projects and scams – with many falling somewhere in between.

For example, the LuckyBlock crypto lottery project got off to a promising start, raising nearly USD $6 million with its LBLOCK V1 token presale. However, it soon ran into trouble, with major crypto exchanges refusing to support the token due to its controversial 12% sales tax mechanism. This forced the project to release the sales tax-free LBLOCK V2 token and morph its entire business plan from that of a crypto lottery to a crypto casino platform. Needless to say, this caused significant confusion and suspicion among investors and has led to many scam accusations. It remains unclear whether LuckyBlock is a scam or just a poorly managed project, but it highlights the difficulty in distinguishing the good, bad, and clueless in the crypto gambling investment space.

With this in mind, you should always be wary of crypto gambling ICOs and token projects, and keep the following in mind:

1. Information Provided: If the project is genuine, there should be extensive documentation provided, including a detailed whitepaper and roadmap. Be wary of claims and projections that seem too good to be true.
2. Founders and Team: A legitimate project will provide detailed information about the founders. This will enable you to conduct your own background research using platforms like LinkedIn. Do the people have relevant backgrounds and good reputations?
3. Technology and Governance: Study the technical details of the project – does it all make sense? Is the token going to be launched on an existing blockchain like Ethereum or Solana? How will tokens be minted and distributed? How will the token supply be managed? How will the project be governed?
4. Utility and Scalability: Does the token and project seem to offer a real utility? For example, if it is a crypto casino project, is it clear why it would be attractive to players? Does the project seem likely to be scalable?
5. Regulatory Challenges: Many crypto ICOs have hit regulatory brickwalls over the years, particularly in the United States – where the SEC hit many with huge fines. While many of these issues have since been sorted out, there is still the potential for crypto token projects to run into legal problems, especially when operating in the online gambling space. A good project will identify potential regulatory hurdles early on.

Crypto Crime Data and Statistics

As to be expected, as the popularity of cryptocurrency has grown, so has the crime associated with it. As previously mentioned, malicious actors often take advantage of people’s unfamiliarity with the space and pseudo-anonymous nature of cryptocurrency transactions to get away with crimes.

Illustrating the scale of crypto crime, here are some statistics from blockchain analysis firm Chainalysis:

• In 2023, $24.2B worth of crypto was received by illicit wallet addresses – that’s 0.34% of the total on-chain transaction volume. This includes funds sent to addresses the firm has identified as illicit and funds stolen in crypto hacks. However, as alarming as this first seems, it’s considerably lower than the 1.29% of on-chain transactions classified as illicit in 2019.

• Until 2021, crypto criminals preferred Bitcoin, but since 2022, stablecoins like Tether (USDT) have made up the majority of total illicit crypto transaction volume. However, Bitcoin, Ethereum, and other altcoins still made up over half of the volume of stolen crypto funds in 2023, and Bitcoin remained the crypto of choice for crooks using malware and ransomware.

• The crypto revenue derived from scamming and hacking fell considerably in 2023, down 29% and 54% respectively. However, Chainalysis did note that certain kinds of crypto scams, for example, romance scams, may be undereported. Given the perception and/or legal status of crypto gambling in some jurisdictions, it seems logical that crypto casino scams are also likely underreported.

However, despite evidence that crypto crime is actually falling, much of the general public still has serious reservations. For example, a Pew Research Center study published in October 2024 found the following:

• 63% of Americans have little to no confidence that the currently available ways to invest, trade, and use cryptos are safe and reliable.

• Only 5% of US adults are extremely confident in crypto, with 18% being somewhat confident.

• 71% of Americans aged 50+ have little to no confidence in the reliability and safety of crypto, though the percentage drops to 55% among those under 50.

Even among Americans who have already invested in cryptocurrency, only 19% say they are very confident in its reliability and safety.

Avoiding Scam ICOs and Token Projects

While some crypto casino scams and frauds still emanate from relatively small groups of hackers, things have taken on an industrial scale – particularly in parts of Asia.

For example, in January 2024, a report from the United Nations Regional Office for Southeast Asia and the Pacific found that the proliferation of “underregulated online gambling platforms and crypto exchanges” is providing “new business opportunities for organized crime.” The report highlighted that the formal online gambling market is expected to grow to more than US $205 billion by 2030, with the Asia Pacific region seeing the fastest growth rate – making the sector ever more attractive to crooks. Indeed, dodgy casino operators have already established huge operations in Myanmar, Laos, Cambodia, and Vietnam, and use online crypto gambling to launder money accumulated from both cybercrimes and more traditional criminal enterprises like drugs, people smuggling, arms dealing, and extortion.

