One of the biggest fears new Bitcoin users face is losing their investment due to personal negligence and online scams, which often go hand in hand as Bitcoin thieves mostly succeed where users fail to protect their coins properly. But for many new users, safekeeping their Bitcoins can be a challenge since Bitcoins are not like gold or cash, i.e. just locking them away in a safe won’t be enough.
To help you have a safer buying/selling experience right from the start and protect yourself from common security threats, here’s an easy guide to safely storing your newly-bought Bitcoins.
What Threats Are You Facing?
There are many ways that you can get your Bitcoin’s stolen nowadays, and more new “ideas” are likely to be developed as Bitcoin continues to rise. Fake wallets, phishing code written in pirated software or online tools, malware that exploits your copy/paste clipboard, keyloggers, or “dummy” exchanges set up to scam you out of your money are all common threats in today’s cryptocurrency ecosystem.
Even the exchanges themselves can fail in their security or collapse financially due to bad management, causing serious damage to large investors in the markets. With so many inroads that can be used by thieves to steal your Bitcoins, it’s important that you take every precaution you can to protect your coins.
How to Protect Yourself?
There is no single solution to keeping your Bitcoins secure but more of a list of practical steps that you have to take together. And since you won’t be relying on any third-party like a bank to protect your investment, it will be your responsibility to continuously monitor your Bitcoins and adhere to these “protection mechanisms” whenever you buy new coins. If you are just getting started, choose a reputable online or mobile Bitcoin wallet, purchase a small amount, store it and get the feel of it before investing more.
Invest in “Cold Storage” and Hardware Wallets
By “hot storage” Bitcoin users usually mean wallets like mobile apps or online wallets that have direct access to the internet. “Cold storage”, on the other hand, are physical wallets without access to the internet that often use more advanced security mechanisms to prevent anyone from breaking into your wallet
The most popular cold storage wallets are hardware wallets, which come in a limited number of models. Hardware wallets are sold for a price, unlike online or mobile wallets, made of hard plastic, and they use a complex PIN and a recovery “seed” phrase that contains a string of words you can use to gain access to your coins, even if you lose the device. And best of all, they are virtually impenetrable by hackers.
If you can’t afford a hardware wallet, you also have the option to store your private Bitcoin keys and address on USB drives and hard drives that you’ll encrypt and keep safely locked away, or even a paper wallet. However, before you think of using either option, keep in mind that both drives and paper wallets can be stolen or physically destroyed, leaving you without any way to recover your Bitcoins.
Don’t Store Anything in an Exchange for Too Long
Cryptocurrency exchanges are heavily targeted by cyber thieves who continuously look for vulnerabilities in their systems to exploit and make off with new Bitcoins. And while it’s true that exchanges invest a lot of money and effort in making their services as secure as possible and updated to modern security standards, it never hurts to stay cautious when using one.
Furthermore, not only can exchanges be vulnerable to cybercriminals but, as Mt.Gox’s case has shown, they can also be negligent to the point of bankruptcy, in which case there will be little users can do to retrieve their investment. Thus, it is better to always transfer your Bitcoins from your exchange wallet to a safer location whenever you buy new coins.
Improve Your Security
The safety of your Bitcoins doesn’t only depend on the security of your hardware wallet or your Bitcoin exchange but also on all the little things you do when buying, selling, and storing Bitcoins. There are a few entirely free ways you can improve your security and keep your cryptocurrencies safer, the key being the following measures:
- Use multi-step authentication – 2FA (2 Factor Authentication) is a common security measure with exchanges and wallet apps nowadays, so make sure you always turn it on to add more authentications and protection to your logins.
- Increase the security of your e-mail address – Since your e-mail address is a needed tool in the buying/selling process, it’s important to keep it safe from anyone looking to access it and abuse the data it stores. Gmail, for example, now has a new Advanced Protection program that uses 2 physical security keys to unlock your account. Other e-mail clients may use other ways to safeguard your inbox.
- Back up your keys – No matter if you’re using a hardware, paper, or a software wallet, having a back up to your private keys is a must. Whether you write your wallet address/seed phrase on several pieces of paper and store them in safe locations or create multiple USB drives with your private keys, a back-up can be a real life safer should something unforeseen happen.
- Encrypt – If you use USB drives or hard drives to store your Bitcoins offline, always make sure to encrypt your devices to protect them if they get stolen or lost.
- Scan your devices – If infected with a more advanced malware, your phones and computers can appear safe right until you try to access your Bitcoins. To stay protected from any scams, always make sure your devices are scanned and updated with the latest virus/malware databases.
One of the ways Bitcoin thefts can happen is by falling for a “dummy” website or have a malware replace your Bitcoin address with a thief’s address. Always double check where you’re sending your coins and where you leave any information that might be used to gain access to your private keys.
Keep a Small Change Wallet
And finally, with all the protection you will have in place it might get hard to use your Bitcoins for everyday purposes. If you don’t want to go through considerable lengths just to buy something online or pay in a store with your Bitcoins, it’s good to have a backup wallet like a paper or a digital wallet where you’ll store only that amount of Bitcoin you are not afraid to lose.