Security is a key consideration when it comes to Bitcoin. Here’s how you can keep your bitcoins safe from theft and hacking.
You should know that when you invest in Bitcoin, not only could the price of Bitcoin drop, but there’s also the possibility that your Bitcoin could be stolen. Unlike traditional investments, there is little insurance or other safety nets can do to protect investors if their bitcoins are taken via a hack or data breach. As Bitcoin prices have begun rising again, it is worth revisiting your security efforts.
How to buy Bitcoin safely?
If you are new to Bitcoin, we recommend you first read our article about how to buy Bitcoin, which includes a beginner’s guide to Bitcoin. If you would like to spend your bitcoins, it is now possible to pay for a ProtonMail email account with Bitcoin.
How to prevent Bitcoin theft
Everyone talks about how great it is that Bitcoin is a decentralized currency, but as with everything, this has its downsides. If you use a centralized version of cash and hold it in a bank account, you are basically guaranteed that it will be there when you go to retrieve it. This is because each bank has a brand value they want to preserve, so they have an incentive to secure the money on their ledger in order to maintain customers’ trust. If your money or credit card number is stolen, the bank will likely replace it themselves to maintain your trust – and your business.
Bitcoin doesn’t have any insurance like this. While no one can move your bitcoins without your wallet’s private key, if they do get a hold of your private key, they’ll be able to take all your cryptocurrency and you will not be able to recover it. Due to the complexity in the Bitcoin ecosystem, there are always risks. Security has improved regarding Bitcoin, but hackers are always coming up with new and creative attacks. However, there are a few things you can do to keep your Bitcoin safe:
The most important thing to do if you are storing large amounts of bitcoins is to make sure you don’t keep them within the exchange you bought them in. While exchanges have become more secure in recent years, there were several high-profile hacks in 2019 alone.
Some exchanges, such as CEX.IO, store user bitcoins offline in cold storage for better security, but this is not a guarantee of safety either. Because of the “cash-like” nature of Bitcoin, we recommend you take security into your own hands.
Taking Bitcoin security into your own hands
There are two main factors to consider when assessing your own security: storage security and computer security.
Storage security refers to what you do to keep your private key safe. Computer security encompasses all the security steps you take to make sure your computer is not compromised.
Computer security is important not just for protecting your Bitcoin, but also your identity and banking-related information. There are many examples of viruses and keyloggers ending up on people’s computers and costing them everything. We recommend regularly updating all software and adhering to cybersecurity best practices, such as not downloading or opening email attachments from unknown senders. ProtonMail can help in this case, thanks to the strong set of anti-phishing protections it uses to warn and protect users from malicious emails.
When it comes to storage security, the first important lesson is to not keep all of your eggs in one basket. In the real world, nobody walks around with their life savings in their pocket. If they did this and then got unlucky and were mugged, they would be completely ruined. Similarly, it is advisable to divide up your bitcoins into several wallets. A quick summary of the different types of Bitcoin wallets can be found here.
We recommend being cautious with online wallets. Any online web wallet that stores your private key online is asking for too much trust, especially given their poor security record. You probably shouldn’t keep your private key on your computer. There are too many ways for it to end up lost if your computer is stolen, crashes, or is compromised.
If you do use an online wallet or a Bitcoin exchange, make sure it is connected to a secure email account. A ProtonMail account with two-factor authentication enabled is a good option. Your messages are protected with end-to-end encryption, and your password is required to decrypt any messages, even in the unlikely event that ProtonMail itself would be compromised. Many people also use ProtonMail to store a copy of their Bitcoin address private key for the same reason ─ a ProtonMail message can only be accessed by the email account owner. Furthermore, because ProtonMail is a cloud email service, there is no risk of losing your private key if your computer crashes.
Bitcoin cold storage
For long term storage of large amounts of Bitcoin, we recommend storing your bitcoins completely offline, using what is known as cold storage. This involves using a hardware Bitcoin wallet (such as the Trezor or Ledger wallet) and writing down your Bitcoin private key on paper stored someplace secure, like in a bank vault. (You could also engrave your private key on something more durable, like metal.) Because your private key is safely stored offline, your Bitcoin storage is now immune to computer viruses and many other hacking attempts.
When holding large amounts of Bitcoin, the cost of losing them increases dramatically. Compared to the value of bitcoins, the cost of taking additional security measures is quite low, so it is worthwhile for every serious Bitcoin investor to take precautions. As a final note, the threat model for your bitcoins needs to adapt as their value increases. The more valuable a data breach or hack is, the more motivated attackers will be.
About the author
Mary Ann Callahan is a UK-based freelance journalist who specializes on Bitcoin-related topics. Currently, she writes for CEX.io, a multi-functional cryptocurrency exchange. She writes articles related to blockchain security, Bitcoin purchase guides, and Bitcoin regulations in different countries. Previously, she worked for Boston Globe Media and holds a Master’s degree in Journalism from Columbia University.
Want to keep your bitcoins safe? Then use an encrypted email account to open your Bitcoin-related online accounts. You can get a free secure email account from ProtonMail here.