Keeping Your Bitcoin Stash Safe
At the very onset of the cryptocurrencies, owning one was a great experience. Today, however, investors and prospective investors alike face myriads of fears, instability, and risk. This fear is not just abstract or theoretical because new threats and scams come up daily and the old ones resurge all the time.
These might come as a fake wallet set up to trick users, a phishing attempt to steal private cryptographic keys and signatures, or counterfeit schemes springing up daily promising colossal return on investment (ROI). In all, there is something to watch out for at every turn.
Bitcoin can give that feeling of security because it is decentralized, and all its transactions are anonymous. It also confirms everything on public and tamper-resistant Blockchains. But this does not make it less vulnerable to scammers and fraudsters who rely on malicious activities to cheat others of their fortunes.
Tips for keeping your Bitcoin Secure
When one thinks of the storage of Bitcoins, what typically comes to mind is having a Bitcoin wallet. A wallet is your digital strong room to keep your Bitcoin fortunes safe. A Bitcoin wallet is equivalent to the physical wallet or bank account.
There are two main types of wallet:
a. Software wallet: this is the one you install on your computer or phone of a different operating system. You are in complete control of the safety and maintenance of this wallet.
b. A web wallet or hosted wallet: this is one that is hosted by a third party. They are often much easier to use, but you have to have trust the provider for maintenance and security of your bitcoins.
For beginners, four main wallets are recommended:
A few simple steps can help to keep your Bitcoin stash or wallet safe and guard against hacker attacks. Just as when you keep your other valuables and would not want to lose them, it will pay off if you apply the same effort to keeping your Bitcoin stash safe.
Cold or Hardware Wallet:
One of the best ways to protect your Bitcoins is to store them in your hardware wallet using a physical device like a USB drive. All the important credentials such as the private cryptographic keys and signature should be stored in this device locally, making sure there is no access to the internet.
Storing your Bitcoins in your smartphones or computers which has access to the internet makes it vulnerable to attackers. They can infiltrate your phone or computer’s wallet and find all the necessary information to loot you.
There are also secure hardware wallets available for a token. Trezor and the Ledger Nano only cost about $100 or even less, and Keepkey which is about $200 has a straightforward setup. All you need to do is to choose a PIN number and recovery questions which usually is a combination of words and numbers in case you forget your PIN if or your wallet malfunctions.
Also, make sure copies of your PIN and all recovery questions are kept safe in a place where you can easily access, or better still, you could back them up in a safe storage and encrypt it. The major problem with using hardware storage, however, is the failure of the device. Electronic devices are prone to malfunction. Hence the user should be cautious in handling these devices.
Most mobile wallets are very good at storing Bitcoins as a newbie. They include desktop based wallets and the application software running on different platforms of the operating system of smartphones. These wallets store private keys for your Bitcoins safe and enable you to carry out transactions easily.
However, it is not advisable to store large amounts of Bitcoin in mobile wallets because they are also susceptible to attacks by hackers. Examples of major mobile wallets available in online stores for download are Blockchain, Xapo, BTC wallet, Luno, and Coinbase. They are capable of encrypting your Bitcoin key and signature and back them up to a web server. Many of these mobile wallet providers also run web-based services that are the same as the mobile wallets.
This is one of the cheapest and safest ways to use wallets. The essential feature of the paper wallet is the integration of QR codes. There are several websites offering this service. They generate a Bitcoin address and create images containing two QR codes. One is the public address which you will you use to receive bitcoins, and the other is a private key you will use to send Bitcoins to others.
One major advantage the paper wallet has is that it does not store your private key over the web. Therefore, they are devoid of the attacks or hardware failure that could result from using mobile and cold storage respectively.
Security of your Wallet and Bitcoins
• Use encryption
A strong password which combines numbers, alphabets and special characters is the best way to keep your Bitcoins from inquisitive eyes. This makes it difficult for others to have access to your bitcoins. However, if your computer or smartphone is compromised by malware or a Trojan, hackers could access and steal your login information.
• Backup your necessary login details
Human errors are also the reason why users forget their login details. The biggest threat to losing your Bitcoins is you, and the best way to counter this is to have a backup of your login private key and signature. One of the most secure ways this is done is via the web. The regular email which you used for the confirmation of your account setup automatically saves your wallet address. You could also save some of your important information in your mailbox.
• Don’t reveal your Bitcoin business
It is no one’s business how large your Bitcoins are; this information is private and peculiar to you and people should know this. It should also be noted that just because an individual possesses Bitcoins does not make him a millionaire. Revealing your information to others and even bragging about it in social media only makes you vulnerable and a sure target by dubious and malicious individuals.
• Double-check URL’s
It is not a good idea to manually type the address because those alphanumeric combinations are case sensitive. It will be better if unknown hackers steal your Bitcoins than for you to blast off your Bitcoins into an unknown destination.
• Spread the risk
If you must engage in trading activities, it is not advisable to keep all your Bitcoins in your trading wallet, because of the risk associated with it. For instance, if you own $5000 worth of Bitcoins and you want to trade
$200 out of the total, it will be wise of you to save the untraded portion, which is $4800 in an offline wallet to prevent theft from hackers. A wallet that you are totally in control of such as Trezor and Ledger Nano is often advised for you to store your Bitcoins. As a rule of thumb, your large quantities of Bitcoins should be stored in a hardware wallet.
• Double-check addresses before making transactions
There have been reports of scams which diverts funds from user’s mining rigs to malicious wallets. This usually happens when the victim forgets to change their login credentials. There are other reports where a malicious Trojan called CryptoShuffer stole thousands of dollars by creeping around on computers and spying on Bitcoin wallet addresses that land in copy and paste click boards. So, it’s important for you to double check before making the final decision of sending Bitcoins.
It is presumed that Bitcoins have a strong security in itself. However, this is not an absolute truth. Its security has been compromised by unscrupulous activities from men of the dark web. The user has to find a wallet that provides the best services of storage and maintenance of their Bitcoins if they are using smart applications and web wallet.
These service providers have done and are still doing their best to ensure thorough security. However, men of the dark web have not relented in their activities to thwart these efforts. The users of cold storage should ensure proper care in order not to damage their wallets.
Make sure to never disclose your wallet credentials to anyone. These credentials should also be backed up in case of humanistic errors or encrypted to disillusioned spy agents. Users should remember that their bitcoins cold wallets are electrical devices and hence could be subjected to failure at some point. Malware and cases of transacting to a wrong or incorrect wallet address can also be avoided.
In all, the safety of your Bitcoins hinges on your ability to adhere to simple precautions. Because new scams come up all the time, you must remain diligent in your efforts to keep educating yourself. A wise Bitcoin user will keep abreast of the latest developments and techniques to effectively handle storage and prevent intruders and hackers from gaining access to their Bitcoin wallet.