Protect your bitcoin wallet

How To Protect Your Bitcoin From Hacking?

How to protect my Bitcoin is probably the hottest question today. With cryptocurrencies becoming ever more valuable, a significant increase in hacking attempts has been observed of late. And, with Bitcoin being the most popular crypto coin available today, there are serious concerns in investors on how secure Bitcoin is.

Remember, once your accounts have been compromised and hackers manage to claim their control, it’s just a matter of seconds for them to rob you of all your Bitcoin. So, that’s probably why you should be proactive and must know how to protect your Bitcoins and other cryptocurrencies you own. In addition, you need to keep a regular check on your Bitcoin wealth to make sure it is where it should be.

With that being said, it’s not too difficult, however, to keep your Bitcoin away from the reach of hackers. All you have to do is to implement some simple Bitcoin security tips and you can easily ensure the safety of every single Bitcoin you own. However, before we get into that, let’s first try to find out the working mechanism of Bitcoin wallets.

How Bitcoin wallets actually work

First and foremost, Bitcoin isn’t some physical commodity that you have to store somewhere safe. Bitcoin isn’t some object; rather it is an address on Blockchain that is stored after encryption.

When you are in possession of a Bitcoin, you actually have a particular unique key which can be used for unlocking a certain Bitcoin location. So, you have to protect that key by keeping it in a reliable wallet so that someone can’t steal it away.

Now, coming back to Bitcoin security, there are several ways of storing your cryptocurrency and ensuring that hackers stay away from it at all times. Let’s check out what options do you have.

Bitcoin security guide for keeping your wealth safe

This Bitcoin security guide shares some of the most secure options you can rely on for keeping all your Bitcoin safe at all times. You can even use these options in combination to ensure maximum protection.

1. Always have a backup

Regular backups of your Bitcoin wallet will ensure that you have your Bitcoin keys safe with you in a second location should something goes wrong. With a regular history of your backups, your currency can easily be recovered from your digital wallet. You should backup each and every wallet.dat file and keep it somewhere safe. For added security, keep the backup in multiple locations and guard it with some solid passwords.

2. Keep software updated

If you’re concerned about Bitcoin security, make sure that your wallet software is updated. But if it’s not, your Bitcoin would potentially be a very soft target for the hackers. Wondering how the latest software can protect your Bitcoin?

Well, it comes equipped with a better overall security system and can offer better security against the latest hacking techniques being implemented. Besides, any security glitches are also patched in the latest security protocols and it can certainly help keep the most seasoned hackers away from your Bitcoin.

3. Have 2-factor authentication in place

Activating 2-factor authentication on your Bitcoin wallet is, probably, among the very first steps you should take for ensuring better safety of your Bitcoin. With 2-factor authentication activated, you’re sure there’s an added layer of security that hackers would have to bypass in order to access your Bitcoin.

Image by Google Authenticator app

Also, no one would be able to access your cryptocurrency unless they have access to your phone as well. It’s, probably, among the initial advice when someone asks how to protect my Bitcoin and the option is available with almost all major cryptocurrencies.

4. Use multi-signature

Multi-signature is quickly getting popular as a source of added security for Bitcoin. It requires several people to approve a transaction before it is actually carried out. As a result, the threat of Bitcoin being stolen is minimized as there’s not a single server or controller that can carry out Bitcoin transactions. You’re required to specify the people authorized to transact at early stages of the process and when a transaction is initiated by one of them, other authorized individuals must approve it before it can actually happen.

5. Encrypt the Bitcoin wallet

Encrypting your Bitcoin wallet is also a source of enjoying added security. When you are dealing with encrypted files, folders or messages, you must have the right key for unlocking it and accessing everything inside. So, when you encrypt your Bitcoin wallet, it means that anyone trying to access it would need the right key or password to be able to do so. When you are using mobile, hardware or desktop wallets, encryption becomes imperative for protecting your Bitcoin.

6. Use secure devices to access your Bitcoin accounts

Probably one of the most important Bitcoin security tips, you really need to understand the importance of accessing your Bitcoin accounts only from the most secure devices. Never use public Wi-Fi networks or public computers to use your Bitcoin accounts or to make any transactions. Doing so will ensure that nobody can ever know your password and use it for stealing away from you.

Furthermore, rather than downloading different applications directly, you should only be using official sources for moving your Bitcoin or checking your account. Doing so will ensure that your Bitcoin, and other cryptocurrencies for that matter, remain protected.

