Question of the day: how to store your bitcoins

Question of the day: how to store your bitcoins

For all owners of digital currency the issue of how to buy and store bitcoin is most relevant. No one wants to lose his savings or become an object of fraud. On the day when a bitcoin rate reached the record, the world of cryptocurrency shook another major theft. The online wallet inputs.io reported that it was hacked. The crackers could enter the server and take away 4100 bitcoins. So how to keep your bitcoins safe?

Table of content

  • Introduction
  • General security issues
  • Piper wallet
  • Do not keep all the information together
  • Make a backup of your digital treasures
  • Conclusion

In accordance with to an administrator of the Tradefortress service, to attack, hackers used ancient postal scientific records simultaneously with password reset: “they could detour two-factor permission due to server-side vulnerabilities”.

This is not the first case of such kinds of attacks during several years, such incidents have occurred at various storage and exchange services of bitcoins. Three services were hacked in 2012. Examples include the theft from Bitconica (it was stolen 58,000 bitcoins), from Linode service (it was stolen 46,000 bitcoins), as well as stealing from Bitfloor service (about 24,000 bitcoins were stolen).

All these incidents took place because of stupid errors of service operators. A reason for a theft with Bitfloor was because of an unencrypted backup of a purse which was kept at the same servers. The problem with Bitconica was because of the hacking of a mail account with higher privileges, which gave admission to the server of hosting provider Rackspace, where the purse was stored. There are many such samples.

Introduction

Bitcoin is a very interesting and popular currency, but it has a reason to be compared to “digital cash”. If you leave all your cash stock in front of everyone or in an unsafe place, be prepared to lose everything. Similarly, in the case of bitcoins, their safety eventually depends only on their owners. If users can not maintain a safety of their own purses, there is a great chance that they will mislay their digital coins.

If you have a little more than a couple of bitcoins, the urgent question for you is how to store your bitcoins. We list all the main ways of storing coins, in order of increasing their reliability, and briefly describe the best practices of providing security for each of these ways. Also, we will give some practical advice based on our personal experience with Bitcoins.

General security issues

First of all, do not over-trust online services that offer services to store your coins. Yes, they are comfortable - but any service can be hacked or can simply disappear with your money. It is more difficult to store bitcoins by yourself (for example, in an offline purse), but it is more preferable from the point of view of safety.

All passwords and passphrases for purses and online repositories of bitcoins should be ENOUGH complex. Never use the same passwords for bit-services as for other sites. Learn the practice of creating strong passwords. Use special password generator programs (preferably open source), if you do not have enough imagination. However, as in any case, be without bigotry. If you came up with an amazingly complicated password for your wallet, and after a while you just forgot it - you LOST access to your bitcoins, permanently. “Resetting the password” in most cases is simply impossible.

After you transferred your bitcoins to an offline purse and uphold with an appropriate password, while the password is securely remembered, make sure that a computer is guarded by a great reliable antivirus and that all the latest software updates are installed on it. If you have a lot of bitcoins, you should store them in your purse on a computer which does not have an online access. And for those who are not at all friendly with the computer, there is such an extreme solution as a dedicated storage device or a piper wallet.

Piper wallet

This is a small device, similar to a printer for printing checks, the only function of which is to create the most reliable from the point of view of security bitcoin-wallets. It is not connected to the Internet, and is therefore not available to malicious online hackers.

Working with the device is extremely simple - it only has one button and one switch. When you click on the button, Piper generates and prints on paper a new pair of bitcoin keys: public and secret ones. The public key (bitcoin-address) you can tell everyone, as the requisites for payment. A secret key should be kept in a safe place (for example, in a sealed envelope) - it will help you in the future to spend the funds received at the public bitcoin-address. For convenience, the printer also prints QR codes, which is convenient for payment, for example, from a cell phone.

The switch allows you to select one of the modes of the device: Remember or Forget. In the Remember mode, all created wallets are stored in the internal memory of the device, in the Forget mode - they are not remembered. What was generated and stored can then be saved on a USB flash drive.

From a technical point of view, the device is a Raspberry Pi minicomputer and a small check printer, HDMI and USB ports are used for a finer configuration. All this farm runs on Linux, and Piper software has free source code.

If you connect the Piper to a computer, you can more flexibly configure the device, for example, you can print purses in lots, encrypt them and also there are many other useful features, such as choosing a prefix for bitcoin wallets and generating LTC purses, and much more even the firmware can be completely modified your needs.

Do not keep all the information together

Your first principle of working with Bitcoins should be diversification. The best strategy for using them is “do not keep all the information together”. You need to use various strategies for short and long term custody.

The most compliant resolutions are often the least reliable. For example, for daily calculations it is very convenient to use a mobile purse on your phone or an online wallet. However, online wallets are most susceptible to hacker attacks, and a smartphone is easy to simply lose. What now, to abandon this convenient way of storage? No, but absolutely there is no need to keep all your bitcoins in the smartphone or, for example, in the purse Blockchain.info. And once a week you can replenish the account from a much more reliable and secure long-term storage.

Make a backup of your digital treasures

Finally, unique property of bitcoin-purse is that you can simply “save” it, what means to create a backup copy of it. If you use a standard client (Bitcoin-Qt) on your computer, your wallet file is wallet.dat. This file can be copied to another computer, to a recordable CD / DVD or to a regular USB-stick.

Why it can be necessary? Imagine that all the coins are on your laptop. And suddenly your hard drive is dead . Or the operating system is down. Or you dragged the laptop with you to the river, and drowned it. Or it has been stolen in the subway. In this case your backup comes in handy. Install the bit-client on another computer. Copy the previously “saved” wallet.dat. Transfer the coins to a new address, just in case. That is it, your digital treasures are saved.

Just remember that the one who received your “backup” at his disposal and knows your password, will be able to access the coins. If your password is not complex enough, you can even try to hack it. Therefore, store the media with a backup in a safe place, where only you have access (locker or safe will be just right). And for even greater security of your data, you can create an “encrypted disk” and write the file-purse to this disk.

Conclusion

Finally, a couple of words about actively advertised “bitсoin-banks”, “bitсoin-funds”, etc. First of all, this has nothing to do with real banks, as long as only one bank is known that works with bitсoins, and that one is only in Germany. Most of these “reliable services” are, at best, just amateurs who do not know much about what they are doing (as was the case with Inputs.io), and in the worst case, they are scammers and rascals.

So if you have a question: “how to store your bitcoins” and see proposals like “we manage your coins”, “borrow and return with a high interest”,or “we invest our bitcoins well!” The most reasonable answer is “thanks, I am not interested”. Bitcoins by themselves are still an investment, do not be greedy.



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