Millions of bitcoin are lost forever due to user error.
Blockchain technology is inherently secure but you’ll want a safe wallet with bitcoin becoming such a hot commodity. The financial sector is fraught with scams and high-profile hacks.
As the saying goes: A fool and his money are soon parted.
Many newcomers’ exploring cryptocurrency don’t understand the market and tech behind it. Investments flowed when many caught wind of its dramatic rise. They wanted a simple way in — without heavily investing their time.
Found yourself exploring bitcoin and worried about your investment? Here’s what you need to know about keeping it safe.
The Security Dangers of the Cryptotrade
The allure of cryptocurrency (anonymity) has turned investors into targets. We see headlines of bitcoin hacks frequently. Nicehash, for example, fell victim to a hack stealing more than $70 million in bitcoin.
Other high-profile hacks include:
- MyBitcoins exiting the market (with user coins)
- A loss of 24k coins on Bitfloor
- The Mt. Gox hack of over 850,000 coins
Users receive a private address when creating a bitcoin wallet. The wallet grants access to bitcoin. The key is typically paired with a seed — a 24 word set acting as a password. Else, users can create their own.
The security dangers to arise tend to happen at this level:
- A thief gets access to your password
- Someone gets ahold of your private key
- Falling victim to fake initial coin offerings
- Ransomware and phishing scams
For the average spender throwing a couple hundred into Bitcoin? The risks aren’t as high if they’re using trustworthy exchanges like Coinbase. Though, the risks are still there. Big holders, on the other hand, need to take serious precautions.
Easy Ways of Protecting Your Crypto Investments
Protecting your crypto investments run parallels to protecting your identity. It’s a matter of due diligence and security best practices.
Two-factor authentication will link your online accounts to your phone. Access to your accounts is done after the user verifies the login attempt. This still leaves you in danger if you’re the victim of theft. But, it will improve your security when purchasing cryptos and accessing linked accounts.
Your best bet is to buy Bitcoin from a clean computer. One with a fresh install or operating a robust OS like Linux. Though, if you must purchase from your phone or computer, make sure it’s clean.
Use virus removal and monitoring software to scan and block malicious files. See something fishy? Ensure you’ve done a complete virus removal and change your information, asap.
These would include:
- Not exposing a digital or written file of your key or seed
- Verifying the legitimacy of the exchange
- Monitoring transactions on the blockchain
A good rule of thumb is to avoid storing your total investment in online or software wallets. Use two wallets — one for “cold” storage (for the large investment) and a small one for doing trades.
And like with general online security… be careful what links you’re clicking and files you’re downloading.
Protecting Your Bitcoin with a Safe Wallet
There are several types of Bitcoin wallets — including:
- Desktop wallets
- Mobile wallets
- Online wallets
- Hardware wallets
- Paper wallets
Most opt for online wallets offered by exchanges like Coinbase. These are set up alongside the account. The private keys are usually kept from the user for safety concerns. However, it does raise the problem if an exchange is attacked or does an exit (taking Bitcoin with them).
Your better options for a safe wallet are paper wallets and hardware wallets.
Going Basic with Paper Wallets
A paper wallet is exactly as it sounds. It’s a piece of paper with your public and private key. Some services will autogenerate these and provide a QR code for handling transactions.
Paper wallets are safe because they don’t expose private data to the Web. A user will want to make duplicates to increase security in case they lose their sole copy. It’s even recommended keeping one in a safe or lockbox.
Going High-Tech with Hardware Wallets
The safe wallet alternative uses hardware.
Hardware wallets store private keys offline. The wallet uses a small, embedded computer to create a seed and pin to access the keys. These safe wallets display transaction reports, too.
Hardware wallets aren’t secure from theft, loss, or damage. But, your information remains intact if you have access to your seed. The seed will restore access to your key sets.
Our Recommendations for a Safe Wallet
Two hardware wallets come to mind when talking about security:
The Ledger Nano S is ideal for crypto investors reaching their security threshold. The Nano S is a small-form, cold storage device with similar form factors as a USB flash drive. It’s the recommended entry-point for those wanting the security of a hardware wallet without high costs.
Our other recommendation is the Ledger Blue.
The Ledger Blue has a touch-screen interface to monitor transactions and access data. It uses enterprise-level encryption on a dual-chip infrastructure to maximize security.
We believe the Nano S is for those investors identifying as newcomers or hobbyists. The small investment types wanting to protect their crypto coins. The Ledger Blue is for serious investors with a lot to lose if they fall victim to a cyber attack. In all, either choice is a safe bet for a safe wallet.
It’s a Long Game, Keep Them Safe
You may feel inclined to offload once bitcoin hits new records. Analysts are comparing bitcoin to tulip mania. But, we’re seeing unprecedented growth. The type of growth you kick yourself over because you got out too soon.
Play for long.
In the coming years, it won’t be that you’re investing, but whether you’ve kept investments safe. All the more reason to use a safe wallet.
Your turn: What do you expect with bitcoin and how will you stay protected? Let us know in the comments!