7. Rely on cold storage

When we talk about Bitcoin, cold storage actually refers to keeping your Bitcoin stored in a safe location offline. There can be different options that you can try in this regard and they include:

• USB drives or any other offline storage media
• Bearer items like physical Bitcoin
• Paper Wallet
• Offline Bitcoin hardware wallets

Image by commons.wikimedia

The most popular cold wallets for today are Ledger and Trezor. They are made in the form of devices that resemble flash drives. They are convenient to use because they allow you to easily store and transfer hundreds of cryptocurrencies. In this case, the level of protection will be really high. The price today seems fairly affordable and doesn’t exceed $100 for the previous years models.

If you’re concerned about how to store Bitcoin on any of these offline storage options, you’ll have to explore them further. However, rest assured that there’s nothing too difficult about it and you’d be able to do without much of a hassle.

So, hopefully, this Bitcoin security guide will help you in keeping your Bitcoin safe and away from the access of hackers. Just make sure you implement the above security ideas to perfection. In fact, using a few of them in combination would turn out to be an even better idea.

And, once you do that, you can easily focus on your Bitcoin trading and making more money than ever without having to worry at all about those hackers and other such elements who are always on the verge of robbing you of your Bitcoin and other wealth you may have in the form of different cryptocurrencies.

George Shnurenko is a Bitcoin and cryptocurrency enthusiast, financial analyst and writer. He’s majoring in history but he believes that the digital currency which has taken the world by storm will bring about change to all us humans.

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Protect your privacy

Bitcoin is often perceived as an anonymous payment network. But in reality, Bitcoin is probably the most transparent payment network in the world. At the same time, Bitcoin can provide acceptable levels of privacy when used correctly. Always remember that it is your responsibility to adopt good practices in order to protect your privacy.

Understanding Bitcoin traceability

Bitcoin works with an unprecedented level of transparency that most people are not used to dealing with. All Bitcoin transactions are public, traceable, and permanently stored in the Bitcoin network. Bitcoin addresses are the only information used to define where bitcoins are allocated and where they are sent. These addresses are created privately by each user’s wallets. However, once addresses are used, they become tainted by the history of all transactions they are involved with. Anyone can see the balance and all transactions of any address. Since users usually have to reveal their identity in order to receive services or goods, Bitcoin addresses cannot remain fully anonymous. As the block chain is permanent, it’s important to note that something not traceable currently may become trivial to trace in the future. For these reasons, Bitcoin addresses should only be used once and users must be careful not to disclose their addresses.

Use new addresses to receive payments

To protect your privacy, you should use a new Bitcoin address each time you receive a new payment. Additionally, you can use multiple wallets for different purposes. Doing so allows you to isolate each of your transactions in such a way that it is not possible to associate them all together. People who send you money cannot see what other Bitcoin addresses you own and what you do with them. This is probably the most important advice you should keep in mind.

Be careful with public spaces

Unless your intention is to receive public donations or payments with full transparency, publishing a Bitcoin address on any public space such as a website or social network is not a good idea when it comes to privacy. If you choose to do so, always remember that if you move any funds with this address to one of your other addresses, they will be publicly tainted by the history of your public address. Additionally, you might also want to be careful not to publish information about your transactions and purchases that could allow someone to identify your Bitcoin addresses.

Your IP address can be logged

Because the Bitcoin network is a peer-to-peer network, it is possible to listen for transactions’ relays and log their IP addresses. Full node clients relay all users’ transactions just like their own. This means that finding the source of any particular transaction can be difficult and any Bitcoin node can be mistaken as the source of a transaction when they are not. You might want to consider hiding your computer’s IP address with a tool like Tor so that it cannot be logged.

Limitations of mixing services

Some online services called mixing services offer to mix traceability between users by receiving and sending back the same amount using independent Bitcoin addresses. It is important to note that the legality of using such services might vary and be subjected to different rules in each jurisdiction. Such services also require you to trust the individuals running them not to lose or steal your funds and not to keep a log of your requests. Even though mixing services can break traceability for small amounts, it becomes increasingly difficult to do the same for larger transactions.

Future improvements

Many improvements can be expected in the future to improve privacy. For instance, some efforts are ongoing with the payment messages API to avoid tainting multiple addresses together during a payment. Bitcoin Core change addresses might be implemented in other wallets over time. Graphical user interfaces might be improved to provide user friendly payment request features and discourage addresses reuse. Various work and research is also being done to develop other potential extended privacy features like being able to join random users’ transactions together.

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Securing your wallet

Like in real life, your wallet must be secured. Bitcoin makes it possible to transfer value anywhere in a very easy way and it allows you to be in control of your money. Such great features also come with great security concerns. At the same time, Bitcoin can provide very high levels of security if used correctly. Always remember that it is your responsibility to adopt good practices in order to protect your money.

