How to Secure your Bitcoin Wallet
Bitcoin and other cryptocurrencies are a quick and easy way to send and receive money.
But just like traditional banking methods, bitcoin also requires you to ensure that your funds are protected from hackers.
Otherwise, you could be one of the unfortunate people who end up losing their bitcoins because of a careless mistake or security vulnerability.
The good news is that securing your wallet and protecting your bitcoin is easy, even for new crypto investors.
Encrypt Your Bitcoin Wallet
The first thing you want to do is make sure that your wallet is encrypted. While this won’t protect you from malware that records your keystrokes, it will help keep all but the most determined hackers out away from your bitcoins.
Most desktop wallets already come with an encryption feature that lets you secure your bitcoins with passwords and secret phrases.
It’s also not a bad idea to add an additional level of security by using a third-party tool to encrypt your wallet.dat file as well.
And if you use a web-based wallet to store your cryptocurrency, make sure that you’re on a secure connection. You can do this by looking at the URL bar in your web browser.
If you don’t see a lock on the left-hand side of the toolbar, it’s not secure and you could be putting yourself at risk of being hacked.
A secure online connection will display a lock in the URL bar.
Back up Your Wallet
If you’ve spent a significant amount of time reading bitcoin message boards, you’ve probably heard stories about unlucky investors who bought what is now millions of dollars’ worth of bitcoins in 2011, only to lose it to a crashed hard drive or corrupted file.
For this reason, you’ll want to back up your wallet so that you don’t lose its contents, your coins! Backing up a bitcoin wallet is a little more complicated than copying a file.
Just make sure to make multiple copies of your entire wallet and store them in a safe and secure place. Because if you misplace your private key or someone else gets ahold of it without your knowledge, you run the risk of losing all your coins.
Start Using Multisig Addresses
Multisig technology works the same as two-factor authentication: before a transaction goes through, more than one party has to first approve it. But with multisig, you have the option of requiring more than two to authorize your bitcoin transactions.
To use multisig, you must first create a multisignature address and set up the number of parties involved.
These can be people like businesses associates, family members, and friends, or you can link the multisig technology to a secondary device like your smartphone or computer –just remember, two signatures can’t come from the same device.
Every party associated with the multisig address is then given a private key, which they must use to approve pending transactions.
To learn more about how multisig works, take a look at this short video clip:
As you can imagine, adds an extra level of security to your bitcoin wallet. Instead of being able to hack one bitcoin wallet and steal funds, hackers would now have to compromise the security of everyone associated with the multisig address just to take bitcoins from the wallet.
In addition to desktop wallets, online platforms like Coinbase and GreenAddress also offer multisig technology.
Go off the Grid
After adopting multisig, backing up, and encrypting your wallet, if you’re still concerned about hackers accessing your bitcoin wallet, you might want to consider switching over to a cold storage.
These wallets are taken offline when not in use, making them inaccessible to hackers.
There are two types of cold storage wallets commonly used: hardware wallets like Ledger, which are essentially USB bitcoin wallets, and paper wallets.
Just like the name suggests, a paper wallet is a piece of paper with your wallet’s address, as well as a public and private key.
When using paper wallets, it’s always a good idea to make copies of your wallet and store it in a secure location, like a safe or important documents file, where it’s unlikely to be lost, damaged, or stolen.
Some people like to use a mixture of cold and hot storage, where they keep the majority of their funds in an offline wallet and have a small percentage available online for transactions.
How Safe Are Bitcoin Wallets?
As you can see, there are a number of ways to safeguard your bitcoin wallet against hackers. But that doesn’t necessarily protect you from careless mistakes that could cost you your money.
For this reason, it’s important to always back up your private keys and store them somewhere safe. You’re going to need them to recover your bitcoins if you ever get locked out of your wallet or lose your cold storage wallet.
And make sure to make copies of your private keys and store them in places you won’t forget. You might also want to consider buying a fireproof safe, so they’d be protected if your house were to burn down.
Now that you know how to keep your wallet safe and secured, you’re ready to start using bitcoin for sending and receiving money, as well as shopping, trading, and investing.