As bitcoin’s value has steadily increased, so too have cyberattacks on cryptocurrency exchanges and wallets. Michael Cobb explains how to keep your bitcoin secure.
One of our employees asked me recently what the best way to secure bitcoin is. I had no idea. Do you have any advice on bitcoin security?
While there’s no pressing need to rush into upgrading your payment system to accept bitcoins, it is worth monitoring its usage, particularly for a business with a big internet presence or one that sells digital products and services, such as online games or subscriptions.
Although some countries, such as China, have banned the use of cryptocurrency, many countries, including the United States, appear to be more relaxed about its existence. Some large organisations began accepting bitcoin payments for goods and services; however, recent fluctuations in the value of bitcoin caused some companies, such as Valve and Stripe, to discontinue support for the cryptocurrency.
Nonetheless, many businesses continue to accept bitcoin and other cryptocurrencies. One advantage for merchants is that bitcoin transaction fees are typically less than the 2% to 3% charged by credit card processors. Customers who pay with bitcoins have the added benefit of leaving no trace of their transaction.
How to Keep Bitcoin Safe
Aside from financial benefits, bitcoin is protected from theft by a number of factors. The creation and transfer of a cryptocurrency is controlled by cryptography, and the protocols underlying bitcoin have proven to be reliable. Because there is no single point of failure, Bitcoin’s use of a distributed ledger known as blockchain provides owners with a record of all their transactions that cannot be tampered with.
However, this hasn’t stopped attackers from exploiting flaws in bitcoin exchanges or wallets – software used to store bitcoins on computers or smartphones. Bitcoin exchanges are not regulated by the government, and they do not generally provide enough insurance and security to be used to store money in the same way that a bank does.
Mt. Gox and Flexcoin, for example, were both shut down after hackers allegedly stole hundreds of thousands of bitcoins from them in separate attacks.
Unsurprisingly, a 2014 study by Dell SecureWorks found that as the value of a bitcoin increased, so did the number of viruses designed to steal bitcoins from wallets. This year has seen a number of cyberattacks on exchanges and wallets as the price of bitcoin and other cryptocurrencies has skyrocketed in recent months. Furthermore, new threats such as cryptomining malware attacks have emerged. You can also check out Segredos do bitcoin 3.0 funciona
Despite the increasing frequency of cyberattacks, cryptocurrency wallets remain one of the best ways to protect bitcoin. Wallet software should ideally be installed on a bootable USB or a live CD to ensure that the operating system is virus-free and does not cache, log, or record data.
Users must treat their software wallet as they would a physical wallet, and the best practise is to use two wallets, keeping only a small amount of bitcoins on a computer or mobile phone for everyday use, and the balance in a separate offline wallet. This protects the majority of a user’s bitcoins from malware that attempts to intercept the password used to access a wallet or to locate unencrypted wallet data in the device’s RAM.
The offline wallet must be kept physically secure, possibly even in a traditional bank vault, because the loss or theft of a wallet results in the permanent loss of the bitcoins it contains.
When the owner forgot it contained 7,500 bitcoins, he threw away and lost a computer hard drive containing more than $4.6 million in bitcoins.
There are offline or cold storage services available, but keep in mind that they are not regulated by the financial services industry. Furthermore, if an offline wallet is encrypted, it is critical not to forget the passphrase. Some experts advise against encrypting this type of wallet because descendants would be unable to access their inheritance in the event of death.
Maintaining bitcoin security
Backups of a bitcoin wallet are required to protect against computer failure, theft, and human error, but they should never be stored online, especially if the backup is not encrypted. Finally, always use the most recent version of bitcoin software and a password of at least 16 characters.
Despite the fact that bitcoin is a purely digital currency, it can be kept safe in analogue form. Paper wallets can be used to store bitcoins offline, reducing the likelihood of the cryptocurrency being stolen by hackers or computer viruses. Printing the contents of a wallet – essentially, the private keys and their corresponding public keys – generates a physical record that, of course, must be kept.
Keeping bitcoins secure is difficult and time-consuming, but it is well worth the effort for anyone who owns a reasonable amount of bitcoins. Bitcoin is more than just a passing internet fad, and when dedicated hardware wallets hit the market, they should provide a better balance of security and usability, potentially increasing the general acceptance and use of bitcoins and cryptocurrency for online transactions.