Be careful with online services

You should be wary of any service designed to store your money online. Many exchanges and online wallets suffered from security breaches in the past and such services generally still do not provide enough insurance and security to be used to store money like a bank. Accordingly, you might want to use other types of Bitcoin wallets. Otherwise, you should choose such services very carefully. Additionally, using two-factor authentication is recommended.

Small amounts for everyday uses

A Bitcoin wallet is like a wallet with cash. If you wouldn’t keep a thousand dollars in your pocket, you might want to have the same consideration for your Bitcoin wallet. In general, it is a good practice to keep only small amounts of bitcoins on your computer, mobile, or server for everyday uses and to keep the remaining part of your funds in a safer environment.

Backup your wallet

Stored in a safe place, a backup of your wallet can protect you against computer failures and many human mistakes. It can also allow you to recover your wallet after your mobile or computer was stolen if you keep your wallet encrypted.

Backup your entire wallet

Some wallets use many hidden private keys internally. If you only have a backup of the private keys for your visible Bitcoin addresses, you might not be able to recover a great part of your funds with your backup.

Encrypt online backups

Any backup that is stored online is highly vulnerable to theft. Even a computer that is connected to the Internet is vulnerable to malicious software. As such, encrypting any backup that is exposed to the network is a good security practice.

Use many secure locations

Single points of failure are bad for security. If your backup is not dependent of a single location, it is less likely that any bad event will prevent you to recover your wallet. You might also want to consider using different medias like USB keys, papers and CDs.

Make regular backups

You need to backup your wallet on a regular basis to make sure that all recent Bitcoin change addresses and all new Bitcoin addresses you created are included in your backup. However, all applications will be soon using wallets that only need to be backed up once.

Encrypt your wallet

Encrypting your wallet or your smartphone allows you to set a password for anyone trying to withdraw any funds. This helps protect against thieves, though it cannot protect against keylogging hardware or software.

Never forget your password

You should make sure you never forget the password or your funds will be permanently lost. Unlike your bank, there are very limited password recovery options with Bitcoin. In fact, you should be able to remember your password even after many years without using it. In doubt, you might want to keep a paper copy of your password in a safe place like a vault.

Use a strong password

Any password that contains only letters or recognizable words can be considered very weak and easy to break. A strong password must contain letters, numbers, punctuation marks and must be at least 16 characters long. The most secure passwords are those generated by programs designed specifically for that purpose. Strong passwords are usually harder to remember, so you should take care in memorizing it.

Offline wallet for savings

An offline wallet, also known as cold storage, provides the highest level of security for savings. It involves storing a wallet in a secured place that is not connected to the network. When done properly, it can offer a very good protection against computer vulnerabilities. Using an offline wallet in conjunction with backups and encryption is also a good practice. Here is an overview of some approaches.

Offline transaction signing

This approach involves having two computers sharing some parts of the same wallet. The first one must be disconnected from any network. It is the only one that holds the entire wallet and is able to sign transactions. The second computer is connected to the network and only has a watching wallet that can only create unsigned transactions. This way, you can securely issue new transactions with the following steps.

1. Create a new transaction on the online computer and save it on an USB key.
2. Sign the transaction with the offline computer.
3. Send the signed transaction with the online computer.

Because the computer that is connected to the network cannot sign transactions, it cannot be used to withdraw any funds if it is compromised. Armory can be used to do offline transaction signature.

Hardware wallets

Hardware wallets are the best balance between very high security and ease of use. These are little devices that are designed from the root to be a wallet and nothing else. No software can be installed on them, making them very secure against computer vulnerabilities and online thieves. Because they can allow backup, you can recover your funds if you lose the device.

Keep your software up to date

Using the latest version of your Bitcoin software allows you to receive important stability and security fixes. Updates can prevent problems of various severity, include new useful features and help keep your wallet safe. Installing updates for all other software on your computer or mobile is also important to keep your wallet environment safer.

Multi-signature to protect against theft

Bitcoin includes a multi-signature feature that allows a transaction to require multiple independent approvals to be spent. This can be used by an organization to give its members access to its treasury while only allowing a withdrawal if 3 of 5 members sign the transaction. Some web wallets also provide multi-signature wallets, allowing the user to keep control over their money while preventing a thief from stealing funds by compromising a single device or server.

Think about your testament

Your bitcoins can be lost forever if you don’t have a backup plan for your peers and family. If the location of your wallets or your passwords are not known by anyone when you are gone, there is no hope that your funds will ever be recovered. Taking a bit of time on these matters can make a huge difference.

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