After reaching a summit in price in late 2017 and subsequently fading from popularity, cryptocurrencies like Bitcoin have encountered a more significant surge through 2019 and 2020, exceeding their previous all-time highs. As this has taken place, so too has the number of publicized hacking events developed as well. Some of the most notable thefts have been those that have taken place in plain sight: some hacks even blatantly reroute tokens bound for one wallet for another. The offerings watch as their tokens are taken away from them, with nothing they can do about it.
Just like the system, we keep cash or cards in a mechanical wallet. Bitcoins are also collected in a wallet. The digital wallet can be hardware. The wallet can also remain on a mobile device, on a computer desktop, or kept safe by printing the individual keys and addresses utilized for access on paper. But are these digital wallets safe? The answer to this depends on how any person manipulates the wallet. Every wallet includes a set of private keys without which the bitcoin buyer cannot access the currency. The most significant danger in bitcoin privacy is the original user losing the private key. Without the private key, the user will nevermore see her bitcoins again. Besides dropping the private key, a user can also lose her bitcoin by computer malfunctions by hacking or physically losing a computer where the digital wallet resides.
Hot Wallet
Online wallets are also identified as “hot” wallets. These are wallets that run on internet-connected devices like computers, phones, or tablets. This can generate vulnerability because these wallets generate the private keys to your coins on these internet-connected devices. While a hot wallet can be very beneficial to reach and secure transactions with your assets immediately, they also lack protection.
This may sound far-fetched, but people who are not using enough safety when using these hot wallets can have their funds stolen. Regrettably, this is not an uncommon occurrence, and it can happen in several ways. For instance, boasting on a public forum like Reddit about how much Bitcoin you hold while using little to no security and storing it in a hot wallet would not be wise.
Cold Wallet
The next type of wallet, and the most reliable option for storage, is the cold wallet. The most detailed description of a cold wallet is a wallet that is not correlated to the internet and therefore stands a far lesser risk of being compromised. These wallets can also be connected to offline wallets or hardware wallets.
These wallets store a user’s address and private key on something that is not connected to the internet and typically come with software that works in correspondence to view their portfolio without putting their private key at risk.
Cold wallets are the most reliable way to store your Bitcoin or other cryptocurrencies. For the most part, however, they require a bit more information to set up. Therefore, it’s necessary for anyone interested in owning cryptocurrency to learn about safe storage and the thoughts of both hot and cold wallets.
Physical Coins
Services are cropping up, which allows Bitcoin investors to buy physical Bitcoins. The coin you buy will have a tamper-proof sticker covering a predestined amount of Bitcoin. However, to purchase the physical coin, you may need to pay an inadequate premium over the value of the Bitcoin you’re buying, owing to the cost of the manufacture and shipment of the coin itself.
Other Security Precautions
Backup
Back up your whole bitcoin wallet early and often. In case of a computer failure, a story of regular backups may be the only way to recover the currency in the digital wallet. Make sure to backup all the wallet.dat files and then store the backup at multiple secure locations. Not only this, set a secure password on the backup.
Software Updates
Keep your software up to date. A wallet running on non-updated bitcoin software can be a manageable target for hackers. The most advanced version of wallet software will have a better privacy system in place, thereby improving the safety of your bitcoins. If your software is updated with the latest protection fixes and protocol, you may avoid a big crisis because of the enhanced privacy of the wallet. In addition, update your mobile device or computer operating systems and software to make your bitcoins more trustworthy.
Multi-Signature
The concept of a multi-signature has won some popularity. It involves permission from several people for a transaction to take place. Thus this limits the threat of theft as a particular controller or server cannot carry out the transactions. The people who can accomplish are decided initially, and when one of them wants to spend or send bitcoins, they require others in the group to support the transaction.
