Top 10 security tips for protecting your Bitcoin Wallet
You all may be using Bitcoin, a very useful cryptocurrency. However as proved by reports, Bitcoin wallets are vulnerable to security which can be curbed by using 10 protective tips.
Bitcoin is an innovative payment network which has revolutionized business transactions and taken the cyber world by storm. It is the first “decentralized digital currency.” This is peer to peer i.e. P2P transaction which does not involve any banks or any intermediaries which means the users do not have to bear the fees for their transactions.
This has a world wide network as it is joined to the several currency exchanges where the currencies can be exchanged for other currencies of that country. Bitcoin resides in a user’s virtual wallet on the computer or even smartphone device. The transactions are faster and it is an open source network means no one owns this. With all these its pros, however Bitcoin has its cons as well.
The major drawbacks of Bitcoin:
- Security issue as the transactions are virtual it is highly vulnerable to hackers and malware defects. Next the transactions are based on encryption for protection however if user misplaces or forgets the decodes then the Bitcoin cannot be used and all money is gone.
- Irreversible: Once transaction is made the money is gone from the account is gone forever and if there is any error it cannot be reversed again unless the receiver returns the money.
- Theft: Bitcoins if stolen will still retain their value so it is again a loss
- Anonymity issues: For each virtual wallet user has to maintain Bitcoin address hence user’s identity is anonymous however the protocol displays the transactions in public so number of transactions made by the address can be traced. This problem can be tackled by using a tool like TOR to mask computer IP address and hence increase the privacy.
Considering all the above drawbacks users needs to pay extra attention to safeguard their Bitcoin wallets and their identity from the digital theft. This can be done by using the below 10 security tips:
- Avoid using Wallets on the smartphones: User should make it a point to never make any transactions through the smartphones as this device is prone to thefts and also to hacking. It is always preferable to keep the virtual wallet data on devices which do not have any internet connection, such a storage is known as Cold storage. This is especially in cases where user handles huge amounts of money transaction in Bitcoin.
- Versatile Bitcoin client: Bitcoin client allows user to change to a new address with each transaction. By using the versatile Bitcoin client user can successfully hide their IP address and their privacy in the public protocols. Here one more advise to the user would be maintain day to day transaction wallet and keep different wallets as per their use i.e. using separate transaction technique.
- Identity protection : User needs to be more careful while giving away information in the social networking sites and must avoid giving the Bitcoin address as much as possible.
- Encryption is a must: Wallets are stored on the virtual sites hence using a strong password is a key to protection and prevention of data breach. Using DESlock+ can help user to create a very strong password to encrypt their vital and sensitive virtual wallets from thefts and hackers.
- Secured backup of the virtual wallet: When the wallet is stored it is advisable to take regular backups of the wallet by using regular updates, changing its location and keeping the data in encrypted format.
- Escrow Service: As already mentioned the Bitcoin transactions are irreversible and when user is into a transaction of buying or selling anything it becomes very difficult as the person on the other end is unknown. In this case the “Escrow Service” comes in handy. Here buyer will send bitcoins to the Escrow service and now the seller would send the product across to buyer. Once buyer receives the product they send notification to the escrow agent to make the payment to seller. This is a safe method to ensure error proof transaction.
- 2FA and Hardware Wallet: Since Bitcoin works on virtual concept and internet connection, Two-Factor Authentication i.e. 2FA, is indeed a necessary requirement when using the online storage services. Also this supported with the online service of Hardware Wallet would give the much required protection.
- 2FA : includes a second layer of protection wherein after passwords the system sends in a verification code on trusted device so it becomes a bit difficult for hackers to invade this protection.
- Hardware wallet : It is a device that stores a part of a user’s wallet securely in mostly-offline hardware which has its many uses.
- Use of Multi signature addresses: This is mainly useful for high profiles and Corporate. Sometimes if many users are using the Wallet then it becomes difficult to make out if some anonymous user misuses the Wallet. Mostly if there are several employees in a corporate firm who need an access to the wallet for making payment then for each user a sub wallet can be created which is encrypted and then they can be given access to the main wallet. In this case any kind of misuse can be caught and it is safe also. This also involves use of more than one key in such a way that the keys are installed on different equipment which are under the observation of authorized personnel, so now to steal the Bitcoins the attacker needs to get all the keys stored on different equipment and this is not an easy task.
- Regular updating of systems: User must follow an essential routine of updating their systems on regular intervals. This implies to the OS of their device, any other programs which run on it as well as the Bitcoin clients. Along with all this a strong security solution to tackle the virus attack and malware is a must in the device where user carries out the Bitcoin transactions.
- Shredding of Virtual Wallet: The Shred command in Linux systems ensures that system overwrites the file with some random data and then it destroys the file. So a similar method can be opted by users to destroy the virtual wallet when user feels it is not longer needed. It is advisable to get rid of the virtual wallet by double checking that it has been destroyed properly and check that there are no threads or copies left of the wallet either created by user or by the system and if so even that needs to be destroyed.
Techworm has tried to bring some of best tips which users can use and secure their Bitcoin Wallets and their virtual money. By taking some extra efforts users can definitely protect their virtual wallet from the crooks who are ready to steal them.