What Is Two-Factor Authentication (2FA) and How to Use It in Crypto

This article will go in-depth into the two-step authentication process and how it can be used to make BTC payments and stay safe online.

Explaining the Two Factor

There are two factors that are required to make a cryptocurrency transaction. It can be arranged in many different forms, but the two factors are usually the same.

• The knowledge factor is the first one, and it requires the user to possess the information needed to start a transaction. In most cases, the player needs to know a password or a PIN code that allows them to start a transaction or make a payment.
• The second factor is possession since the user must have a method to approve the transaction. It can be a token or a device on which they got the second code – usually a phone.

Where is it Used?

Two-step authentication can be used for any online purchase using cryptocurrencies. They are often used when users make a lot of small transactions in a row, for instance, on sites to gamble on with crypto.
BTC gambling sites often require a lot of small transactions because players keep adding funds to their accounts to make another wager. Using two-step authentication can help the players avoid accidental transfers and provides an additional layer before a payment is made, so the players can change their minds about it if they want to.

Players can also initiate two-step authentication for their crypto wallet and go through it for every transaction and payment.

Which Method to Use?

There are a few methods that can be used to authenticate the transaction. They all work based on the same principle. It’s just a matter of choosing, which is the second step in the process. Some establishments that allow BTC payments allow users to choose between different methods.

SMS

 SMS is the most common method used to authenticate a transaction using an alternate device. The user makes a payment via a site or an app, and they get a code via an SMS message. Once they enter the code, the transaction is authorized.

It’s the simplest way to do it as almost all users have a phone, and it’s a good way to ensure there are no fraudulent transactions – even if one device is lost or stolen, there’s less chance that both a computer and a phone are. Some mobile service providers charge extra for sending these codes, which is an expense to factor in.

A Code Generating App

There are many apps that can be used to generate unique codes. These are usually a combination of letters, numbers, and characters. Such apps can be synchronized with the cryptocurrency server to produce a code when a user authorizes a transaction for the first time.

These codes are valid for a set period – usually just a few minutes and if they are not used within that time, the user needs to generate another one. An advantage of this method is that it works even when there’s no phone service and no third party (such as the phone service provider) is involved. It does require the user to be a bit more tech-savvy.

An Email

A code can also be sent via email, and many sites use this method. The code can be sent in the body of an email, or an email can contain a link that will lead to a site that generates code. It’s usually a short numerical code.

This approach also has downsides since an email is the easiest to hack out of all the other vessels we mentioned. Often, the email isn’t protected as it can be, and if your device is stolen, there’s a chance that both your BTC account and the email are compromised.

Hardware Security Tokens

Hardware security tokens are rarely used for two-step authentication, but they are one of the most effective tools out there, especially for BTC gambling. They are small hardware devices connected to the server used to make cryptocurrency transactions. The users press a button on this device and authorize the transaction. The device is often as small as a USB drive.
Such tokens are the most expensive out of all the devices we mentioned, given that they have no other uses other than approving transactions. They are the safest since they can’t be hacked and can only be used to confirm an action started from another device.

Push Notifications

Push notifications are another standard method of confirming a transaction as a part of a two-step authentication. The code is delivered to a user via a push notification on their phone. The code is also a string of numbers and letters, the same as with an SMS message. It’s a more convenient way to do it since it doesn’t always require a phone number.
The same issues that trouble the use of SMS codes also apply to getting a push notification. The phone battery can die at the wrong time, phones can be stolen, and it’s even easier to accidentally read someone’s notification than an SMS or an email.

Biometric Confirmation

This is the latest addition to the security protocol, and it’s not yet widely used; some users even avoid it. However, the technology is there, and it’s safer than most alternatives, so it’s bound to catch on. The confirmation is done by providing some sort of biometric data. It can be a fingerprint or a facial or retinal scan.

It is one of the safest ways to confirm a cryptocurrency transfer. There’s no way for anyone to steal or copy this data. However, besides the novelty, there’s also a downside: the user needs a device to read it. In most cases, it’s an app used from a mobile device.

Two-factor authentication is Just a Beginning

From the user’s point of view, two-factor authentication is one of the most important security measures for using cryptocurrencies, but it’s not the only one. Many others are equally useful in case there’s a breach and that are not public-facing.

It includes encrypting the data and keeping a ledger of transactions that are written into the blockchain so it can’t be erased or changed. Combined with the 2FA, these make crypto transactions safer than the use of any fiat currency.

Conclusion

Two-factor authentication is a security measure used to confirm a cryptocurrency transaction. It can be used for any BTC transaction as well, but it’s common in industries such as gambling, where many small transactions are executed. The concept is simple – the user must authenticate the transfer via two devices. One is proof that the user has the password, and the other is proof of possession. It limits the chance of fraud and errors.

There are many ways to do that, and all have their upsides and downsides. The most common is via an SMS or email, but using specific devices and biometric data is also possible.