Bitcoin Owners Beware of Software Wallets and Using Online Storage
If you have invested in Bitcoin or if you’re thinking about buying Bitcoins or other alternative digital currency, know that there are some security issues that need to be addressed.
We have mentioned Bitcoin in few posts and recommended it as a viable alternative investment in January this year at the price of $350. Soon after the price of bitcoin went up to $750 (that’s over 100%) and is now hovering at $580. Now we have a warning for those who invested in Bitcoin.
It’s a very serious warning about possible hacks that may follow after recent Bitcoin core update. Many Bitcoin users keep their bitcoins in online wallets.
There are numerous exchanges and mining pools that offer free online storage of your coins. However, recently there has been a slight surge in hacks on major Bitcoin exchanges.
These hacks, once successful cause a lot of damage to the online exchange, Bitcoin owners, and even the noted price of Bitcoin, as was the case with the recent hack of the Hong Kong based Bitfinex after which the Bitcoin price dropped 14% to the US dollar)
Online Bitcoin exchanges vs. your personal computer
Software wallets and online wallets keep your Bitcoin signing keys on the Internet or your computer. Online exchanges can be hacked. Often times it’s only a matter of time.
Your personal computer can also be hacked, perhaps even faster than an online exchange. Contrary to what some people may think, storing your Bitcoins in a software wallet on your computer is not at all safer than in an online wallet.
Companies that offer Bitcoin wallets and want to attract thousands of users have to spend a lot of money and resources on the protection of their members’ assets. They hire professionals to continuously monitor the security of their exchange. Simply put, they spend a whole lot more on security than an average person does on protecting their computer.
It could turn into a nightmare scenario
I’m sure the last thing any Bitcoin owner wants is to wake up to a reality in which their bitcoin count is 0. Their online/offline wallet has been compromised and all Bitcoins were transferred.
More and more Bitcoin ransoms will happen as the digital currency ownership expands and not enough will be done to protect individuals. Hackers break into thousands of computers daily. It’s time to reconsider storage solutions, especially when it comes to your money and your investments.
If you are a serious Bitcoin investor or you’re thinking about buying Bitcoins don’t try to save money on secure storage. Security should be your number one concern with Bitcoin ownership.
The best solution to store your Bitcoins
The best option to store your bitcoins is offline in something called ‘cold storage’. It basically means that your Bitcoins are stored in a small dedicated device that may be connected to the Internet to send or receive Bitcoins. It’s essentially your own bank vault which you only use for transactions.
You could use a laptop or a portable drive to store your Bitcoin wallet but that would require a lot of configuration and it still wouldn’t protect your digital currency as well as a dedicated hardware wallets that connect only via an encrypted connection.
Here are the most popular three hardware wallets:
Trezor – $99
Trezor is probably the most widely used hardware wallet thanks to its ease of use and a safe working environment.
Transactions can be initiated safely even on an infected computer. Your pin will remain hidden at all times.
There are many online wallets that are compatible with this hardware but Trezor also designed its own app. The size of Trezor vault is similar to the size of a key chain.
It can support many digital currencies (Litecoin, Dogecoin, Dash) but it was designed for Bitcoin.
Ledger Nano S – $75
This is another very secure Bitcoin and Etherum hardware wallet. You can connect it with any computer via a USB connection.
Similarly to Trezor, each transaction can be confirmed on its digital display and physical buttons. It is also very easy to use and to set up.
All Nano accounts can be backed up on a paper wallet. In case of a loss of your hardware wallet you will still be able to get your bitcoins.
Most importantly, however, in the Ledger Nano S all transactions are your private keys are very well secured by a isolated environment locked by a PIN code.
KeepKey – $99
KeepKey is another very secure and popular hardware wallet. It hasn’t been around for as long as Trezor but it has some very interesting features.
As with previous examples, with KeepKey it is possible to recover your Bitcoins in the case of a loss or stolen wallet.
It is malware proof and protected from viruses by offering, as in the case of Trezor or Nano S a completely isolated environment that can work without a supervising operating system.
KeepKey is made of hardened aluminium body and poly-carbonate front which make this device very resistant and tough.
Final thoughts on Bitcoin
Bitcoin price has recently fallen due to another big hack on a known exchange. But this doesn’t mean that Bitcoin is dead.
In this article we urge Bitcoin owners to secure their assets to offline storage because we believe that despite the hacks there is value in Bitcoin long term and perhaps even short term. There are more people using it and there is a lot of investment money being pumped into the Bitcoin industry.
In recent years Bitcoin has become a safe haven investment comparable to gold and silver. If you look at the bitcoin chart juxtaposed with that of Gold you will see how these pairs now move in similar fashion.
Many Bitcoin investors believe that the value of Bitcoin will skyrocket next year. Some optimists believe it will change the monetary system to such a degree that one bitcoin can be worth a million in the future. This is perhaps far fetched but there is value in Bitcoin because ordinary people are starting to use the digital currency are there are many more outlets that offer Bitcoin.
The power of Bitcoin lies in its decentralised structure and very low transaction costs that are next to nothing in comparison with bank fees.
Yet although there are many advantages of Bitcoin, users must beware of leaving their Bitcoins in a software storage on their computer or in an online wallet.
Please protect your coins before it’s too late!Published in Education, Other Investments