Stablecoin Security Guide

Security is the most important consideration when using stablecoins. This guide will help you understand how to securely store, use, and manage stablecoins, identify common risks, and adopt best security practices.

Overview

Although stablecoins are relatively stable, they still face various security risks. Understanding these risks and taking appropriate protective measures is key to protecting your assets.

1. Wallet Security

Choosing a Secure Wallet

Hot Wallets (Online Wallets)

Recommended Hot Wallets:

• MetaMask: Most popular Ethereum wallet, supports multiple chains
• Trust Wallet: Official Binance wallet, supports multiple chains and DeFi
• Coinbase Wallet: Official Coinbase wallet, user-friendly
• Rainbow Wallet: Beautiful interface, supports multiple chains

Hot Wallet Security Points:

• ✅ Only download from official websites or app stores
• ✅ Use strong passwords to protect wallet
• ✅ Enable two-factor authentication (2FA)
• ✅ Regularly update wallet apps
• ⚠️ Don't use on insecure networks
• ⚠️ Never share mnemonic phrase or private key

Cold Wallets (Hardware Wallets)

Recommended Hardware Wallets:

• Ledger Nano X/S Plus: One of the most popular hardware wallets
• Trezor Model T/One: Open-source hardware wallet
• SafePal S1: Multi-chain hardware wallet

Cold Wallet Advantages:

• ✅ Private keys stored offline, cannot be stolen by hackers
• ✅ Relatively safe even when connected to infected computers
• ✅ Suitable for storing large amounts
• ⚠️ Need to properly store hardware device
• ⚠️ Lost device requires mnemonic phrase to recover

Mnemonic Phrase and Private Key Management

Importance of Mnemonic Phrase:

• Mnemonic phrase is the only way to recover wallet
• Lost mnemonic = permanently lost assets
• Leaked mnemonic = assets stolen

Secure Storage of Mnemonic Phrase:

1. Physical Storage: Write on paper, store in safe place (safe)
2. Metal Plate: Engrave on stainless steel or titanium plate, fire and water resistant
3. Distributed Storage: Split mnemonic into multiple parts, store in different locations
4. Encrypted Storage: Encrypt and store using encryption tools (need to remember password)

Never:

• ❌ Screenshot and save mnemonic phrase
• ❌ Store in cloud (iCloud, Google Drive, etc.)
• ❌ Send via email or SMS
• ❌ Tell anyone (including "customer service")

Multi-Signature Wallets

What is Multi-Signature?

• Requires multiple signatures to execute transactions
• Example: Need 2 out of 3 signatures to transfer
• Increases security, prevents single point of failure

Use Cases:

• Large asset storage
• Team or corporate wallets
• Individual users needing extra security layer

Recommended Multi-Sig Wallets:

• Gnosis Safe: Most popular multi-sig wallet
• Argent: Smart contract wallet with multi-sig support
• Fireblocks: Enterprise multi-sig solution

2. Trading Security

Choosing Trusted Trading Platforms

Centralized Exchange (CEX) Security Points:

Selection Criteria:

• ✅ Regulatory Compliance: Choose regulated exchanges
• ✅ Security Record: Check historical security incidents
• ✅ Insurance Fund: Whether assets are insured
• ✅ Cold Storage: Whether most assets are cold stored
• ✅ Two-Factor Authentication: Whether 2FA is supported

Recommended Exchanges:

• Coinbase: US compliant exchange, high security
• Kraken: European exchange focused on security
• Binance: World's largest exchange, but be aware of regulatory risks
• OKX: Globally renowned exchange, supports multiple chains, relatively high security
• BackPack: Solana ecosystem exchange, focuses on user experience and security

Decentralized Exchange (DEX) Security Points:

• ✅ Use official frontend (official website)
• ✅ Check if smart contract address is correct
• ✅ Use hardware wallet to connect
• ⚠️ Pay attention to slippage settings
• ⚠️ Check if liquidity is sufficient

