One of the biggest digital assets, Bitcoin, has its own list of stories of thefts and breaches. With its value shooting up to $2900+ this year, it’s very obvious why everyone including cyber criminals shows interest in Bitcoin. Either by asking BTCs in ransomware attacks or looting your wallets, hackers try their very best to get bitcoins.
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For example, last year, hackers stole bitcoins worth millions of dollars just by using the victim’s phone number. And this is just one story from a long list, actually.
With this in mind, it’s extremely important to secure your bitcoins. And if you ask me, you must adopt some processes and take various precautions to be sure your BTCs are safe.
Alright, let’s talk about the tips and tricks to safeguard your BTCs. And do remember to implement them in your daily life — these aren’t going to help you otherwise.
Why Securing Bitcoins?
Since every aspect of bitcoins lies within the digital boundaries, it can be compromised just like any other digital asset. As the overall authority of your BTCs lies in their private keys, it can be stolen if keys aren’t secured. Although Bitcoin wallets provide a lot of protection yet it’s best to take some extra steps to harden its security.
It’s also because a theft or a hack can happen due to even a smallest bug or loophole — say in the wallet’s code or in your process of safekeeping bitcoins. And a small mistake may lose you a fortune, which you don’t want for sure (as you’re reading this article, right?).
Let me tell you few examples of worst bitcoin thefts from the past:
- Mt. Gox’s Hack (2014): More than 744k BTCs worth $350 million (per that time’s exchange prices) was stolen from Mt. Gox exchange of Japan. An additional loss of $55 million in fiat currencies was known but unconfirmed at the time of the hack.
- Bitfinex Exchange’s Hack (2016): Almost 120k BTCs worth $60 million (at the time of the hack) was stolen from the Bitfinex exchange based in Hong Kong.
Bitcoin Security Tips
Here are some useful tips you can apply to safeguard your bitcoins against hacks and thefts:
Use strong passwords
I know you must’ve heard this tip before, but as people hardly follow this rule, I thought to remind you of its importance.
A strong password is like a powerful shield that guards you from brute-force and other such attacks, and thus prevents the attacker to access your encrypted data. That’s what makes it so important to set up a strong password for your crypto holdings.
In case you don’t know, a strong password is the one that contains letters, numbers, and symbols and must be at least 16 characters long — the longer the better, actually. I know that remembering passwords is even trickier than remembering people’s names, and that’s why, I always suggest to write down passwords on a paper sheet and keep it somewhere safe.
You can check your password to know its potential. Additionally, there are various tools that generate strong yet memorable passwords for you, which you can use to better protect your assets. However, do remember to avoid using digital password managers and store your passwords using pen and paper only for the best security of your crypto holdings.
Encrypt your wallets
Since any Bitcoin wallet is a sensitive app as it stores details of your funds, you should encrypt it using a password to avoid anyone getting access to your money. Though every wallet offers some security features yet you must research about wallets before starting to use one. If you’re in a hurry, just choose one of these secure Bitcoin wallets.
Do note, however, that password-protecting and encrypting your wallet will protect your bitcoins against thefts, but it doesn’t protect against keylogging and other advanced types of attacks like brute-forcing the password or installing a backdoor in to your system.
Backup your wallets
A wallet is like your bank account or a locker — it’s secure if nobody has its access but it’s safe only when nobody can tamper with it. If your wallet is properly backed up, then you can recover it even after it’s lost, corrupted, or crashed. Having a backup of your bitcoin wallet will protect your money from system failures and other similar blunders.
For the best safety, you need to backup the entire wallet including its private keys and other info about your bitcoin addresses. If you keep the backup of just private keys, then you might be unsuccessful to recover some part of your funds. That’s why, backing up the whole wallet in different places is the best way to keep it safe from digital faults.
Additionally, you can encrypt the backup as well using a good encryption tool and a long and strong password. This will ensure nobody can use your backups even if someone gets access to them. And don’t forget to make backups in different places like pen drives, and external hard drives, etc. Also, do backup at regular intervals to secure your latest funds.
Let me introduce you to a few methods to backup your bitcoin wallet:
- Backup wallet.dat: One of the methods is to backup the wallet.dat file which is used by various wallet software. This file preserves data about addresses and their keys, information on transactions, and metadata such as contacts.
