Bitcoin, crypto currency wallets and security
I spent the morning looking into the best way to store crypto currency. I have a small sum in Coinbase which is a wallet and an exchange. It’s convenient to have the crypto currency in the wallet where you bought it but the purists would say it’s better to look after your own currency. There are various wallets to store bitcoin, Ethereum, Litecoin or whatever. If you do take responsibility for the security of your crypto money it’s essential you know what you’re doing. There are stories of people with a large amount of bitcoin, worth thousands or even millions who have lost all of it. Maybe they didn’t have a backup of the hard drive which contained the bitcoin wallet. They might even have just thrown the computer away and forgotten about the bitcoin stored on it. These sorts of stories have occurred in the news more than once. So what can you do to ensure your crypto currency wallets are safe as they can be?
Safety and security of software/hardware crypto currency wallets
Make sure you’re using a trustworthy wallet for your currency. Get the one to use on your desktop computer or on your mobile device as recommended by trustworthy sources. Have a look at the well-known crypto currency exchanges and see what advice they have for you. Check out the webpages for the currency itself such as Ethereum, Bitcoin or Litecoin. You’ll find recommendations or even download buttons so you can get the right crypto currency wallet for your digital money.
Import a Wallet into Trust App
Another way to check out wallets to use with your crypto currency would be to look in the app store for your device and read the reviews. There are a lot of crypto currency wallets to choose from and you might need to look at a couple to find out if they suit your specific needs. For example, I needed one which would allow me to import a wallet already created for Ethereum. I had created a wallet on the web and I needed something which would let me import by either scanning a QR code or inputting the private key for a wallet. I had to try out two or three different wallets before found one with the right trust level and the facilities I needed.
You must have multiple backups
With normal computer files on whatever sort of computer you need to work on the basis of having three backups. The first backup can be a copy or a clone of the necessary file on the same computer. The second backup will be stored off the computer on a second separate drive. The third backup will be stored encrypted in the cloud. If you are really paranoid you can also have another backup you keep on a separate drive and not on the same site. One way to do this would be to copy the file to drive and store it at your mom’s house or whatever relative or friend you choose.
The reason for all this backup is because hard drives fail from time to time. You don’t want to be pulling your hair out and hoping beyond hope to retrieve data from a failed drive. It’s an expensive process and often it doesn’t work. My preference for backups on my Mac is to use Time Machine as the first line of defence. I also make clones of the system hard drive and the drive I use for data using software called Superduper. Not only that, I save a copy of important files to cloud storage. I must be completely paranoid!
Use a Paper Wallet
This morning I spent quite a bit of time researching how to use a paper wallet with Ethereum. There is a website called myEthereumwallet and it’s really easy to create a paper wallet. What it does is to give you a QR code for the public key used to send money to the wallet and a private key for the security. It really is a paper wallet as you print this onto a sheet of paper. So long as you keep this sheet of paper safe you have no chance of losing the funds contained within the wallet. The crypto currency doesn’t have to be stored anywhere online. It doesn’t have to be stored in a software wallet on your computer which could be accessed if your computer was hacked. It is one of the safest ways to keep your crypto currency safe and secure. Put the piece of paper into a bank vault or into a secure locked safe in your house and you can breathe easily.
It was a simple process to create the paper wallet through the website. Make sure you’re using the correct website you wouldn’t want to be caught out by a phishing scam. That’s where somebody puts up a fake website which looks like the original in order to steal your passwords and private keys in order to get at your money. Be careful when you’re clicking on links sent to you in emails or by other means. Store the correct website in your bookmarks in your browser. Double check everything by making sure the URL is as it should be when you go to login.
After I made a paper wallet to try out I thought it would be a good idea to check how you use the currency stored in the wallet. There’s no point in it being so secure you can’t use it. You can go back to the website you used to create the paper wallet. By using all of the security features by having a good password and also two factor authentication you can get back in again. From there you can convert it to other currencies or send it to either a currency exchange or to an app you can use to spend it.
I then was wondering what would happen if the website used, myEthereumwallet went off-line. It isn’t a wallet which stores your money or has access to your crypto currency in any way. So your funds are safe in that respect. So what I looked for was an application I could use on my iOS device I could use to import the paper wallet. I was hoping to find one which would let me scan the QR code printed on the paper. I didn’t find one that did the scanning using the iPhone camera, but I did have the option of importing using a key store JSON file or a Private Key with a password. I found the easiest way to do it was to use the private key and of course I have a very good password. Don’t forget you need to have a way to keep your passwords safe too. I use the application 1Password. The application I used on my iPhone to do all this with the paper wallet is called Trust. This application also connects up with Coinbase which is what I use to buy and sell crypto currency. You also have the necessary capability of sending Ethereum somewhere else such as buying something from somebody who accepts the currency as payment. You can also bring up a QR code and the wallet address to allow somebody to send money to you. Trust is a simple application which also gives you a list of transactions so far for that wallet.
Bread Wallet to import an Existing wallet
In my testing of the paper wallet I sent two small amounts to the paper wallet. I also did one transaction going the other way. It’s no good putting the money into the account and not being able to get it out. It all worked incredibly smoothly. I’m happy to have worked out how to use paper wallets for security of crypto currency. It super that it’s easy to get the money into the wallet and also out of it, providing you have the required crypto security in place.
If you’re really serious about the safety of your crypto currency you could use a hardware wallet. On the bitcoin website they recommend four different hardware wallets. Digital Bitbox, KeepKey, Ledger Nano S and Trezor. The last two of those will also work with Ethereum and were recommended by MyEthereumWallet. I haven’t got one of these at the moment but I’m probably going to try one out at some point in time. This is an actual hardware device which you load up by connecting to your computer device. Obviously, when it’s disconnected it is going to be safe from hackers. You just have to put it away in a safe place such as a safe or a bank vault and you’re golden. The Trezor device costs €89 and would be well worth the money if you’re working with large sums of crypto cash. Make sure you don’t lose it or break it!
Trezor hardware Wallet
Good to know your Crypto currency is Safe
With this information you should be able to sleep safe in the knowledge your money is safe. Take these precautions with which ever method you use and you’ll be golden.
- Use good passwords and store them in a password manager
- Use 2 factor authentication
- If you use hardware/software wallets always have multiple backups
- Use a paper wallet to store crypto currency if you are worried about getting hacked.
- Consider getting a physical device for a hardware wallet and keep it safe.
- Read thoroughly so you know how these things work. There are so many ways you can trip yourself up if you’re not careful.
Quote from Bitcoin.com
In simple terms, cold storage refers to keeping your bitcoin completely offline. Cold storage, also known as a cold storage wallet, is the opposite of a hot wallet where your bitcoin is kept online. Since Bitcoin is a digital asset, keeping them online increases your risk or attack surface for having your bitcoin stolen when kept online using a custodial service. By keeping your bitcoin in cold storage, your attack surface is greatly diminished.
It’s all Very Up and Down
Since writing this the price of bitcoin has dropped, losing a proportion of the fantastic gains over the month or so. My portfolio has dropped in value by 30% in a couple of days. This is normal behaviour of Bitcoin. It will surge and drop before regaining its correct level and then do the same again a while later. You never know when this might happen and it is always a good idea to take a long view with crypto currencies. I reckon is it a great idea to take out your seed money when the value is high and you will not be so upset if the value drops. Besides when the price is low it is a brilliant opportunity to buy more of the currency. I do follow my own advice and I cannot lose money as I have the original money back in my bank account and some profit too. If you bought high don’t panic. You just have to be patient and wait for the next massive rise.