Securing your bitcoin is essential, whether you own thousands of bitcoins or just fractions of one. This article explains the fundamentals of bitcoin security and what you can do to prevent bitcoin theft.
Is Bitcoin Secure?
There is a fair amount of confusion regarding whether bitcoin is secure. Some people think bitcoin, as a digital currency, has no security risks. This is only true to a point. Bitcoin is inherently more secure than traditional currencies in certain ways. Because bitcoin transactions are recorded on a distributed ledger, you are not at risk of having your bitcoin disappear if a server crashes somewhere. This makes bitcoin more secure than some other digital assets.
Nor do you have to worry that the collapse of a bank or a government will make your bitcoin worthless. Bitcoin’s value is not secured by a single bank or state institution.
However, bitcoin is by no means immune to security risks. Anyone who gains unauthorized access to your bitcoin wallet could steal your bitcoin. This risk is particularly great if you use a hosted bitcoin service, as the victims of the infamous Mt. Gox attack learned in 2014.
You could also effectively lose bitcoin by sending it to the wrong person or losing access to your own wallet.
How to Maximize Bitcoin Security
How can you manage bitcoin security threats like this? Following are best practices for keeping your bitcoin secure:
- Use a hardware wallet. A bitcoin hardware wallet allows you to keep your digital wallet on a physical device, usually a USB drive. This way, you have physical control over the wallet. Stealing the wallet would require someone to obtain the physical device, as well as overcome the digital authentication protections of the wallet.
- Use a local wallet. If you don’t want to invest in a hardware wallet, or deal with the hassle of using one (transactions are a bit more complicated with hardware wallets), you can at least use a wallet that runs on your local computer. This ensures that your bitcoin is not stored on a third-party server, where it could potentially be stolen.
- Back up your wallet login. Most bitcoin wallets don’t have password recovery services or a customer support number that you can call if you forget your login. This makes it crucial to protect your login information.
- Double-check bitcoin addresses. If you send bitcoin to the wrong wallet address, your chances of getting the money returned are virtually zero. Because bitcoin addresses are anonymous, you can’t just request a refund-and even if you could, the unauthorized recipient is under no obligation to send your money back to you. That’s why it’s crucial to make sure you are sending bitcoin to the right address during a transaction.
Keep these tips in mind to enhance bitcoin security and avoid losing your bitcoin.
Interested in keeping your finances secure? Get started today with credit score monitoring from banks.com.
Getting Started with Cryptocurrency