Pre-Trading Checklist

Before Each Trade:

1. ✅ Confirm receiving address is correct (double-check after copy-paste)
2. ✅ Confirm network is correct (mainnet vs testnet)
3. ✅ Confirm token contract address is correct (avoid fake tokens)
4. ✅ Check if gas fees are reasonable
5. ✅ Small Test: Test with small amount before large transfer

Identifying Common Scams

Common Scam Types:

1. Fake Tokens

   • Use similar names or symbols
   • Check if contract address matches official
   • Verify using CoinGecko or CoinMarketCap

2. Phishing Websites

   • URL spelling errors (e.g., metamask.com vs metamasik.com)
   • Check SSL certificate
   • Use bookmarks to access, don't click suspicious links

3. Fake Customer Service

   • Real customer service won't contact you proactively
   • Won't ask for mnemonic phrase or private key
   • Contact customer service through official channels

4. Airdrop Scams

   • Ask you to transfer first to claim airdrop
   • Ask you to connect wallet and authorize
   • Real airdrops don't require you to transfer

5. Fake Projects

   • Promise high returns
   • Ask you to invest first
   • Check project team and audit reports

3. DeFi Security

Smart Contract Risks

Importance of Audits:

• Check if project has been professionally audited
• Review audit reports (CertiK, OpenZeppelin, etc.)
• Check for known vulnerabilities

Risk Assessment:

• ⚠️ Unaudited Projects: Extremely high risk, avoid using
• ⚠️ New Projects: May have unknown vulnerabilities
• ⚠️ Complex Protocols: More complex mechanism, higher risk

Authorization Management

What is Token Authorization?

• Allow smart contracts to use your tokens
• Example: Authorize Uniswap to use your USDC

Secure Authorization Practices:

1. Minimum Authorization Principle: Only authorize necessary amounts
2. Regular Revocation: Revoke when not in use
3. Use Authorization Management Tools:
   • Revoke.cash
   • Token Approval Checker
   • Debank

Check Authorization:

// Use tools like Etherscan to check
// View your token authorization list
// Revoke unnecessary authorizations

Liquidity Risks

What is Liquidity Risk?

• Cannot sell tokens at reasonable price
• Liquidity pool drained
• Severe price volatility

Reduce Liquidity Risk:

• ✅ Choose pools with high liquidity
• ✅ Diversify investments, don't put all in one pool
• ✅ Set stop-loss or price alerts
• ⚠️ Avoid projects with low liquidity

Impermanent Loss

What is Impermanent Loss?

• When providing liquidity, if token price changes, may incur losses
• Larger price changes = larger losses

How to Cope:

• Understand impermanent loss mechanism
• Choose relatively stable token pairs
• Consider using stablecoin pairs (e.g., USDC/USDT)

4. Platform Risks

Centralized Platform Risks

Main Risks:

• Rug Pull Risk: Platform suddenly closes, assets cannot be withdrawn
• Regulatory Risk: Regulatory agencies shut down platform
• Technical Risk: Platform hacked
• Liquidity Risk: Platform suspends withdrawals

Reduce Risk:

• ✅ Choose well-known, compliant platforms
• ✅ Don't put all assets on one platform
• ✅ Use hardware wallet for large amounts
• ✅ Regularly withdraw assets to personal wallet

Decentralized Platform Risks

Main Risks:

• Smart Contract Vulnerabilities: Code errors cause fund losses
• Governance Attacks: Malicious governance proposals
• Oracle Attacks: Price data manipulation
• Frontend Attacks: Malicious frontend steals funds

Reduce Risk:

• ✅ Use audited protocols
• ✅ Use hardware wallet
• ✅ Check if frontend URL is correct
• ✅ Follow project updates and security announcements

5. Stablecoin-Specific Risks

Depegging Risk

What is Depegging?

