Bitcoin, the cryptocurrency that started it all. Touted for its transparency and privacy, it changed the way we think of money and brought blockchain technology to the public. Its astronomical growth has made many people instant millionaires.
If you’re thinking about investing or already knee-deep in, you may be still unaware of massive security holes that jeopardize any investment. Due to numerous high-profile hacks over the past few years, you should be asking “Is my Bitcoin investment safe”?
Worry not. After you follow this complete guide will give you a step-by-step guide to the best Bitcoin security you’ll ever need. If you want to save time and money protect your investment with our security hardware wallets offer the best cold storage solutions.
There have been many Bitcoin attacks that have occurred over the years. These all come in different shapes and sizes, but ultimately their end goal is the same – to steal your hard-earned Bitcoin.
The two main ways in which your Bitcoin can be stolen via hacks is through the use of exchanges and software wallets.
The starting point for most people with cryptocurrencies will be through an exchange. This is where you can exchange your fiat currency for Bitcoin and make trades with a variety of digital tokens. There have been many instances of major exchanges being hacked throughout the years, usually as a result of subpar security.
Mt. Gox was the most high-profile hack at a time when it was the most popular exchange in the world, accounting for 70% of all Bitcoin transactions. It was revealed that about 850,000 Bitcoin was discovered to be missing, which was worth $450 million at the time (~$56 billion at today’s prices).
Approximately 200,000 of these missing coins were subsequently found, but the rest was gone forever. It is believed that hackers gained access to the exchange’s hot wallet and stole these coins over the course of a number of years.
BitFloor was a popular exchange that was hacked and had 24,000 Bitcoin stolen after hackers were able to get their hands on unencrypted private keys as they had been stored online for backup purposes.
There have been numerous other instances of major exchanges across the world also being hacked, including Poloniex, Bitstamp and Bitfinex.
To stop yourself from being on the receiving end of one of the hacks, you should never leave significant sums of Bitcoin in your exchange account. Your coins need to be transferred somewhere safe, ideally a cold storage hardware wallet immediately.
These are wallets that allow you to store your Bitcoin directly on your desktop or through an app.
This is another risky method of storing your Bitcoin, as hackers can simply access your funds by utilising computer malware. A Trojan virus can act and appear to be a friendly app on your computer, but it will cause serious harm without you even knowing it is there. This malware can be easily downloaded by clicking a link in an email or downloading a corrupted file.
If you store your Bitcoin in a hardware wallet, you can avoid being affected by most if not all forms of malware.
Using these two storage methods are like leaving your entire investment in a visible spot in an unlocked car. Sooner or later, you’ll lose it.
While it is true that the likes of Bitcoin can be more secure than fiat currency, this is only the case if the proper steps are taken. The many instances of accounts being hacked or scammed are too many to list, with some people even simply forgetting their wallet passwords. These instances can be easily avoided with a few simple steps (i’ll put a anchor link here for the steps below).
To understand why these steps are important, it is vital that you understand the core security aspects of Bitcoin.
Bitcoin is a cryptocurrency, which is a digital currency that utilizes cryptography as a key component of its protocol. It is through the use of cryptography that decentralized and anonymous currencies can be created.
Cryptography is a technique used to ensure that communication between parties is kept secure. It prevents third parties from looking at this private information.
While Bitcoin transactions are recorded on a public ledger for all to see, you can only see the wallet addresses and not the actual identity of the sender or receiver of these funds.
In order to send, receive or hold Bitcoin, you need to have a Bitcoin wallet. This wallet comes in many different forms, with each one coming with a unique public key and private key. The public key is used as the wallet address or it generates a usable Bitcoin address to send or receive funds.
The private key is essentially your signature which allows the funds in your wallet to be sent to another user. This is why it is vital you keep your private key extremely safe, as it can be used to drain your account of all your Bitcoin if it falls into the wrong hands.
The record of all Bitcoin transactions is kept on a blockchain and because this relies on thousands of computers across the world, it is nigh on impossible to falsify or change transactions that appear on this ledger.
As the blockchain itself is clearly not a security concern for Bitcoin users, a lot of issues with Bitcoin security come down to decisions the user has taken.
When a user loses their Bitcoin, the majority of the time it comes down to a hack or a fraudulent party. Sometimes though, people simply forget their private key and there is no way for them to recover it. People have gone to such desperate lengths as hiring hypnotists to try and remember the password for their Bitcoin wallets.
There are a few commonly occurring ways in which people lose their Bitcoin. Most of these come down to the carelessness of the user or the dishonesty/incompetency of a company they have dealt with.
A lot of people keep their Bitcoin on the exchange platform from which they purchased it, such as Coinbase. This means that you don’t have to deal with remembering your private and public keys. It’s similar to an account you may have with your bank, where all you need is a username and a password in order to access your funds.
Most of the time the username will be the user’s password, so all a hacker needs to do is gain access to this email address and they can easily reset the password. Now they have access to all of your Bitcoin and they will inevitably send it to their own wallets before you even realize there is a problem. Of course, there is no way of getting these funds back one the transaction is processed.
