What is Two-factor-Authentication? Its Importance in Crypto Security

We cannot overstate the importance of solid online security, especially now that more of our lives are online. For example, this article's author has to sign in to different writing tools and spend most of their waking hours researching and gathering information online.
To perform their tasks, they must share sensitive information online, like emails, phone numbers, IDs, or credit card numbers.

However, the first line of defense is often a username and password, which are vulnerable to hacking attempts and data violations. This is where two-factor authentication (2FA) emerges as a solid obstacle to these threats.

Two-factor authentication (2FA) is a vital security technology that goes beyond the traditional password model and introduces a second layer of security.

At its core, 2FA is a barrier between our online presence and potential malicious forces seeking to exploit it.

What Is Two-Factor Authentication?

2FA is a multi-layered security mechanism that verifies your identity before granting you access to a system. In contrast to the traditional username and password, 2FA adds an extra level of security by asking users to provide two distinct forms of identification:

1. Password

Your password serves as your digital identity's first line of defense, acting as a gatekeeper.

2. Code
The second factor introduces an external element that only the authorized user has. This element could be:

  • A physical device like a smartphone or a hardware token like YubiKey, RSA SecurID tokens, or Titan Security Key.
  • One-time code generated by an authenticator app.  
  • Biometric data such as fingerprint or face recognition.

2FA combines these two factors to mount a strong defense against unauthorized access. Even if malicious actors steal your password, they will always require the second factor to gain access to your account.

 

Why do you need Two-Factor Authentication?

Passwords have long been a popular and widely used form of authentication, but they have significant limitations. They are vulnerable to several hacks, like brute force attacks, where attackers repeatedly try different passwords until they gain access.

Most people also use weak or guessable passwords, jeopardizing their security. Passwords have become less secure due to the increased spate of data breaches and compromised passwords shared across multiple online services. 

Where do you need 2FA Authentication?

Here are the most common 2FA applications:

  • Email addresses:
    Gmail, Outlook, and Yahoo provide 2FA options to protect your inbox from unauthorized access.
     
  • Social media platforms 
    Facebook, X (formerly Twitter), and Instagram encourage users to secure their profiles by using two-factor authentication (2FA).
     
  • Financial services
    Banks and financial institutions frequently use 2FA for online banking to protect your financial transactions.
     
  • E-commerce
    Amazon and eBay, for example, offer 2FA options to protect your payment information.
     
  • Business and the workplace
    Many businesses require two-factor authentication (2FA) to protect sensitive corporate data and accounts.

2FA authentication has become an increasingly common and necessary feature, enhancing security across various online interactions.

Different types of 2FAs and their pros and cons

There are several types of Two-Factor Authentication (2FA), each with advantages and disadvantages.

1. SMS-enabled 2FA

The benefits of this method include its ease of use, as almost everyone owns a mobile phone capable of receiving text messages. After entering your password, you receive a one-time code via text message on your registered mobile phone. It's also simple because no additional hardware or apps are required.

However, it is vulnerable to SIM swapping attacks, where someone can hijack your phone number and intercept your SMS messages. In addition, SMS delivery may be delayed or fail in areas with poor network coverage.

2. Authenticator applications 

Apps like Google Authenticator and Authy generate time-based One-Time Passwords (OTPs) without requiring an internet connection.

The advantages include offline access (even without an internet connection) and multi-account support (a single app can generate OTPs for multiple accounts).

The disadvantages include the need for setup, which may be slightly more difficult than SMS-based 2FA. It is also device-dependent, as you must install the app on your smartphone or another device.

3. Physical tokens 2FA

Hardware tokens are physical devices that generate one-time passwords (OTPs). Some examples include YubiKey, RSA SecurID tokens, and Titan Security Key.

These hardware tokens are usually small and portable, similar to keychain fobs or USB-like devices. Users must carry them with them to use them for authentication.

The benefits are that they are highly secure because they are offline and not vulnerable to online attacks. These tokens frequently have a battery life of several years.

The drawback is that users must buy them. These devices can be lost or damaged, so you'll have to pay for a replacement.

4. 2FA biometrics

Biometric 2FA uses unique physical characteristics such as fingerprints and facial recognition to verify identity. Its advantages include high accuracy and user-friendliness, which is helpful for users who prefer not to remember codes.

Privacy concerns are one of the potential drawbacks, as biometric data must be securely stored to prevent misuse. Biometric systems can also make mistakes from time to time.

5. Email-based 2FA

Email-based two-factor authentication sends a one-time code to your registered email address. Most users are familiar with this method, which requires no additional apps or devices. However, it is vulnerable to email compromises, which could result in insecure 2FA. Email delivery is also occasionally delayed.

How can you choose the best type of 2FA?

You should consider the level of security required, user convenience, and the specific use case when selecting a 2FA method. You may prefer hardware tokens or authenticator apps for high-security situations like financial or cryptocurrency exchange accounts.

SMS-based 2FA or email-based 2FA may be more appropriate in cases where accessibility is critical. Biometrics are great for devices with built-in sensors, but privacy and data security must be prioritized.

Step-by-step instructions for installing 2FA

Let us walk you through the steps required to configure Two-Factor Authentication (2FA) on various platforms. The steps may vary depending on the platform, but they all follow the same logic.

  1. Determine your 2FA method.

    Choose the best 2FA method based on the platform and your preferences, whether SMS-based, authenticator app, hardware token, or biometric. If you want to use an authenticator app or a hardware token, you must first download, install, or buy them.
     
  2. Enable two-factor authentication in your account settings.
    Navigate to your account or security settings on the platform or service where you want to enable 2FA. Find and turn on the Two-Factor Authentication option.
      
  3. Select a backup method.
    Many platforms provide backup options if you lose access to your primary 2FA method. You can use a backup method such as backup codes or secondary authenticator apps when available.
     
  4. Follow the setup instructions to ensure your setup is correct.
    Follow the setup instructions for the 2FA method you've chosen. Scanning a QR code with an authenticator app, linking your phone number for SMS-based 2FA, or registering a hardware token are common examples. Finish the setup by entering the verification code provided by your preferred 2FA method.
     
  5. Secure backup codes
    If you receive backup codes, keep them somewhere safe and accessible, preferably offline. You can print or write them down and store them in a safe place. You can use these codes if you ever lose access to your primary 2FA method.

Once you've set up 2FA, you'll have to use it effectively while avoiding common pitfalls and ensuring the security of your backup codes.

How to use 2FA effectively

Setting up 2FA is only the first step in keeping your accounts secure. When using them, you must adhere to best practices.

These include keeping your authenticator app current, enabling 2FA on all eligible accounts to protect your other online accounts, and using strong and unique passwords.

You must also be cautious of potential pitfalls or mistakes. This includes:

  • Never share your OTPs with anyone.
  • Be on the lookout for phishing scams.
  • Always verify the legitimacy of requests you receive.
  • If you ever lose a 2FA device, you must immediately revoke access and update your 2FA settings across all accounts.

Final thoughts

2FA is not an option but a necessity. The spate of security breaches and the resulting daily losses are a stark reminder to use Two-Factor Authentication (2FA) for all your accounts. This is especially important for protecting your financial and investment accounts, including cryptocurrency.

So, get to your computer, pick up your phone, or purchase a hardware token right now and set up your 2FA. It's a tool that gives you control over your digital security and safeguards your valuable assets.

If you already have 2FA enabled, remember that staying safe online is ongoing. New technologies and attacks will emerge in the future. To stay safe, you must stay informed and vigilant.