Options To Secure Digital Currencies

Generally, cryptocurrency is safe to use. The transactions are conducted anonymously; and with proper practice, utilizing blockchain technology is more safe than depositing your money in the bank. This is because, thanks thanks to the blockchain, only the individual who controls the private keys has the power to move anything out of a wallet.

What the heck is a wallet?

A wallet is any digital or physical security apparatus which allows the ends user to actually deposit their currencies for holding. This means that, with a wallet/account, you can pull your goods off the exchanges and put them some place secure.

Why would I want to take my stuff off the exchange?

Well, unfortunately, there are a few reasons. computer-based exchanges are not especially secure, app exchanges being even less so. With proper malware or key logging software, someone could have access to your exchange accounts.

Next, a string of events in Bitcoin’s past has shown us that exchanges do not always have the best intentions. A quick Google search of the term “Mt. Gox” should be sufficient to convince you to pull your shit off the exchange pronto. Though no one is entirely sure what happened, the company suspended trading and filed for bankruptcy. During this process, 850,000 Bitcoins were allegedly “lost”, presumed stolen. The consensus seems to be that CEO Karpeles was skimming funds off the top; though the story remains unclear.

The last reason I’ll cite has to do with private keys. The entire point of cryptocurrency is that its encrypted. This encryption comes in two form: public and private keys. The public key is your wallet address, something another individual would use to send you currency. The private key, however, is the part that allows you – and only you – to access your wallet. When you leave your cryptocurrency on an exchange, the exchange controls your private key…..which makes it not very private. This endeavor can lead to security concerns with your accounts, especially with the inflating prices of most top-performing currencies.

To learn more about private keys check out the link below:

http://www.investopedia.com/terms/p/private-key.asp

What is the solution here?

In my opinion, there is only one way to store your goods: cold storage. Cold storage consists of two methods, which I will outline and provide resources for!

Method 1: Paper wallet. The function of a paper wallet is pretty interesting. The concept is simple enough, and completely anonymous if you do it correctly. Head over to bitaddress.org, where you will be asked to randomly move your cursor around or complete some other random task. This random task actually generates the wallet; I don’t think I have an understanding of how that works. Anyway, after you have completed the task, the page will display your public and private keys. Under the paper wallet tab, you can select how many addresses you’d like to generate; this gives the user options for separating funds. Once you get all that sorted out, you simply hit the print button and there you have it; a paper wallet. You can send your coins to and from this wallet utilizing the keys provided, and as long as you do your part, this should be completely secure. There are still some security concerns, however, and some research you should do before utilizing this method of storage. To read more about building a paper wallet head over to https://www.coindesk.com/information/paper-wallet-tutorial/.

Method 2: This method is a little less brain-intensive. I’m a bit hard-headed, and I have to watch someone do something fifty times before I’m able to complete a technical task. This method is perfect for people like me! The hardware wallet. A little piece of technological miracle. This device is a simple USB-powered piece of kit that cannot connect without being plugged into a computer. I kind of works like an old school iPod, where the data could only be transferred via a physical connection to your computer. Furthermore, the two hardware wallets I’m familiar have outstanding security features. For instance, the Trezor wallet displays a cypher on its’ screen when plugged in, and to avoid being keylogged, the user clicks the numbers with their mouse. Also, both the Trezor and Ledger Nano come with recovery seeds. This makes it so that, even if you lose or destroy your wallet, you can access your lost or stolen goods. Another great feature, of both wallets, is multi-currency support. Many phone apps or wallets you can find online only allow storage of one currency; though this is not always the case. With Ledger and Trezor you can store most of the top-performing coins out there. I’ll include a link to each wallet below.

Bottom-line

When you invest in something, risk of security breech goes up with each dollar put in. In the cryptocurrency world, this threat is no different; especially if you believe the 500k BTC hype, the money is starting to get real. Even small-time guys are starting to see some really nice gains, and security needs to be our number one concern. You wouldn’t send a stranger to the bank with your debit card and pin (hopefully), and you shouldn’t act any other way about digital currency. Leaving assets on an exchange account is unacceptable; you’re just painting a target on your head, basically.

Resources

Check out the Trezor wallet here: https://trezor.io/

Check out the Ledger Nano here: https://www.ledgerwallet.com/

An outstanding video from Ameer Rosic on crypto security:

I hope this article helps!

-Error