For a long time people have participated in activities related to the protection of items of value, such as money, fine arts, archaeological findings, jewelry, technology, and documents. We have created various institutions that provide multiple layers of security to our valued possessions, banks for our money, museums for our art and historical objects, and patent offices for our technology.
In this day and age, the ever growing presence of bitcoin promotes the need to safely store your Bitcoin. As soon as you start getting involved in the new economy, various questions should come to mind as an individual, because you are the only person responsible to take measures to effectively secure your digital currency.
Bitcoins are protected by design, but you need to take steps to ensure that your money isn’t going to simply disappear from your accounts! The reality is that you can’t really store bitcoin in any form or way, because they are deeply intertwined within the public blockchain ledger. What you’re storing are the private keys necessary to access the permission for your address.
In order to store Bitcoin you need a bitcoin wallet, and while there are many forms, for the purpose of this article we are going to focus on the safest and useful variants. The terms associated with wallet safety, are hot and cold wallets. Hot wallets can be compromised whereas cold wallets cannot be compromised by means of hacking, but are still vulnerable to conventional stealing methods. Nevertheless, both hot and cold wallets require you to take responsibility in the safety of your funds.
Hot wallets
These wallets refer to the storage of private keys on internet connected devices, even devices that have been connected only once, can theoretically be considered “hot”. Most of the Bitcoins held by the average user comes with the possibility to be compromised, especially when proper security features aren’t activated.
Cold wallets
This term refers to wallets kept safe on an air-gapped devices, which have never been connected to the internet, or through special bootable USB drives, which are considered free of malware. This way you can efficiently create paper wallets or simply transfer the private key to a USB drive, which you would keep in a safe and secret location. You could further encrypt the private key, but make sure to remember the password or write it down somewhere safe. These types of storage are still vulnerable to physical theft, so ensure that they are kept away from other people.
There are also hardware wallets, which are physical devices, created with the sole purpose of storing and transacting Bitcoin. They are not recommended for the casual user of Bitcoin, but business owners could benefit highly from these devices.
Methods of protecting your Bitcoin
As I mentioned before, one of the most efficient methods is to encrypt your private keys, and while there is still the risk that your computer might be infected by malware that tracks your keystrokes, it provides safety for your key even if your data gets stolen. Bitcoin Core is the official Bitcoin software that offers full encryption for your wallets. Just make sure to unplug your computer from the internet and choose a strong password (containing special characters, Uppercase letters and numbers) to make it increasingly difficult for hackers to succeed.
Another method to protect your wallet is Two-Factor Authentication (2FA). 2FA adds another security layer to your online wallets. Besides using your wallet ID and password, your account will now request a 2FA code, which you will access through your mobile device, usually through an app called Google Authenticator. These codes are refreshed every 25 seconds, so the possibility of a hacker simply guessing your password is about one in a hundred trillion attempts. One of the best wallets offering this type of protection is Blockchain.
One of the more popular options for business owners is to simply create multi-signature addresses, which require signing in from multiple holders, before it becomes possible to transact Bitcoin. The users could be your business partners, but you could also achieve the same effect by yourself, with a second device being the signature holder for the account. This way the would-be hacker would need to fully compromise two devices in order to effectively steal your money. For this, the best method is to use the official Bitcoin Core software.
It all comes down to your particular needs and the amounts of Bitcoin that you are holding. The general safe practice is to use secure networks, have anti-virus software, don’t use services that do not offer a 2FA feature and create backups for each and every one of your big Bitcoin wallets.
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