In the core of a bitcoin lies the idea of distrust. Keep an eye on your wallet to make it safe.
As bitcoin wallet users, we exchange significant sums of money through the network without knowing a single detail of each other. Blockchain technology encrypts and decrypts transactions mixing them with each other and approves them automatically. So, the direction of the transaction also can’t be properly tracked. It’s not surprising in such conditions to see criminals occasionally infiltrating bitcoin users trying to steal some funds.
Good news is that you need to know only 12 rules to make your bitcoin wallet a much safer asset as it was.
Forget Testimonials, Research the Web
Scams resulted in approximately $60 million loss in total for last years. Despite wallet scams are only 4% of this amount, they represent what happens, if people believe unrealistic promises.
Double- and triple-check online services before trusting them your money. It may seem odd, but phishing sites sometimes look better than their legal competitors. Customer testimonials are bought here and there, so you can never tell if they’re real for sure. Look for a real customer experience in dedicated communities on Reddit and Quora and research the web for brand mentions.
Always Have a Plan "B"
Think of all possible outcomes before trust bitcoins to start-ups or investment funds and doubt everything you see or hear. It's better to spend less and get less (even if promises were fulfilled) than put all eggs in one basket and end up broke.
Risky investments should not overlap 20% of your entire assets.
Think of Bitcoin Wallet as the Regular One
You don’t want to bring all your $10,000 to buy a couple of beers in the dark alley, don’t you? The Internet is one of the darkest alleys for sure. It’s not a safe place at all, so the best practice is to hold only small amount of coins that you’re planning to spend soon.
You can use a bitcoin debit card similar to Cryptopay Visa to spend money whenever debit cards are accepted and not be limited by the bitcoin.
Backup Desktop Wallet on a Scheduled Basis
If you use an offline wallet, it should be backed up as any other piece of software on your computer. You can do it manually (pretty time-consuming) or leverage online solution similar to free Crashplan version or Arq Backup.
Here are some backup principles I stick to for my own bitcoin wallet security.
Don’t Forget to Backup Private Keys
Locate and add the “wallet.dat” file in the backup set, so you can easily restore the wallet and local private keys.
Reveal Hidden Keys
Some services double regular private key with hidden key to better process transactions internally, make sure they’re also included in the backup set. This data is usually situated in the same folder as the “wallet.dat” file, if the opposite is not stated by the provider.
Encrypt Wallet Backups on Client-side
Personally, I think it’s redundant to remind the bitcoin wallet backup should be encrypted before it will be sent to the storage, but not after. Modern solutions allow AES-256 encryption on client-side, which can be doubled by the server-side encryption.
Ensure Provider Backs Up Online Wallet
Once you backed up your desktop wallet locally, it doesn’t mean it is safe forever. Local backups still depend on hard drive malfunctions, natural disasters and human errors. Online bitcoin wallets are the best from this point of view, because they perform necessary backups all by themselves, encrypt them and store in the cloud. This possibility adds one more requirement to the stack.
Use Off-site Secure Locations
Cloud destinations are safe from disasters, since they can be situated in the other part of the continent. Major cloud storage providers like Amazon S3, Microsoft Azure and Google Cloud will also make about three internal copies of your data set to ensure you will get it back in the same state you’ve send it. Their data centers are well-guarded facilities, so the possibility of a human intervention or data thefts is eliminated.
Use MFA Whenever Possible
Multi-factor authentication is a must-have once you’ve entered into the cryptocurrencies. Two-factor approach is enough in most cases: the regular wallet password doubles by an SMS or verification application on your smartphone. After the setup you can be sure that nobody will enter the wallet without a full access to all your systems.
If using MFA in bitcoin wallet is impossible, protect the browser or a software folder with an additional password.
Keep Bitcoin Passwords in Secure Locations
While it may seem obvious, but it isn’t wise to store passwords in unprotected document. Use software similar to KeePass that will help you to store all your passwords under one master password. Store bitcoin-related passwords separately from each other. In this way you’ll be sure that money is secure even when hackers got all other passwords from your system.
Use Strong Passwords
It means what it means - don’t rely on word combinations you’ve used before, neither make a password from your or your children birthdays. These types of passwords are usually first to be compromised and breached. Use password generators instead and keep to the maximum of 16 characters for bitcoin passwords.
Keep it Simple, Keep it Safe
Reading through tips above, you may notice that staying aware of possible pitfalls is the best option to keep a bitcoin wallet safe. Don’t rely on suspicious resources, keep significant sums of your money offline and don’t forget to backup your ledgers and wallets. This simple procedures and your own consistency will keep your bitcoins safe and protected under any circumstances.