• Stablecoin price deviates from $1
• Example: USDT drops to $0.95

Depegging Causes:

• Reserve asset issues
• Large-scale redemptions
• Market panic
• Regulatory crackdown

How to Cope:

• ✅ Follow stablecoin's proof of reserves
• ✅ Choose stablecoins with high transparency
• ✅ Diversify holdings across multiple stablecoins
• ⚠️ Don't panic sell when depegging

Regulatory Risks

Possible Regulatory Impacts:

• Ban stablecoin use
• Require KYC/AML
• Restrict trading
• Freeze assets

How to Cope:

• ✅ Understand local regulations
• ✅ Use compliant stablecoins (e.g., USDC)
• ✅ Avoid using in prohibited regions
• ⚠️ Follow regulatory developments

Technical Risks

Smart Contract Risks:

• Stablecoin protocols may have vulnerabilities
• Upgrades may introduce new issues

Network Risks:

• Blockchain congestion
• Network forks
• 51% attacks (PoW chains)

How to Cope:

• ✅ Choose audited stablecoins
• ✅ Follow project security announcements
• ✅ Use multiple networks (multi-chain)

6. Best Security Practices

Daily Use Recommendations

Asset Allocation:

• Small amounts: Hot wallet, convenient to use
• Medium amounts: Hardware wallet, secure storage
• Large amounts: Multi-signature wallet, highest security

Regular Checks:

• ✅ Check wallet balance
• ✅ Check token authorizations
• ✅ Check transaction history
• ✅ Update wallet and software

Backup Strategy:

• Mnemonic phrase: Backup in multiple secure locations
• Private key: Encrypt and backup
• Wallet files: Encrypt and backup

Emergency Preparedness

If Wallet is Compromised:

1. Immediately transfer remaining assets to new wallet
2. Revoke all authorizations
3. Report to relevant platforms
4. Record all transaction information

If Mnemonic Phrase is Lost:

• If wallet still exists, immediately create new wallet and transfer assets
• If wallet is lost, cannot recover (unless you have backup)

If Encounter Scam:

1. Immediately stop all operations
2. Disconnect wallet
3. Check if assets are stolen
4. Report to relevant platforms and community

7. Recommended Security Tools

Wallet Tools

• MetaMask: Browser extension wallet
• Ledger Live: Hardware wallet management
• Trust Wallet: Mobile wallet

Security Check Tools

• Revoke.cash: Revoke token authorizations
• Etherscan: Blockchain explorer, check transactions
• DeBank: DeFi asset management
• Token Approval Checker: Check authorizations

Security Information Sources

• CertiK: Smart contract audits and security scores
• OpenZeppelin: Security audits and tools
• SlowMist: Blockchain security company
• Rekt: DeFi security incident database

8. Common Security Misconceptions

Misconception 1: Small amounts don't need security measures

• Fact: Small amounts can also be stolen and may become large amounts

Misconception 2: Hardware wallets are absolutely secure

• Fact: Hardware wallets are more secure, but still need to properly store mnemonic phrase

Misconception 3: Using multiple wallets is more secure

• Fact: Managing multiple wallets may increase risk, key is choosing appropriate security level

Misconception 4: Not updating software is more secure

• Fact: Not updating may miss security patches, actually more dangerous

Misconception 5: Mnemonic phrase can be stored in cloud

• Fact: Cloud storage is extremely vulnerable to hackers, never do this

Summary

Stablecoin security is an ongoing process that requires:

1. Choose Secure Wallet: Choose appropriate security level based on asset size
2. Protect Mnemonic Phrase: This is key to protecting assets
3. Trade Carefully: Carefully check before each trade
4. Understand Risks: Understand various risks and take countermeasures
5. Continuous Learning: Security threats constantly change, need continuous attention

Remember: Security first, returns second. Better to be slower, but ensure asset security.

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Next Steps:

• 📖 Technical Principles - Deep dive into stablecoin technical mechanisms
• ❓ FAQ - Answer security-related questions
• 💰 On-Ramp/Off-Ramp Guide - Safely buy and sell stablecoins