Once you start getting involved with Bitcoin, it is paramount to take proper security precautions to ensure your funds are safe at all times. Computer users, who run any Bitcoin wallet software on their machine, are the most vulnerable targets for hackers trying to steal Bitcoins. Luckily for all of us, there are some basic steps users can take to create a far more secure environment.
Securing The Bitcoin Software Client
One of the first security measures to take is creating a passphrase for your Bitcoin software client. Every Bitcoin address is protected with a private key, which is stored in the wallet.dat file on your computer. However, this wallet.dat file can be copied by hackers to another computer, and then imported, including your Bitcoin balance and associated private keys.
What a passphrase does, is add an additional layer of protection on top of the Bitcoin software client itself. You could compare a passphrase to a password, which will need to be entered every time someone wants to move funds from your Bitcoin address(es). Generating a secure passphrase is important, there should be letters, digits and special signs included, and the longer it is, the more secure your Bitcoins will be.
Using a passphrase is an important security measure, but it also brings a certain risk to the table. Without the passphrase, access to that specific Bitcoin wallet address will be lost. Always make sure to note down the passphrase you created in a secure location that is not connected to the internet. A piece of paper inside a lock box in your personal safe would be a great solution, but anywhere safe that is not easily accessible by just anyone will do the trick.
Cold Storage – Create Your own Bitcoin Vault
The second most popular option to secure your Bitcoins is by creating a cold storage option. Similar to how bank vaults work, a Bitcoin cold storage solution is wallet address that is not actively operated by an Internet-connected device. The whole idea of “cold storage” is that there is never an internet connection tied to this wallet address, other than to move funds to a different wallet by the owner himself.
There are multiple ways to create a Bitcoin cold storage solution: using a data storage medium, creating a paper wallet, using an offline Bitcoin hardware wallet, or take advantage of the BanxMint coins. Physical coins in the world of virtual currencies can be used to store Bitcoin – and other currencies – securely, as these coins are not connected to the internet. Plus, Banxmint coins, as well as other types of physical Bitcoins, make great gifts and collectible items, making them all the more valuable.
When you want to redeem the balance associated with your Bitcoin cold storage solution, the cold storage wallet address, along with its private key, will need to be imported to an internet-connected device running Bitcoin software. This device can be a computer, mobile phone or tablet; any of these will do as long as it can run Bitcoin wallet software.
Cold storage is a much more secure solution for Bitcoin users compared to creating a passphrase, although any solution is better than doing nothing at all. From a convenience point of view, using a passphrase might be better for Bitcoin users who spend funds on a regular basis. Those who invested in Bitcoin, or see it as a long-term investment, are better of using a cold storage solution such as Banxmint coins.
Images courtesy of BanxMint, Bitcoin Babe and Shutterstock