Securing Your Bitcoin – Managing Your Wallet’s Security
We talked about strong passphrases, but how best to keep the wallet file (often called a wallet.dat) secure and what are the best practices one can use to keep them safe? Well, we’ve got some answers for you! First is take that wallet.dat file and copy it everywhere. You always want multiple copies in case you lose one. This is not to say keep your passphrase everywhere, just keep your wallets backed up at all times and in various places!
The most important aspect of Bitcoin security is that, if it is used properly, you’re almost guaranteed your Bitcoin is safe. As we’ve talked in a previous article, the single strongest point of failure in Bitcoin is you. First and foremost you should be very picky when it comes to any ‘online’ service that purports to host your Bitcoin online. Coinbase, as we’ve said, is a reputable service that has bank level protection on your Bitcoin but other than that we suggest you do your due diligence before putting your money into an online wallet or an exchange. If you are going to use any of these services we highly recommended you use the two-factor authentication most sites offer. Google offers a great two-factor authentication app and we suggest you use it whenever possible.
It is also good practice to keep a few Bitcoin wallets. Now, this may make it more difficult to remember all your passwords, but again you want to have an extra level of security mindedness when it comes to these things. When you’re out and about in your daily life you don’t keep tens of thousands of dollars on you all the time. In the same idea you wouldn’t want to have all your Bitcoin in a wallet that you use for standard day to day transactions. Keep a wallet with a smallish balance that you want to use for depositing coin into casinos or buying items online, and keep another wallet for your ‘savings’.
You may come across the terms ‘hot wallet’ and ‘cold wallet’. A hot wallet is a wallet that you would have stored in any place that can be connected to the internet and that you can use at any time for various transactions. A Coinbase wallet is technically a hot wallet, but they store your funds in cold wallets and only move them when you make the request to move them. A cold wallet is having your wallet.dat stored in such a way that no computer or internet connection can access it. Cold wallets are the ultimate in security because you’ve essentially taken the ability to access your private key completely offline. There are various methods of storing your wallet.dat offline but we suggest a usb device or a paper wallet.
A final, and slightly extreme, way of keep your funds safe while using a hot wallet is using a multi-signature feature, built into most Bitcoin wallets. The multi-signature feature is essentially requiring a certain number of signatories (passphrases) to unlock the private key. This is good for companies that don’t want one single person to have access to all of the company funds but as a single user it is also a great way to ensure that even if someone gets one of your signatures they’ll still need others to access your funds. As we said, it can be a bit extreme, but when you are your own bank using Bitcoin it’s sometimes good to be extreme!
As a last thought, always remember that in the event of something happening to you, you may want your loved ones to have access to your Bitcoin. Never make it too hard for those close to you to access your information in the event of some tragedy, but always do your best to keep everything as secure as possible!
Now, you’ve got a backed up wallet, a hot wallet for sending funds and a cold wallet for storing your winnings, how about visiting some bitcoin casinos to celebrate your security!