In the recent past, the world has been a witness to numerous security threats, particularly in terms of electronic data protection and money transfers pertaining to commercial transactions. Terms such as cyber theft and ransomware are not alien any longer. With cryptocurrencies like bitcoins galloping up the popularity charts, moreover, here’s how you can protect your Bitcoin wallet.
How to Protect Your BitCoin Wallet
How Safe is Bitcoin?
Bitcoin so far has proved to be the most secure virtual currency. But even then, it has not been spared of its share of cyber-attacks. Bitstamp was recently in the news when 19,000 BTC were pilfered after the exchange’s virtual wallets were compromised. This amounted to a net loss of about $5 million. The Trojan, Pony Loader 2.0 is capable of identifying and stealing from wallets that are stored in infected systems. It has stolen other cryptocurrencies like the Litecoin as well.
Why is this happening repeatedly? Since bitcoin transactions happen to be irreversible, no official authority which can act as an intermediary can undo them. This assumes special significance as both buying and selling parties are unknown to each other and reversing can happen only in the case of an error. Moreover, authorities lack the ability to track stolen bitcoins in spite of numerous techniques being applied to trace them.
Additionally, although Bitcoin users remain anonymous by way of private Bitcoin addresses created for every individual virtual wallet, all transactions are made public for anyone to see the transaction list belonging to an address. This calls for extra precautions that increase privacy by hiding the IP address of the computer with a tools like VPN or Tor.
Protecting your Bitcoin Wallet
When you start protecting your Bitcoin wallet, you are actually increasing your security when paying with the currency. This enables you to both protect your identity and of course, the wallet from potential cyber theft.
1. The Versatile Multi-faceted Bitcoin Client
In order to enhance your privacy as also to conceal your IP address, using a Bitcoin client which enables you to alter or change to a new address with every transaction. Also, separating transactions into numerous wallets, based on their importance is advisable. The recommended procedure is to maintain a wallet for daily transactions of relatively smaller amounts, which can be topped up as and when necessary.
2. Identity Protection
Be extremely careful when you share transaction information in public spaces such as the Net. Otherwise, you might risk revealing your identity and Bitcoin address by mistake. This could lead to some disastrous results as has been seen before.
3. Use A Strong Password
Make sure you are using a random strong password. Do not use the same password on multiple platforms either. If you do, you might put all of your online accounts in jeopardy in case cyber-criminals hack into one of them. You can easily create a strong random password by using this tool.
4. Escrow Service
The escrow service is useful if you are buying or selling something from someone you don’t know. The person paying has to send his bitcoins to the escrow service as he waits to get the item he’s buying. The seller, meanwhile, knows that his money’s safe in the escrow account and remits the item agreed upon earlier. On receiving the merchandise, the buyer notifies the escrow service to make the final payment.
5. Backup the virtual wallet
In terms of physical storage, stick to the norms stipulated by any important backup policy. Keep updating frequently, use different locations and media while keeping them encrypted always. By encrypting, you will ensure safety.
6. Encrypt the Wallet
Encrypting the wallet is absolutely essential, particularly when storing it online. The basic key to safety is having a very strong and unusual password. Make appropriate use of tools like DESlock+ for encrypting files containing all sensitive information. It’s even better to encrypt the whole user space or system which has the files.
If you do not think that information can be taken from you, just go watch the movie Blackhat!
7. Two-factor Authentication is a Must
When you use storage services online, it’s important that you critically survey the pros and cons of the ones that are truly reliable before selecting one. But even then, you need to remember that no online storage service is absolutely foolproof and service provider could develop an Achilles heel and get hacked, given the super wisdom of professional hackers and cyberspace robbers ruling the roost nowadays.
The two-factor authentication asks for a one time password for every transaction you make and this is sent to your mobile device. Once that is supplied from your end, then only the transaction goes through.
8. Don’t use Wallets on your Mobile Devices:
Mobile devices may certainly be convenient but are extremely vulnerable to hackers as well. Thus, it’s prudent to avoid using them. This is even more relevant in instances where large sums of money are being transferred either for buying or selling. The transaction may either be compromised or lost. In such cases, it’s actually safer to keep your wallet on something that is unconnected to the Web.
9. Use VPN for Added Security
Connecting to a virtual private network, better known as VPN, allows you to securely encrypt all of your traffic. That means all your traffic will pass through a private tunnel, keeping your sensitive data away from potential prying eyes. For more info about which VPN services are best to use with BitCoin, feel free to read our in-depth VPN revision guide.
10. Multi-signature Addresses
These addresses are suitable for corporate or high security transactions and use more than one key which are stored on separate equipment, monitored and manned by authorized staff only. This way, a hacker’s job becomes much more difficult as he will have to compromise all equipment on which the keys are stored to pinch the Bitcoins.
Updating systems regularly and eliminating the virtual wallet if you don’t use it are two other ways of protecting your wallet.
How to Protect Your Bitcoin Wallet – Conclusion
As with any other service you use online, there is a certain element of risk involved when you make transactions using your Bitcoin Wallet. However, as long as you take the necessary precautions, there is no reason you should not make the most out of this secure type of cryptocurrency.