With the recent surge in the usage, buying and selling of Bitcoins as well an increase in Bitcoin related transactions happening all over the world, it has become more important than ever to learn what is the best and simplest way to secure your Bitcoin wallets.
You may have heard of the recent reports of hacks by hijackers who used only a mobile phone to steal millions of dollars in the form of Bitcoins.
Here are some of the actual cases I discovered recently…
I like what bitcoin.org said about wallet security…
“Always remember that it is your responsibility to adopt good practices in order to protect your money.”
Actually, when one digs deeper, it is known that the hacks can happen from a multitude of ways. For example:- email, social media, social networking and mobile phone. Not to scare you or what. You need to do the right thing in order to keep your wealth safe or else you may lose your hard earned money or in this case, Bitcoins for nothing.
Here’s what I do and you’re most welcome to follow in my footsteps:-
1. Spread ‘Em Out
Don’t keep all your Bitcoins in one place. Spread out your Bitcoins and keep small amounts for everyday uses. Think of it this way, how much of cash would you carry everyday in your wallet? $200, $300? Maybe. Would you carry $5000, or $10,000 daily? Definitely not, right?!
So, if you wouldn’t carry that much cash around, then you might want to have the same consideration for your Bitcoin wallet.
TIP: Keep small amounts of bitcoins on your computer, mobile, or server for everyday uses and keep the remaining part of your funds in a safer environment.
I usually split my Bitcoins and park them in two different online wallets. For daily usage, since I don’t use much Bitcoins, I prefer using the wallet from Blockchain.info. I like this wallet because of several factors (which I won’t cover in this post) but according to statistics, Blockchain wallet is one of the most popular and preferred wallets of all time.
For the rest of my Bitcoins, I usually keep them in a cold-storage wallet like Xapo.
Because, I personally like it. And, according to the Wall Street Journal, Xapo is known as “Building The Fort Knox of Bitcoin”
Well, that could be a little exaggerated 🙂 Hahaha. In my opinion, Xapo has a great 2-in-1 concept. You can use it like a regular online wallet to store your Bitcoins for daily usage and you can also set aside the larger chunks of your Bitcoins into a safe cold storage vault.
How safe is Xapo? The Xapo Vault incorporates multiple layers of the most advanced forms of cryptographic security to secure your bitcoins. These processes include multi-factor authentication and private key segmentation between others. So, yeah they have a cold storage vault and it’s free!
The other thing I like about Xapo is you can purchase a debit card from them for just $20 and link your Bitcoin wallet to it. In fact, you can even tie up your Paypal account to this card which I think is really cool.
So, for example, you went shopping and you really liked this suit priced at $375, just take out you Xapo physical debit card and swipe it at the counter. So long as the outlet accepts Visa, you can use your Xapo card there. If you are interested to know more, you can find out all about the Xapo card later.
2. Back It Up
This step is extremely CRUCIAL!
These days with all sorts of bugs and hacks, it’s very likely you may be carrying a phone with a virus or malware stored on it. In fact, most of our phones web browsers come with a very minimal set of virus and malware protection.
If the phone gets a bug, a serious one, it can render the OS (operating system) useless. In this instance, you may have to reboot the OS or worst off, reinstall the entire OS. (Not a very good idea especially if you stored all your Bitcoins on your phone’s wallet.)
Same thing if you’re storing your Bitcoins on your computer. What if your hard drive crashes? You can lose all your bitcoins in an instant. What if you lose your private key or forget your password? There is no way you can ever retrieve these.
I usually backup my wallets at least once a week. Most hardware and software wallets use an industry standard backup protocol called BIP 39 that allows your wallet backup to be 12, 18, or 24 English words.
It’s important to write the words down, on paper, in order, and securely store the backup somewhere safe from people, water and fire.
Here is a complete tutorial from Blockchain.info on the steps on how to backup your wallet.
3. Use 2FA Wherever Possible
No security measure is 100% fool-proof. Agree? Yes! But here is what you can do to tighten the security of your wallets. Install and use 2nd Factor Authentication or 2FA for short.
Here are some of the more commonly used 2FA tools:-
- Google Authenticator
- U2F security key
All my wallets have this feature preset and they make it compulsory for the user to use it. I’m more familiar and use Google Authenticator on my end so I know.
Some use SMS for their 2FA authentication but for me I feel SMS is not a very good two-factor solution, though it is still better than none at all.
4. Move Your Bitcoins Off The Exchanges
And the last thing you want to do is leave your wealth on a 3rd party website or exchange. I see many of my friends make this mistake. They earn Bitcoins and leave it on the exchange.
Most of the popular exchanges what they do is they pool coins and while you have a “balance” showing on your account, you do not actually control the keys. If the exchange gets hacked you could lose your money. Remember that you only control the bitcoin if you control the keys: “If you don’t own the keys, you don’t own your bitcoin!”
5. Think Of Your Family
And the last step you need to put in motion to really have a secure wallet is to plan how your Bitcoins are distributed and to whom when you’re gone. This you MUST do right now, not tomorrow or day after.
What if something happened to you tomorrow, would your family be able to access your Bitcoins?
I like what Pamela recently advised in a special feature published by Coindesk. She said…
While this tip takes time to implement, it’s worth it. It shouldn’t take you more than an hour to make a plan and decide who you want to get what, write down instructions and tell your family about your plan.
Be sure to consult an attorney, to make sure your plan is consistent with local law and can’t be challenged in a court. If you have a will, trust, or other estate plan, let your attorney know that you have new assets that need to be included in your plan.
You need to take charge of your Bitcoin wallet security and not complain later if something were to go wrong! Because no matter what, even the most secure wallets, vaults, banks and even government institutions can be hacked or crash these days.
Hackers maybe getting smarter day by day but you’ve nothing to worry if you took some time and implemented most, if not all of my five suggestions above. At least you know, you did your best. Rest, leave it to mother nature 🙂
Do you secure your wallet any differently than the 5 steps above? Please tell me.