Every user of Bitcoin would want to be assured that their assets are safe. Nearly everyone is aware that this asset needs internet connection to use, when you factor in the reality that there are many malicious players that strive to steal your bitcoins, you wouldn’t but agree that protecting them is of great import.
So how do you protect your bitcoins? There are several precautionary measures that you need to take to ensure that your coins are not lost. We shall examine them presently.
First, let us look at the threats that you face when you own bitcoins and how to surmount them. The fundamental risks associated with owning bitcoins has to do with the human angle of storage, transferring or retrieving the cryptocurrency.
Bitcoin is stored in wallets that are dedicated to it. There are multi wallets that store BTC and other cryptocurrencies. Bitcoin wallets have private and public keys which the owner must store securely if their wallets would not be compromised.
Public keys are the string of numbers and alphabets that you can exhibit to the public when you are making a transaction while private keys are never exposed. However, hackers work very hard to ensure that they access the private keys of users who are less discreet in using them. If this happens, the owner invariably loses their coins.
To prevent this, private keys must not be stored anywhere that they could be accessed by third parties. Fraudsters usually use phishing sites that demand that users import private keys, hoping that uninformed bitcoin holders would be lured to do this. It is important that private keys are protected at all costs.
Another precaution that could be taken in protecting bitcoins in storage is by avoiding using the same Bitcoin address repeatedly. Some BTC wallets automatically generate a new address after each transaction. This is to protect the funds in the wallet.
Another step is to avoid storing your private keys as a plain text or even sending your coins to a new wallet that cannot be traced to your previous transaction history. This can be done through the use of blenders.
Bitcoin mixers or blenders are software that obfuscate the transaction history of a wallet by dissociating it from another. They can be used to ‘mint new bitcoins’ in a sense because the history coins that the person receives cannot be traced, so they are like new.
They can be used to safely store your coins by sending them to the mixer which blends them and sends the new coins to another wallet that you own. Ideally, this should be a wallet that you have not used for transactions.
A good blending service such as Bitcoinmix.org would do this. The outcome is that you have a wallet that has never been used for transactions holding your bitcoins.
This method of storage should be used for large amounts of bitcoins that the owner doesn’t have immediate use for.
Offline Storage of Coins
Cold storage is considered the safest way of storing your coins. This is essentially keeping them in a state where they’re not linked to the internet. Some standard cold storage methods are paper wallets and hardware wallets, Paper wallets have the setback of not being as safe as hardware wallets because the paper could be damaged.
Hardware wallets are devices that can be plugged to computers to retrieve your coins. These devices primarily store your bitcoin offline. Some of the popular hardware wallets are Trezor and Ledger wallets. Although they do not come cheap, everyone who has a substantial amount of bitcoins should invest in them.
Limits of Mobile Wallets
Mobile wallets are convenient because they are always with you. This makes it easy for you to access your BTC on the move, but they have a safety issue. A phone could be lost at any time, thus exposing the wallets to the intrigues of malicious players. This is why you must never put all your bitcoins in a mobile wallet.
A mobile wallet should be utilized the way you use your fiat wallet – storage of a small amount of money that you would need for the day. This would prevent you from losing your bitcoins when your phone is lost.
There are risks associated with Bitcoin transactions. These include sending to wrong addresses due to user mistakes and sending to wrong addresses due to bugs or malware.
User Error Transfers
It is important that wallet addresses are cross checked to make sure that transactions are being made to the right wallet. Bitcoin transactions cannot be reversed, so sending to wrong addresses result in irreversible losses.
Wrong Transfer Due To Bugs
Hackers sometimes use malware to steal bitcoins of users who do not take necessary precautions. Bugs such as clipper malware can change the destination address of a wallet to that of a hacker, if unnoticed, the sender sends the coins to the hacker’s address which imitates the destination wallet’s at the beginning of the string and at its end.
This is why it is important to double check the address before sending.
To prevent bugs such as clipper malware it is important that you update your operating system regularly. Makes sure that computers used in making BTC transactions are secured with antivirus.
Retrieving Bitcoins Safely
Apart from your private key, another important step in securing your bitcoins is the recovery phrase or seeds. These are necessary in case you’re locked out of your wallet due to one reason or the other.
These words seeds be stored safely at places that are off the internet. The best strategy should be writing them down on a piece of paper and not store them online or on your computer.
If you forget the password of your wallet or for whatever reason could not access your wallet, this is the easiest way to recover it. Furthermore, it is bad practice to let third parties open a Bitcoin wallet for you. Anyone in control of your recovery seeds is in control of your wallet. Just like the person who has access to your private key.
Use of Hot Wallets
Hot wallets are those that are connected to the internet such as web wallets, mobile and desktop wallet. These are the most vulnerable to hacking, so they should be used to store smaller amounts of BTC. Huge volumes should be stored offline.
Avoid Storing in Exchanges
Cryptocurrency exchanges are meant to buy and sell bitcoins and other digital assets. They are not viable options for storage of coins because they are magnets for hackers because of the large volumes of coins that they hold.
Do not leave your coins in exchanges. You may lose them if the platform is hacked. After transacting on an exchange, move your BTC to your own wallet.