Not much can happen to your money in normal every-day use and your bank is responsible for the security of your funds. You don’t have to worry about backups or special bitcoin storage service when handling your money.
The problem is that the average user is not used to this radical shift in responsibility and as a result a lot of money can be lost by simple mistakes. And there is no one you can call to have it fixed. And this also implies caring about security. The analogy I often like to use: If you handle significant amounts of value in bitcoin you have to treat it like handling a loaded gun! One mistake can have significant consequences.
First I’ll go over some basic rules and at the end of this page we will talk about secure wallets to store your bitcoins. Without 2-Factor Authentication everyone can steal all your bitcoins with just your account password. How the attackers get your password is another story, but they will eventually. Check the account management area of your bitcoin exchange or service on how to set up two factor authentication. If you don’t have the keys, you don’t control the bitcoins. Wallets are collections of public and corresponding private keys where the public key is represented by the bitcoin address. If your bitcoins are not in a bitcoin address that you directly control, they are not under your control.
Example: You bought bitcoins on Mt. Gox, Bitstamp, Coinbase or any other exchange and you have not withdrawn them from the exchange. In that case you do not have full control over your bitcoins. If the exchange gets hacked or as it happened with some smaller exchanges where the owner claims the exchange got hacked: Your bitcoins are gone for good.
The same applies for online wallets: Instawallet and Inputs. Solution: Withdraw your coins from exchanges and only keep coins there that you want to sell in the immediate future. Same applies to wallets on smartphones. Also be sure to enable the password function to encrypt your wallet and use a strong password that you will NOT forget! You can write down hints in safe places if you think you might forget your wallet password. Make regular backups of your bitcoin wallet! This should go without saying that backups are a must when handling important data.
1 of these offsite, like at a friends house. 12 or 24 human readable words that you can write down and keep in a safe place. Two examples for hierarchical deterministic wallets are Electrum or the hardware wallet Trezor. The rest revolves around the security of your computer and wallet software which we will cover now. Secure wallets There are several ways to store bitcoins safely, some more elaborate and secure, some less. For larger amounts a more secure solution is highly recommended! And the future of secure wallets?
All this caring about security sounds like a lot of headache. Hardware wallets like the Trezor make it easy for the average user to keep their coins secure. Once these hardware wallets are a bit more affordable they might become be the standard solution to store bitcoins without having to worry about computer security. Many of us have been raised on cash and debit cards, so introducing a new currency into our lives may seem pointless. However, there’s no denying the impact that Bitcoin has made, and with new sites such as bestcryptocurrencyexchanges. The reason why Bitcoin has become so popular is due to the benefits it offers. So, if you’re currently sat on the fence as to whether you should adopt this currency or not, then why not consider the following benefits.