Protecting Your Bitcoin and Cryptocurrency
The most important practice you should be putting into action is keeping your Bitcoin and cryptocurrency investments safe. Here are a few simple suggestions and good habits to ensure that your coins are never a liability for theft or loss.
Do Not Trust Unknown Networks
Keep any device that contains a Bitcoin wallet away from unidentified networks or WiFi connections. For example, if your smartphone has a wallet with funds in it, do not connect to any WiFi that you are not very familiar with. This is due to two reasons. First, you don’t know what other users are connected to the network. Smart hackers can see your information as you browse the Internet. This is called “sniffing”. If they detect that you’re making Bitcoin related searches or actions, they could likely threaten your security by snooping deeper. Second, network owners may have configured malware to see your device’s contents.
To avoid this, make sure you know who owns what network you’re connecting to and who uses that network. The biggest threats are coffee shop wireless networks. They’re insecure, and many people use them at the same time. Computer hackers run packet-sniffing software to see what other people on the network are doing. Sometimes they can pull out names, email addresses, phone numbers, home addresses. In rare scenarios they can pull out credit card information and cryptocurrency private keys. Never assume you are safe when you’re connected wirelessly!
Also ensure that your home wireless Internet is not set to publicly broadcast its network name (SSID). This is really simple to do in most routers such as Netgear. Also ensure that your network is WPA2 protected with a very long password. Never give this password out to anybody; create a separate network for your guests. This will ensure you never have security issues, whether or not Bitcoin-related, when you’re browsing the web at home.
Understanding Hot Wallets Versus Cold Wallet
A cold wallet or “cold storage” is a long-term holding device. Think of it similar to a retirement account or long-term savings account. A majority of your cryptocurrency should be in this wallet.
If you have a considerable sum of cryptocurrency, do not keep them on the same wallet you use for regular spending! You may carry around high-value credit cards, but you can easily cancel those if they are stolen. Bitcoin has no protections; if someone gains access to your coins, they’re gone for good. Therefore research cold storage and cold wallets to ensure that you’re keeping a large portion of your fortune safe.
A hot wallet is one you use for daily spending. You keep a small sum of Bitcoin on here to use on demand. The contents are never so much that would ruin you if they were stolen. A good figure to keep in your hot wallet is 2-5% of your total investment, perhaps even less.
Safety Practices For Your Hot Wallet
Also ensure that you’re keeping your regular-use wallet safe. Don’t plug it into any foreign machines or devices. Perform a malware and virus scan every week. Ensure that you keep its software up to date. Update the operating system. Don’t visit any unfamiliar websites. You’re going to want to pay closer attention to the security status of any device that holds Bitcoin because it can be labeled a target.
Change Wallet Addresses Often
One threat that many don’t consider is a hidden danger. This threat is that your wallet may have already been compromised in the past even if you still have coins within. One tactic malicious hackers use is to compile a long list of all addresses they can find and simply wait. They don’t steal the funds right away; what they’re doing is waiting for a moment when more funds are deposited, and that’s when they make their move.
Change your address often to prevent this. A good tactic is to never receive Bitcoin into the same address more than once. This is called wallet recycling. However, don’t discard the old wallets. For example, Bitcoin often forks, and new coins are essentially created. This is what created Bitcoin Cash and Bitcoin Gold. It may create more coins in the future. Many people got rid of (deleted or forgotten) their wallets in August 2017 without realizing that they did not spend the Bitcoin Cash they received that month.
The Future of Cryptocurrency Security
The technology is still very new. Coins are a lot more susceptible to theft today than they will be in the future because many people are still learning about them. Likewise, there are not as many safety features as there will be in the future. There may be a time when we have access to a more secure wallet that allows us to safely travel with larger sums of cryptocurrencies.
One such example is the Ledger Nano S; it’s a highly secure flash drive that prevents from intrusion, malware, and foreign attempts to access. This wallet us just the beginning. The future will reveal many more adaptations to Bitcoin and cryptocurrency to enhance security. In the meantime, do all that you can to keep your coins safe.