How Do You
Securely Store Bitcoin
and Other Cryptocurrencies?

2017/10/27

Are you worried that you will lose your Bitcoins and crypto money for some reason? It’s normal to think that. If you’re wondering how you can lose your crypto money, here are some possible situations:

  • You lose your unencrypted device (desktop, laptop, or phone).
  • A virus scans your hard disk and finds your private key after you download something odd.
  • Your email provider loses its user database and some guy buys it, hacks your email, and steals your email-accessed crypto money.
  • A virtual exchange scam disappears with your crypto money.
  • You authorize a fraud blockchain.info site (e.g. blochchain.info) to deal with your bitcoins.
  • When you’re trying to pay for something, a Trojan virus encrypts your hard disk, locking your bitcoins in it.
  • An advanced keylogger reads your private key/email address.
  • Some government intel agent takes advantage of a backdoor pass to civilian OS.
  • You transfer cash to a smart contract that supposedly does A, but it does B.

What you need to remember as a cryptocurrency user

You’re solely responsible for the safety of your Bitcoins, altcoins, and other crypto money. Nothing and no one will be able to help you if you do something wrong that leads to you losing them.

Lucky for you, you can do something to protect your bitcoins and altcoins better. If you handle your bitcoins the right way, malicious entities will not be able to steal your crypto money.

A general advice: Improve your computer knowledge

A specific advice: Strictly follow instructions on crypto transactions without unnecessary actions

Keeping your crypto money in wallets

The first, most basic, and most important rule in handling bitcoins and other crypto money is…

BE CAREFUL WITH YOUR PRIVATE KEY.

When you want to use wallets, be wise in choosing your crypto wallet service provider, whether it uses a web platform or an app platform (hot wallet).

You can also opt to do the following:

Method 1 – Solely use cold storage (offline wallet)

You can use the following storage items as cold storage for your crypto money.

  • USB drive
  • Paper wallet
  • Physical cryptocurrency (e.g. notes)
  • Offline hardware wallet

Method 2 – Use multiple wallets

There are two factors crypto wallet users should take into account in using their crypto wallets: transaction volume and transaction value.

Transaction volume is the number (or rate) of crypto transactions you make. This can range from multiple times a day or less frequently. What passes as high- or low-volume is purely relative.

Transaction value is the value of the cryptocurrency transferred per transaction you make. There’s no definite number that represents “big value”. For easy reference, you can define “low transaction value” as less than or equal to the amount of money you would be comfortable carrying around as pocket cash. Anything larger than that can pass as high-value.

Use the following crypto wallet types for certain transaction behaviors

Mobile Wallet

  • If you make high-volume, low-value transactions
  • Your crypto money will be accessible all the time as long as your phone has power
  • If your smartphone is good and your OS is updated, your crypto money will be secure
  • Back your seed phrase on a piece of paper and keep the paper somewhere secure

Hardware Wallet

  • If you make high-volume, high-value transactions
  • These devices look like USB sticks and store your private keys on specialized chips, similar to iPhones’ secure enclave
  • Hardware wallets won’t be affected by computer or phone hacking
  • These can cost quite an amount of money, from $30 to $100
  • Like mobile wallets, these also need seed-backing on a piece of paper

Paper Wallet

  • If you make low-volume, high-value transactions
  • Useful if your savings are in Bitcoin and needs no frequent spending or moving
  • A document containing all data necessary to generate X private keys, forming a wallet of keys.
  • One way of using this securely is to use this on a computer that wipes out all memory after use.
  • Seed-backing is also required

Online Wallet

  • If you make low volume, low-value transactions
  • Normally in the form of a website platform.
  • Accessible as long as you have an Internet connection.
  • Most useful when you need to access your bitcoin through other devices.
  • Can be accessed using an email address and a password.
  • A strong password and a password manager would be useful in managing online wallets
  • Consider online wallets that have extra layers of security like two-factor authentications and captchas.

How to Secure Your Wallet

1 – Store little amounts of crypto money in your wallet

The most preventive way to secure your wallet is to not store huge amounts of crypto money in it in the first place. You can store small amounts of crypto money in your wallet for easy access. On the other hand, you must store the crypto money you won’t use in a safer environment.

2 – Backup your wallet

Another security method is backing up your wallet. A backup of your wallet must be stored in a safe place. It can protect you from computer failures and a lot of human error. Backing up also allows you to recover your wallet after your access device (mobile or computer) is stolen, assuming that your wallet is kept encrypted.

Tips in Backing Up Your Wallet

Backup your entire wallet – There’s a chance that you won’t be able to recover a huge part of your wallet funds using your backup. This can happen if you only have a backup of the private keys for your visible crypto addresses. If you don’t know yet, some wallets internally use many hidden private keys. It won’t hurt to be thorough with your security practices.

Use many secure locations – If your backup is stored in multiple locations, it’s less likely that any mishap will stop you from recovering your wallet. Try using different media like USB keys, CDs, and papers.

Make backups regularly – Back your wallets up regularly to make sure that all recent Bitcoin address changes and all the new Bitcoin addresses you made are included in your backup. This may not be necessary in the near future since wallets that need only a one-time backup will be used soon.

Encrypt your online backups – Online-stored backups can are vulnerable to theft. Even computers that are merely connected to the Internet can be as vulnerable. Encrypting a backup that’s exposed to the worldwide network is definitely a good security measure.

3 – Encrypt your wallet

You also have the option to encrypt your wallet or your smartphone for further security by setting a password for people who want to withdraw your funds. This protects you against thieves but not from keylogging hardware or software.

Tips for Encrypting Your Wallet

Use a strong password – Passwords that contain only letters or typical words are pretty weak and easy to break relative to hackers’ standards. Use a password that contains at least 16 characters’ worth of letters, numbers, punctuation marks, and other symbols. The strongest passwords used are created by programs specifically created to produce them. Since strong passwords are hard to decode, it’s no surprise that it’s hard to memorize. Thus, take time memorizing your strong password before actually using it.

Never forget your password – if you forget it, you will be locked out of your wallet for an indefinite time, if not permanently. There are very few password recovery options with Bitcoin and other cryptocurrencies. Passwords are so important in crypto that you’re expected to remember your password even after many years without touching it. Having a paper copy of your password stored inside a vault or any safe place is a good idea.

4 – Use multi-signatures

Bitcoin includes a multi-signature feature that requires transactions to be approved from multiple points to be settled. This system allows members to access the treasury while only allowing withdrawals that are signed by a certain number of members. Some web wallets use this to allow the user to control their money while preventing thieves from stealing the funds by tampering with a single device or server.

5 – Keep your software updated

The latest versions of Bitcoin software lets you benefit from crucial security and stability fixes. Updates can prevent problems, from neglectable to severe, and offer new features that can improve service and security.

Conclusion

If you neglect your Bitcoins and other cryptocurrencies, you can lose them forever. You need to create a backup plan to make sure your Bitcoins successfully serve their purpose in your life. If you have no way to determine the locations and passwords of your wallets, they’re gone forever. Spend a little more time in protecting your crypto assets and you’ll see the huge difference when it comes to security.

Sources

https://medium.com/@nellsonx/how-to-properly-store-bitcoins-and-other-cryptocurrencies-14e0db1910d
https://www.expressvpn.com/blog/secure-your-bitcoins/
https://www.coindesk.com/information/how-to-store-your-bitcoins/
https://bitcoin.org/en/secure-your-wallet