How to protect your Bitcoin wallet from theft and fraud

Bitcoin and the whole cryptocurrency ecosystem resemble a ‘cyber wild west’ right now

You need to carefully look after your Bitcoin wallet. A lot of people are intrigued by cryptocurrencies and want to grab a piece of the action, and this opens the door to those looking to take advantage of newcomers. As such, theft and fraud schemes keep popping up.

As Bitcoin is a decentralised asset, compared to fiat currencies, there is no central authority to watch over transactions. Bitcoin holders therefore need to take additional measures for protection and security. In the end, it is our responsibility to secure and protect our wallets from illicit access.

What is a Bitcoin wallet and how does it work?

If you want to receive, store, or send Bitcoins, the first thing you need to do is get a Bitcoin wallet. Technically speaking, there are no actual Bitcoins stored in a wallet, since Bitcoin is a network with lists of immutable transactions. Instead, a wallet stores a private key—a secure digital code known only to the owner. This private key is the ‘connection’ between you, the owner, and a public key, or a series of public keys (numeric codes associated with a certain amount of Bitcoins).

Hardware wallets

A safe solution is to store your Bitcoin on something called a hardware wallet. Manufacturers like Trezor and Ledger offer various models of USB-like devices which come with pre-installed security layers and encryption features.

Keep your private key offline

You can protect your wallet by taking your private key off the grid and keeping it in the ‘real world’. Simply writing down your private key on a piece of paper will work, rather than saving it on any electronic devices. Make sure you keep it in a dry place, protected from heat and direct sunlight, to avoid deterioration.

Always use a secure internet connection

Most public networks are vulnerable and have security flaws. If you have a Bitcoin wallet on your laptop, try using your phone’s hotspot instead and avoid connecting to public networks at all costs when accessing your wallet.

The best thing is to use only home or well-known networks, where you are certain connections are not being easily exposed to security flaws.

Use good and up-to-date antivirus software

While Windows users usually are exposed to a wider variety of malware, all operating systems have their share of malicious programs. You should therefore check whether your computer has an up-to-date and reliable antivirus software installed. Since most cyber attacks use viruses and malware to access and tamper with your device, it is important to do a proper device scan before installing your wallet.

Remember to also update your software on time, to keep you protected from the latest malware programs.

Do not access unknown or suspicious links

Be careful with your online activity and always check the link of the site you’re on if something feels strange. Internet scammers can clone entire websites and use almost identical URL addresses to the authentic ones.

If you use an online wallet or a similar service where you are required to enter the private key, make sure to verify that the website address is the authentic one.

Use a strong password for your online wallet

If you use an online wallet, be careful when choosing your password. Avoid using phone numbers, birth dates, names, or favourite movies. Instead, go for an alphanumeric combination that only makes sense to you.

Never give away your private key

Private keys are for your eyes only. Do not share them with anyone and do not ask for somebody else to make transactions for you. Ignore all proposals or requests that involve you sharing your private key to a third party or person.

Keep a separate wallet for day-to-day transactions

If you need to make small daily transactions, a good practice is to create a separate wallet that you can top up when necessary. There is no limit to how many Bitcoin addresses or wallets you can create.

Sorting your transactions and keeping the most important ones separate will improve the safety of your whole portfolio.

Use two-factor authentication for online wallets

Most online wallets have two-factor authentication, and you should always use it. It’s a simple but effective security measure.

Always check the Bitcoin address

When making transactions, you should always pay close attention to the recipient’s address. There are malware programs that can ‘intervene’ when you copy and paste a Bitcoin address and change the pasted output to another address. If you are not careful, you will end up sending your Bitcoins to someone else.

Back up your digital wallet

A backup will allow you to access your wallet in case you lose your device (losing your laptop, PC failure, or other incidents). Choose either a different or a safe location for your backup. In case your device is stolen, you can restore access to your wallet with the backup file. As a precautionary measure, you can move the funds to another wallet.

In the end, you are solely responsible for the security of your Bitcoin wallet. The cryptocurrency scene is constantly evolving and security systems are being improved, so you should take all the necessary safety precautions and stay up-to-date with the latest security improvements and updates to keep your Bitcoin or any other cryptocurrency wallet away from ill-intended parties.

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