Here’s How To Keep Your Bitcoin Safe
Owning cryptocurrency isn’t quite the Wild West experience it was at the beginning of the decade, but investors still face plenty of instability and risk in Bitcoin. The threats aren’t just abstract or theoretical; new scams crop up, and old ones resurge, all the time. Whether it’s a fake wallet set up to trick users, a phishing attempt to steal private cryptographic keys, or even fake cryptocurrency schemes, there’s something to watch out for at every turn.
Cryptocurrencies can feel secure because they decentralize and often anonymize digital transactions. They also validate everything in public, tamper-resistant blockchains. But those measures don’t make cryptocurrencies any less susceptible to the types of simple, time-honored scams grifters have relied on in other venues.
A few simple steps, though, can help cryptocurrency proponents—be it Bitcoin or Monero or anything between—guard against a swath of common attacks. Just as you might keep your cash out of plain sight, or stash your jewelry in a safe deposit box, it pays to put a little effort into how you manage your cryptocurrency. The following won’t defend against every conceivable attack on your digital doubloons, but it’s a good place to start.
Cold, Hard Cash
A key step to protecting your cryptocurrency is to store anything of significant value in a hardware wallet—a physical device, like a USB drive, that stores your private keys and currency locally and isn’t connected to the internet. Experts caution against storing large amounts of coins through cryptocurrency exchanges, or in digital wallet apps on your smartphone or computer.
Secure hardware wallets like Trezor cost about $100 or less and have a straightforward setup. You just choose a PIN number and a recovery “seed” (usually a set of words and numbers) in case you forget your PIN or your wallet malfunctions. It’s pretty robust security, so make sure you keep copies of your PIN and seed somewhere accessible to you, but not to home intruders.
Your setup also doesn’t have to be fancy; you can store backups of your coins on any external storage device, like a portable hard drive. Just make sure to encrypt the data in case the device is lost or stolen. You might even consider making a backup to leave in a safe deposit box.
The downside to a hardware wallet is that it makes approving transactions a bit cumbersome. If you want more fluid access to your bitcoin, experts suggest storing a small amount in a wallet app to facilitate low-value transactions. The key here: Only keep an amount you would be willing to lose in the app, and never give anyone your private key.
Apps like Mycelium Wallet that are interoperable with popular hardware wallets can make your setup more seamless. And some app-based options like Samourai Wallet are working to prioritize robust encryption and privacy features.
Additionally, consider where you store your private keys, the secret part of the public-private key set that lets you authorize revisions to a blockchain. Always keep them encrypted, and try to avoid leaving them lying around on devices that you use all the time for a lot of different tasks, like your personal PC.
When the cryptocurrency OneCoin, marketed as a Bitcoin competitor, launched this year people bought about $350 million-worth of the coins—which has since drawn comparisons to a Ponzi scheme. And people are even being scammed during legitimate ICOs when attackers launch phishing attacks around the events, or trick would-be investors into sending money to fake wallets.
Nail the Basics
It’s also important to remember that all the small things you’re already doing to protect your general digital life help defend your cryptocurrency as well. Use a password manager, use two-factor authentication, leverage enhanced security protocols for your email address.
Turn on Gmail’s new Advanced Protection feature, and/or adding defenses like a PIN or password to your phone number to make it harder for attackers to grab control of your accounts by transferring your SIM to their own device.
Take CryptoShuffler trojan, which originally emerged more than a year ago. It shows just how basic cryptocurrency scams can be. The malware works by lurking silently on a victim’s computer and passively monitoring their clipboard, waiting for the victim to copy a Bitcoin wallet address. When it sees a string of numbers that looks right, CryptoShuffler simply starts swapping the wallet ID the victim copied for its own malicious wallet address in payment fields. If the victim doesn’t spot the change, the transaction goes through and the coins go to the crooks.
The best way to defend against an attack like that (if your malware scanner doesn’t detect the intrusion) is simply watching all transactions carefully, and taking steps to safeguard your assets so you know your data hasn’t been exposed.
And once you have the basics in place, make sure your friends adopt the same mindset. The more secure the ecosystem, the less attractive a target it is to the bad actors. Help newcomers to crypto with their security. The area is new and we need to support the people who are just finding their way in.
Luckily, you don’t need to be a cryptography expert to take the basic security steps that will protect you against the majority of attacks. And seriously, if nothing else, don’t lose that wallet seed.
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