An unfortunate predicament for newcomers to Bitcoin is most do not hold PhD’s in cryptography or computer science. The idea of being responsible for the security of a technically intimidating and poorly understood asset is terrifying. Too often individuals defer this challenge and choose to leave their coins on exchanges as “surely they know how to better secure these things”. Here I will summarize what newcomers need to know, why securing your own bitcoin is important and the easiest ways for a newcomer to secure their bitcoin & take personal responsibility for their assets.
No More “Forgot Password?” Button
Bitcoin’s greatest strength comes from the fact that it is censorship-resistant. If you own the private keys (bitcoin speak for password) to your bitcoins you can send them to whomever you want whenever you want. You alone control your wallet (bitcoin speak for account) and no organization, business, bank or government can stop you.
Historically for many a password has always been something you can easily recover by clicking the “Forgot Password?” button, right? This has been an option with online accounts because the service providers (Google, Facebook, PokemonGO, etc.) have record of your password. You don’t always think about it this way but you are trusting them with your account access and information.
This is not the case with Bitcoin. In Bitcoin you have the option to own your own private keys (password) giving you sole control and responsibility of maintaining access to your funds. A scary but empowering new possibility.
Why Securing Your Own Private Keys is Important
The recent hack of crypto-currency exchange Bitfinex of nearly 120,000 bitcoin (worth over $60 million at the time of the hack) has brought the issue of security back into mainstream discussion; an issue the industry is all too familiar with as displayed by the following tweet:
It is important to note these instances were never a hack on the bitcoin network itself. Rather they were instances where 3rd party service providers were robbed. (akin to your local bank branch being held up). When this occurs it is typically the customers of the exchanges (you) that end up holding the bag with no recourse. Imagine if your bank was robbed and they told you; “Sorry, we got robbed and it was your money. Nothing we can do!” This is what has happened time and time again to the customers of Bitcoin exchanges.
Ultimately, the takeaway for a newcomer should be this; Bitcoin has value. If something has value people will likely try and steal it — especially if it can be stolen easily and with little risk. Bitcoin exchanges have shown they get robbed pretty regularly (at least one major hack per year) and when they do their customers lose there money.
If you don’t want to end up like these people you should learn the simple ways to secure your own Bitcoin that also don’t involve becoming a master cryptographer. Here I share the easiest & most secure known options for newcomers.
Important Tip Before You Read On
- Creating Backups of Your Wallets: Each of the options below encourages you to create “backups” of your private keys. This is a good idea. Create backups and store them in a secure location(s)
Easiest Ways to Secure Your Own Bitcoin
- Phone a Friend: First and foremost if you have a friend or know an expert in the space get their support in navigating your options. Ask them questions.
- Buy a Hardware Wallet: Think of a hardware wallet like a really secure USB drive. They come with fairly simple instructions that will walk you through setup. You need to treat these as you would a wallet full of cash or a brick of gold. If someone physically steals them they can now control the funds stored on them. Here are the websites of two reputable brands:
- Print a Paper Wallet: Think of paper wallets as a unique account with it’s very own password printed out on a sheet of paper. Generate a new one, print it out, send bitcoin to it, and store it in a secure & safe place. Here’s a trusted site: Bitcoin Paper Wallet. You can take this to the next level by buying a device called Mycelium Entropy which will generate secure paper wallets offline and allow you to easily print them on a offline print. Link here: https://mycelium.com/mycelium-entropy.html
- Create a Coinbase Multi-Sig Vault: A little more complex then the previous options but Coinbase’s instructions walk you through the process of setting up a secure “vault” that only you can access. If you have 2 secure e-mail addresses this shouldn’t be too hard to learn to do yourself. Here’s a link: Coinbase Multi-Sig Vault
Getting More Secure
The Bitcoin protocol and its peripheral service providers continue to innovate and increase the ease of security over time. This list will get you started for now but if you find yourself getting more into Bitcoin you should make it your own priority to stay on top of the trends in security. If owning your own keys is still something you are not comfortable with be sure to investigate a service provider that has insurance. I believe Coinbase and Xapo currently offer more secure “vault” storage that provides this.