Unlike most traditional currencies, Bitcoin is a digital currency and thus intangible. This means Bitcoin does not exist in physical form. Access and spending occurs only through a Bitcoin address requiring a set of digital secure keys, a Bitcoin wallet.
The Bitcoin Wallet, also referred to as a digital Wallet, is a program that has the functions of storing, sending and receiving Bitcoins. The main objective, just like a common tangible (physical) wallet, is to store Bitcoin.
Once you purchase Bitcoin at a cryptocurrency exchange, the only way to guarantee full control and ownership of your funds is to transfer them to a Bitcoin wallet where you are the only person with access to its private keys.
In the case you decide to leave your coins on an exchange or transfer to a cloud based Bitcoin wallet, understand that you place trust in and give control to the exchange or cloud wallet operators to keep your funds safe, much like you would when depositing money at a bank.
In this article you will learn more about:
- Wallet Encryption
- Using dual authentication
- Risks associated with mobile wallets
- Operating system security
- Backing up your keys
- Keeping your information offline
- Choosing a strong password
- Risks of public disclosure
1. Bitcoin Wallet Encryption
Encryption is the process of converting data into code, preventing third parties, or the public in general, from accessing and reading it.
2. Using Dual Authentication
Google Authenticator 2FA is one of the applications designed to ensure greater security for accounts. Token software implements two-step verification services using two algorithms: Time-based and One-time, HMAC-based One-time Passwords.
3. Risks Associated With Mobile Wallets
Mobile devices are extremely widespread are already a part of daily life. As convenient as it may be to use mobile wallets, when it comes to transactions and storage of large sums of cryptocurrency, it is recommended that you avoid using these wallets.
Keep in mind that your mobile, or “virtual wallet” is like a regular wallet of money and that it may end up being lost or stolen. If it is inside your cell phone, the risk of losing your cryptocurrency can be much higher.
4. Operating System Security
Bitcoin wallets are susceptible to viruses and other types of malware that may be hosted on your device hardware. Due to this, it is recommended to continuously update your operating system and any other software you use.
5. Backing Up Keys
Another useful practice to implement in order to increase the security of your wallet is to perform frequent backups of your keys. In addition to this, you should keep offline copies. It is recommended to keep your backups in multiple secure, restricted-access locations.
6. Keeping Your Information Offline
A hardware wallet is a particular type of cryptocurrency wallet that stores the user’s private keys in a secure hardware device, while a paper wallet involves printing your private keys and Bitcoin addresses on paper or other suitable medium.
7. Choosing A Strong Password
We live in an age where everything is password protected and we tend to lose sight of the importance and need for security in protecting this information.
However, this is not acceptable with regards to with your Bitcoin Wallet. Set a long, complex password: this is the ideal password type for security seekers which includes both lower and upper case letters, numbers and special symbols.
8. Risks Of Public Disclosure
It’s worth mentioning the importance of using utmost caution sharing details about your transactions and wallet holdings in a public space.
You may be tempted sharing successful trades & wealth accumulation with friends on social media platforms.
This however, paints a clear target on your back, calling attention to potential hackers and thieves. Information can and is shared & spreads quickly on the internet.
It is much harder for a hacker to steal money from multiple wallets simultaneously, especially when the user is aware of security factors, having more than one email account, password and security phrases for each.
Diversification using multiple wallets, exchanges and unique email/username/password combinations draws less attention and keeps your options open for making quick trades while minimizing risk of loss.
As you have read, there are many ways you can protect your cryptocurrency holdings. Focusing on security, you are ensuring more efficiency while minimizing the likelihood of falling victim to malicious cyber attacks.
While it is not possible to ensure absolute protection of all digital attacks, that is no reason why you should not take advantage of the benefits and opportunities offered by cryptocurrencies.
Is our content enlightening and useful to you?
Please leave your comments below,
share your experiences and challenges in this ecosystem of digital currencies and any tips you may have learned along the way!