- BIP 32 wallet: It’s a wallet that creates a seed key which is later used to create your wallet’s public and private keys. That means, having the seed key, you can later restore your wallet even if you lose access to it due to any theft or crash. The most popular wallets supporting this feature are Electrum and Carbon Wallet.
Some bitcoin wallets feature a multi-signature option that allows multiple persons to own a single address or a single wallet unlike the well-known single-person wallets. When you want to transact your bitcoins, then the signature of the complete party is required to initiate the transaction. That means better security than single-person wallets.
While creating the wallet, the number of signatures can be configured depending on the number of persons you wish to divide the authority between. For example, these signatures can be from your business partner or from a second device you own. Thus, even if someone get access to your private key, he can’t steal your money without other keys.
Multi-signature, however, is not yet supported by every wallet but yes, the support will grow over time. There are also a few web wallets those allow multiple signatures, letting you control your money and preventing a fraud from thieves looking to take control of your funds by stealing your key or hacking or negotiating an individual device or server.
Below are few of the bitcoin wallets that allow multiple signatures:
- Blocktrail: Now owned by BTC.com, it’s a robust, multi-sig wallet service for web and mobile platforms including Android and iOS.
- Coinbase: Well-known as an crypto-exchange, it also offers an easy-to-use web and mobile wallet with various features including multi-signatures.
Use hardware wallets
Everything digital poses a security threat, and anything connected to the Internet poses a greater security threat. That means, the software wallets you use may not be as secure as they tell you — it’s by design. For example, if hackers come to know of a bug in some wallet, they can leverage it to crack open that wallet and steal people’s coins.
A hardware wallet, however, provides more security in these type of scenarios as it’s not always connected to the Internet unlike your computer having software wallets. Let’s visualize the old example again with a hardware wallet — hackers may come to know of a bug but won’t be able to access your wallet as it requires physical access first.
Moreover, hardware wallets promise highest security measures to protect your funds from unauthorized access. For example, a good hardware wallet may verify your transactions physically by requiring you to press a hardware button. Owing to such measures, it’s hard for hackers to access the funds until they get physical access to your hardware wallet.
- TREZOR: It’s the first hardware wallet for Bitcoin, and now supports various altcoins including Litecoin, Ethereum, Ethereum Classic, Dash, Zcash, etc.
- Ledger Nano S: It’s a small, thumbdrive-sized hardware wallet that can backup accounts on recovery sheet and store Bitcoin, Ethereum, and other altcoins.
Use paper wallets
Paper wallets are one of the cheapest ways to keep your coins safe. The advantage of using a paper wallet is, its private keys aren’t stored anywhere digital. Since, private keys prove the authority of the BTCs, hence, paper wallets can’t be attacked and your coins remain safe. That’s why, these are chiefly used to store huge amounts for long-term.
The paper wallets also creates two QR codes — a public code for the public key to receive bitcoins and a private code for the private key to spend bitcoins stored in it.
However, it’s not possible to spend a fractional amount from paper wallets. You must swipe the entire amount of the paper wallet into a digital wallet using its private keys. And then that paper wallet can no longer be used as you’ve already transferred all of its coins.
And if you ask me, these are few, working paper wallet tools for bitcoins:
- Bitcoin Paper Wallet: It’s one-of-its-kind beautiful, easy paper wallet generator that allows users to generate their own paper wallets in offline mode.
- BitAddress: It’s a simple, open-source paper wallet generator which can also be used offline by downloading the files from its GitHub repository.
- WalletGenerator: It’s another open-source paper wallet generator for Bitcoin and its various forks as well as altcoins including LiteCoin, Dogecoin, etc.
Feel Safe Yet?
Though the bitcoin currency and its wallets are built to be secure enough to protect your finances, the same can’t be said for your computer, especially when it comes to the third-party programs. And any breach in your computer can result to a breach in the wallet, hence it’s better to take the control in your own hands, and take necessary precautions to protect your coins.
These tips and tricks will add additional layers of protection to your bitcoin wallet, and make it difficult for hackers and cyber criminals to steal your worthy bitcoins. I’ll suggest to always create paper wallets for safe-keeping large amounts of bitcoins or for long period of time. And do remember to note down your private keys a sheet of paper or a diary.
What’s your mantra for safe-keeping bitcoins? Did you find these tips & tricks helpful for keeping your coins safe? Please share your story with me using comments.
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