This is why online wallets should never be used to store Bitcoin, as they are extremely easy to compromise.
Steps can be taken to better protect your account, such as enabling two-factor authentication. This means that in addition to your username and password, every time you log into your account, you will be sent an SMS with a passcode that you need to also enter. However, you should never keep more than a couple of hundred dollar’s worth of Bitcoin in this account.
Initial coin offerings (ICOs) have become a very popular way for companies to raise funds for their new projects and operations. It involves the creation and issuance of a new digital token. Investors contribute to this offering in exchange for the new tokens, with Bitcoin being one of the main forms of contribution.
There have been many instances of scammers setting up fake websites that pose as a legit ICO. For example, the most successful ICO to date, Telegram (the messaging app), has witnessed many fake websites posing as the real site in the hopes of lulling investors into their trap.
Investors contribute their funds thinking they are investing in the Telegram ICO, when unknowingly, they are actually sending their Bitcoin to a scammer. This has led to millions of dollars being scammed.
Usually, these types of impersonations are coupled with emails promising significant discounts that attract the eye of investors. According to an Ernst & Young report, about 10% of the total funds invested in ICOs during 2017 were stolen.
It is vital to conduct your due diligence before making an investment with a given party. Researching the team behind the project, looking at how the tokens are distributed, seeing if they have a working platform to showcase, what advisors and investors already on board are just some of the key variables that need to be considered.
Even simple steps such as manually entering the correct URL for a given ICO when making an investment could be the difference in losing it all or finding a gold nugget.
If you are managing your own Bitcoin wallet and you expose your private key, someone can drain the Bitcoin from your wallet. You may have recorded the private key in your email and this account was hacked or you may have accidentally sent it to another person/persons. There was one case where a person accidentally exposed their private key while on television and it didn’t take long for somebody to drain the wallet of all funds.
This is why you need to keep your private key extremely safe, usually keeping it written down or on a USB in a safe or safety deposit box.
There are a few different ways in which private keys can be held by a user. Users can handle the private keys themselves, but this requires expertise and skills in cybersecurity and coding.
The easier option is to purchase a hardware wallet, as all you need to do is turn it on and let it look after the private key storage for you. They do all of the hard work for you, as they hold your private keys and give you full control when it comes to using them. You do not need to be skilled in coding or cybersecurity to use hardware wallets.
There have been many high-profile instances of insecure third parties being hacked, with thousands of user’s wallets being emptied on a mass scale.
These companies obviously don’t have proper security protocols in place, which is why it is extremely important you are dealing with companies that take their security very seriously. This could be a mining platform, a cryptocurrency exchange or an online wallet platform.
One of the most well-known cases of this involved a Bitcoin exchange called Mt. Gox that was dealing with more than 70% of all Bitcoin transactions across the world in 2014.
Almost 850,000 bitcoins belonging to users were stolen, with the stolen funds amounting to $450 million at 2014 prices, which would be approximately $6.8 billion at today’s prices. Approximately 200,000 of these Bitcoins were subsequently found, but the rest of the funds were gone forever.
While in this day and age it is very important you follow proper security protocols when it comes to your passwords, such as two-factor authentication and complex passwords, this is not enough to keep your Bitcoin protected. You must conduct due diligence on all platforms you use and investments you make.
The number one solution to avoid having your Bitcoin stolen is to protect it with a hardware Bitcoin wallet. This is a physical Bitcoin wallet that is not connected to the internet, meaning that hackers are unable to compromise it.
Other Bitcoin wallet options have significant flaws. Desktop and smartphone hot wallets can be compromised by malware and viruses, online wallets can be compromised by passwords being leaked and third party party sites often have improper security protocols in place.
To answer the question, “Is my Bitcoin investment safe?” stop looking for answers on unstable wallets with a track record of hacks. Instead look to Bitcoin cold storage.
Cold storage is when Bitcoin private keys have been created and they are then securely stored in a safe environment offline.
This type of storage is vital for holders of Bitcoin as computers connected to the internet are vulnerable to attacks by hackers and should never be utilized in the storage of significant amounts of Bitcoin. A hardware Bitcoin wallet like the CoolWallet S is the ideal type of cold storage for your Bitcoin holdings.
When you are dealing with a cold storage hardware wallet like the CoolWallet S, you will have no issues with your Bitcoin being compromised once you keep it in a safe place.
This is the perfect mobile cold storage hardware wallet for your Bitcoin, Litecoin, Ethereum, Ripple, and Bitcoin Cash with other coins or tokens supported soon. It is convenient to use and your funds are kept extremely safe.
What makes it stand out from other hardware wallets, aside from its sleek design and quality security features, is that it is the very first mobile hardware wallet.
While other wallets are immobile and have a lengthy setup procedure, the CoolWallet S simplifies the entire process.
Rather than utilizing a USB port, like every other hardware wallet, transactions on the CoolWallet S are completed utilizing encrypted Bluetooth technology.
If you are serious about your Bitcoin security, a cold storage hardware wallet is an essential purchase, saving you a lot of time, money, and stress in the process.