Additionally, rogue nation states like North Korea have also got in on the crypto crime scene. Illustrating this, in 2022 the Federal Bureau of Investigation (FBI), the Cybersecurity and Infrastructure Security Agency (CISA), and the U.S. Treasury Department (Treasury) issued a joint Cybersecurity Advisory (CSA). It warned that “North Korean state-sponsored advanced persistent threat (APT) groups”, commonly known as “Lazarus Group, APT38, BlueNoroff, and Stardust Chollima” were targeting a range of blockchain and crypto platforms and businesses, including exchanges, DeFi protocols, gaming platforms, and trading companies. Specifically, these groups were trying to get victims to download trojans that would propagate malware to steal private keys and initiate fraudulent cryptocurrency transactions.

AI and Crypto Crime

Another aspect to be aware of when considering crypto crime is artificial intelligence (AI). So far, the best-known uses of AI technology in terms of crypto crime are deepfakes used to promote dodgy “investment opportunities.” Even reputable platforms like YouTube have found it increasingly difficult to keep this kind of content off their platforms. For example, you will often see scammers using the hyperrealistic deepfakes of well-known entrepreneurs like Elon Musk and Richard Branson to promote their schemes.

However, while deepfakes of celebrities are relatively easy to spot, as AI technology evolves, it seems certain that criminals will employ it in more ways. For example, criminals could use AI chatbots and deepfakes to make scam casino sites more convincing by faking elaborate, dynamic social media presence and user communities.

Keeping Crypto Crime in Perspective

As we’ve already seen, the attributes of cryptocurrency make it inherently attractive to criminals. But, it’s important to keep things in perspective. Many experts say the fear of crime in the crypto space is now overblown. For example, Amanda Wick, founder and CEO of the Association for Women in Cryptocurrency and former federal prosecutor for the US Department of Justice is quoted by The Banker as saying “As somebody who’s prosecuted a lot of money laundering for years, we didn’t really talk about bank crime. There’s no evidence that there’s more crime in crypto than traditional finance.”

This is most likely reflected across the board – there is very likely no more criminality involved with online crypto gambling than with traditional gambling using fiat currencies. The point is that unlike the traditional financial world, where for example, if you lose money to an online scam, you might eventually get it back from your bank or credit card issuer, in the world of crypto, you’re on your own. Thus, reports of crypto crime can seem scarier, especially to those new to the space.

Best Practices for Securing Cryptocurrency

Okay, so we have looked at the types and scale of the threats to crypto users, but what can you actually do to protect your assets while gambling with crypto?

• Diversify Your Crypto Holdings: One of the easiest and most effective ways to minimize your exposure to risk is simply to spread your digital assets across multiple wallets. Even if one is compromised, it won’t affect all of your crypto wealth.

• Use Hardware Wallets: While you will likely need at least one software wallet for day-to-day crypto transactions, you should consider storing larger amounts in hardware wallets. Get into the habit of regularly moving excess funds from your software wallets to your hardware wallets.

• Limit Funds in Gambling Wallets: Try to keep only the minimum required funds in any wallet you specifically use for crypto gambling. This is especially true of your casino account wallets – even those marketed as “long-term storage” options like the vault from Gamdom.

• Regularly Update Software: Be sure to keep your crypto wallets updated with the latest security updates and patches.

• Backups: Be sure to securely back up your recovery phrases and private keys in multiple safe locations – consider the risks associated with crime, accidents, and natural disasters.

• Stay Informed: The crypto world changes rapidly, so it’s important to keep up-to-date with the latest news. The easiest way to do this is, of course, to follow us here at CoinBets.

Case Study: MetaWin Crypto Casino Hacked

In early November 2024, the online crypto casino MetaWin was targeted by hackers who stole around USD $4 million worth of crypto. The hackers managed to exploit MetaWin’s “frictionless withdrawal system” to access the casino’s hot wallets on both the Ethereum and Solana blockchains, withdrawing significant amounts before the casino realized and suspended all withdrawals.

According to the popular crypto news site CoinTelegraph, ZachXBT, a well-known blockchain crime investigator, worked with MetaWin to track the stolen funds. It was discovered that the attacker/s had used more than 115 wallet addresses and transferred assets through both Kucoin and a nested service on HitBTC to try and cover their tracks. At the time of writing, MetaWin was working with specialist blockchain investigators and law enforcement to try and bring the hackers to justice and recover stolen funds.

Lessons learned: The biggest takeaway from the MetaWin hack is really how challenging it is to reconcile reducing friction for players while also maintaining a high enough level of security. Of course, this is nothing new – even traditional online casinos, especially those licensed by strict regulators like the UKGC, receive endless complaints about their withdrawal verification processes creating too much friction for customers. However, in the crypto space, where players expect to enjoy a high level of privacy and virtually instant transactions, the issue is even more acute.