Guide: How to Stay Safe With Your Bitcoin Wallet
By: Kristen Graham
Tags: Cryptocurrency Investment, Bitcoin, Finance, Bitcoin Wallet, Cryptocurrency

Guide: How to Stay Safe With Your Bitcoin Wallet

How to stay safe with different types of crypto wallets and keeping safe your keys and seed phrases Kristen Graham Follow Jul 1, 2020 · 3 min read

What is a “cold” wallet?

Cold storage allows the owner of the amount of cryptocoins to protect yourself from such misfortune. It is also installed directly on the user’s personal computer, but does not support a permanent connection to the world wide web, and is therefore inaccessible to Internet attackers.

Because of its autonomy, this type of purse is more suitable for the storage of cryptocurrencies than to implement instant transactions.

The private key is entered only at the time of the transaction. let’s look at the main ways to store it safely:

Key on paper

After the key and bitcoin addresses are generated, you should fix them on a piece of paper. Then the user must securely hide it from prying eyes. Scanning a password is risky: it increases its vulnerability. An even more reliable way is to encrypt the key itself using a special resource bitaddress.org.

“Declassify” the resulting code is able only the person who knows the password, this creates another obstacle in the way of their fraudulent schemes.

Key fragmentation

Among cryptographers, a special technique called “secret sharing” is practiced. Its essence is that the key is “split” into a certain number of components that do not contain valuable data. To restore the code, you must collect the specified number of its components. Even if one of the pieces of this “puzzle” is stolen, the main key will remain safe.

Offline signature

This method is suitable for users dealing with large volumes of cryptocurrencies, it consists of the following steps:

installation on the first device of the hot wallet (without entering secret codes), and requires access to the Internet;

creating a transfer of funds;

copying the transaction file to another PC with the entered keys that has a wallet with digital signature support.

transaction signature;

transfer the file to a computer with Internet access and finish the translation.

The security of this method is that operations with the key are performed without an Internet connection. It is recommended to back up the data in case of possible problems with the device.

Multisignature

This method is convenient for use in companies with a large financial turnover. Several keys are created, the number of which depends on the number of top employees who are jointly and severally responsible. Thus, it will not be possible to use the funds alone, and all responsible persons will need to sign the transfer.

Speaking of cold wallets, it should be noted that despite their high level of reliability and protection from attacks by cybercriminals, they do not provide a one-hundred-percent guarantee of the safety of funds. Physical media is not immune to breakdowns and losses, so the user needs to take care of creating backups of all the necessary data in advance.

Hardware wallets

A popular type of storage for cryptocurrency is hardware crypto wallets — they are small gadgets designed specifically for storing bitcoins and other cryptocurrencies. Such wallets can boast a high level of security, they allow you to keep private keys for accessing coins separately from equipment that has an Internet connection.

Jordan Tuviner, the founder of the famous Buy Bitcoin Worldwide service, compared a hardware wallet to a personal underground storage facility equipped with an armored door.

What features make this device a reputation as such a reliable device? The main advantages of a hardware wallet include:

the ability to verify transactions using the screen, which also serves to visualize the data required by the user;

easy to configure the gadget-the settings are clear even to the inexperienced owner;

minimizing the risk of exposure to hacker attacks;

additional protection of the wallet with a PIN code, which will prevent hackers from using the gadget if the wallet is stolen;

compact and portable.

Sources: AML Safe.

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