Store your Bitcoin Safely in a Hardware Wallet:
Many new investors will be entering the market right now, taking advantage of the buying opportunity currently presented. And many of them will be inexperienced in cryptocurrency security. They may simply have set up a Bitcoin wallet at the exchange where they purchased their Bitcoin, without even knowing that many exchanges have been hacked, and that storing Bitcoin online is not safe.
Today, the price of Bitcoin is hovering around $16,500 – $17,000 so Bitcoin still represents a great investment opportunity, given where the price has been and where it is returning.
However, along with the investment opportunity, comes risk. And I’m not currently talking about investment risks, but about keeping your Bitcoin safe once you have acquired it. (Bitcoin is also the plural of Bitcoin, just as ‘money’ is the plural of money.)
Although it has been estimated that it would take around 14 trillion years to even list all possible combinations of Bitcoin private keys using the very best computing systems that currently exist, even if they were all working together, the problem of someone else getting hold of your private key still exists, and that is how many Bitcoin have been stolen from software Bitcoin wallets such as those on phone apps, or Bitcoin wallets stored online in crypto exchange platforms.
Now, whilst it’s it’s possible to look up your private keys on for example, blockchain.info, (and that’s what people do to get their private keys to write down or etch onto aluminium or copper plates), it’s also risky in that if your computer is infected with a trojan connected keylogger, or if your ISP is tracking/monitoring your traffic, or, lets face it GCHQ or NSA, nothing you do online is private. And I’m not talking about Facebook, I’m talking about every time you hit a key on your keyboard when you are online.
Use a Bitcoin Wallet that is Hardware-Based and Stored Offline:
Paranoid much? I am when it comes to protecting my cryptocurrency. In the past I’ve done all that etching and I still rent safety-deposit boxes for engraved plates. But now there are secure hardware wallets like the Trezor or the Ledger, (the Nano S is a good Ledger wallet) which make a very good job of securing your Bitcoin and other cryptocurrencies without you having to expose your private key online.
Incidentally, if you are the helpful sort, and you want to help someone get into cryptocurrencies, pointing them in the direction of a good hardware wallet is one of the best ways to get them started. It’s a Click of a button to share this on social media.
I could go into a lot of detail about how hardware-based Bitcoin wallets work, but unless you have one, there is no point, and anyway, they come with non-complicated instructions and are instinctive to use with the simple instructions provided.
What I will say is that both the Trezor and the Ledger are unhackable with current technology in the lifetime of our universe, and when quantum computers some time in the future do make it possible to derive your private keys from your public keys, (if that becomes possible, and it’s a big IF), there will most likely be quantum hardware wallets to negate that possibility.
But by then, the last Bitcoin will have been mined, people who bought a few Bitcoin at its current price will be multi-millionaires, and a Quantum Bitcoin Upgrade will happen, to make ongoing transactions continually safe.
It is worth noting, at this point, that neither the Trezor or the Ledger hardware wallets have batteries. They draw their power from your computer or device when you plug them in. There is no Bluetooth option, but just to be extra paranoid ensure that you switch off Bluetooth on your computer when you have your hardware wallet plugged in, never use it in a public network, on a LAN at work, and ensure that you don’t have a shoulder surfer looking at your code when you login to your device. Even at home! You know, a lot of partnerships end up in separation or divorce.
The Bitcoin Blockchain has never been hacked. It probably never will be. Exchanges are the weak point, so as soon as you purchase Bitcoin, wherever you purchase it, immediately send it to a hardware wallet. Or split it and send it to more than one hardware wallet.
That is easy to do. Just click the ‘Receive’ tab in, for example, your Trezor, generate a new receive key, by the click of a button, label it so that you know where that bitcoin that you are going to send to your wallet came from, and then copy your new receive address into the send address on the exchange where you just bought your Bitcoin or other crypto, and click the button to send it to your hardware wallet.
You Have to Be There to Work your Bitcoin Wallet:
One of the great things about hardware Bitcoin wallets is that you have to physically validate everything that happens by clicking a button. They are secure even when plugged into your computer/laptop, because even if someone with backdoor access to your computer manages to navigate through the code and hardware involved to be able to access what your computer screen is showing when you have your Trezor plugged in, as soon as that person tries to send any of your coin to an address, you’d have to validate it by pressing a button to accept that it is what you want to happen.
It just can’t happen. Your Bitcoin is as secure on your Trezor as it would be if you travelled to a deserted island and buried your private keys six feet deep under a ten ton rock. More secure perhaps.
If you lose the location of that ‘buried treasure’, or the island sinks under rising sea levels, you’ve lost your coin. But if your Trezor gets destroyed you have your 24 word seed that you can put into a new Trezor to recover your accounts.
The seed is 24 random words both in the Ledger and the Trezor. That’s about as secure as it gets. How long would it take a supercomputer to guess those words, and put them in the right order? Again, longer than the lifetime of the universe.
Write down the seed words when you set up your device. Engrave them on metal. Give half the seed to your solicitor and the other half to your brother or sister. Or put it in a number of safety deposit boxes. Keep a copy in case of emergencies in a place that only you will know. Keep a fake one too, in case you are forced to give it up by a burglar or robber.
If you lose or break your Trezor or Ledger, you can use your recovery seed to get access to all the accounts you have stored on your hardware wallet. Your wallet does actually not store your coin. It just stores access to your coin on the blockchain.
There’s also a password consisting of up to nine digits displayed, each time you switch the device on, in a different position. There is no possible way to brute-force attack that.
It all sounds a bit complicated, but it is so easy to setup that a nine-year-old child could do it.
Meanwhile, in my opinion, the time is ripe for buying, although no time, again, in my opinion, is the wrong time to buy Bitcoin. You can use a Smartphone wallet while you are waiting for your Ledger or Trezor. But keep it offline except when using it, and don’t use it in a public WiFi area. And use an App to encrypt your phone.And there are other ways, like using USB drives.
Do your own due diligence as to which hardware wallet to use. There are others than just the two trusted items that I have mentioned.
Be ultra careful not to give out your ‘send’ instead of your ‘receive’ address, when dealing in Bitcoin or any other cryptocurrency, and don’t leave your coin online, no matter how secure the platform appears to be.
Disclaimer: Don’t take anything I say as financial advice. I’m not a financial advisor. As for security advice, I’m not an official crypto-security advisor. And I haven’t even begun, if I were going to be providing you with detailed security advice. So I won’t do that. For example, I have not even mentioned Two Factor Authentication (2FA), although I have written about it previously.
Security is largely a matter of common sense. You need to think about both recovering and securing your Bitcoin or other cryptocurrencies in a way that would seem paranoid to an observer. But my advice is not security advice either. People make mistakes, and there is a rough guess that Bitcoin worth approximately $30 Billion have been lost forever. Finally, I should mention for reasons of disclosure that I have an interest in both the Trezor and the Ledger Hardware Wallet systems.