Don’t lose your Bitcoin to bad luck!
Tags: Wallet, Articles, Bitcoin, Security, Cryptocurrency

From week to week Bitcoin is cresting the charts, supported by growing waves of public and commercial interest. You don’t need to be an expert in economics to see that Bitcoin’s encroachment on gold suggests a lot of room for growth, but when it comes to making and securing your investment, it can feel like you were meant to pick up a PhD somewhere along the way.

Over the past decade, tens of thousands of Bitcoin have been lost or stolen because they were not properly secured. The scale of these losses in dollar terms will continue to increase to unbelievable numbers, but there is no excuse to let any more Bitcoin be lost to carelessness, laziness or lack of understanding about how to secure it. Read on to learn more about how to keep crypto safe.

How do you store cryptocurrency?

Keeping Bitcoin secure is easier than you may think. Making it easy and safe to use, and more forgiving of mistakes, has helped propel it to global success. That’s why the Trezor hardware wallet was created, to give Bitcoiners an easy and comprehensive way to protect cryptocurrency investments, without needing to understand how everything works.

Despite the large amount of money reported lost to hacks and scams, crypto is safe to use. The issue of security usually arises in how you interact with your coins. If you keep the keys to your cryptocurrency online, or on a device that connects to the internet, there is an ever-present risk they will get stolen. Most major crypto crimes happen on hot wallets or exchanges, or because someone willingly gave their keys to a con artist.

While Bitcoin exists online, a hardware wallet creates the secret keys that unlock your bitcoin offline. Since your keys are kept isolated in the physical world and the coins are digital, it becomes practically impossible for someone else to get hold of them. If you create your keys on a Trezor, your coins are safe against all known external threats.

Like with anything that involves the internet, there is social engineering and phishing to think about. While your keys are secure, you’ll need to be vigilant of sites and messages asking you to give away your secret, known as a seed. This will always be an issue, not just in crypto, but the messages can safely be ignored and reported.

Using Bitcoin keeps getting easier

Bitcoin is decentralized, which means it depends on contributions from lots of different people working independently or in small groups all over the world. While this keeps it secure and not controlled by anyone, it means the ecosystem of tools used with Bitcoin have developed independently as well, at different rates of progress.

Trezor Suite is free software that takes the best cryptocurrency tools and makes them work in harmony through one interface, all secured by your hardware wallet. Not only does it provide a safer alternative to exchanges, letting you buy bitcoins directly to your secure wallet, but you can also do more with them, like:

To get started using cryptocurrencies in a safe environment, just pick up a Trezor hardware wallet. It has everything you need to get started, laid out intuitively, and everything you need to progress as you become more comfortable.

Can Bitcoin be hacked?

In short, no — Bitcoin has had technical issues but has never been hacked. But that doesn’t mean there aren’t other ways criminals steal coins. Just over 9 years ago the cloud hosting service Linode, which was running the world’s first mining pool, SlushPool, was hit by an attacker. A hot (online) wallet holding 3000 BTC for payouts to miners, was emptied, leaving the pool operator, Slush, to compensate the losses from his own funds. In total, 50,000 bitcoin were lost by Linode users, making it one of the biggest bitcoin thefts at the time.

The losses in fiat terms were significant, totaling around $20,000 for SlushPool alone. Had they been secured properly, they’d now be worth around $170 Million. This incident was just one of many examples of the experimental nature of Bitcoin in those early days. Since then, it’s become a lot easier to stay secure.

The problem is, most people are still making the same mistake that led to that theft. Keeping Bitcoin or any other cryptocurrency on an exchange for more than the time it takes to complete the desired trade is an unnecessary risk. Coins that are not part of an active trade should be kept in cold storage using a hardware wallet, where they can be conveniently accessed without being exposed to a network.

Why you need control over your keys

For Slush, the Linode incident was a costly lesson not to ever leave coins on a hot wallet. He later went on to found SatoshiLabs and invent the Trezor hardware wallet to make sure everyone had an easy way to secure their keys offline. But massive losses continue to take place, draining money which could have been quickly and easily secured.

MtGox, one of the first major marketplaces where Bitcoin could be exchanged, is the setting of the most infamous cryptocurrency crime so far. Not longer before Linode’s servers were compromised, MtGox had already started experiencing problems. Years of uncertainty and suspicion went by before the exchange was officially closed, unable to pay back its customers, with estimated losses of around 4% of the total Bitcoin supply. Those who had coins on the exchange at the time its accounts were seized are still waiting to whatever remains of their funds returned to them.

While MtGox was ostensibly a mistake attributed to a malleability issue (transaction IDs were being changed before confirmation), the more recent case of Quadriga CX has been reported as a much more sinister, calculated scheme from the get-go. After months of supposedly creating false orders and buying customers’ Bitcoins with fake money by abusing admin powers, the founder is suspected to have faked his own death in 2018, leaving customers out at least 24,000 Bitcoin.

While both of the above cases are particularly noteworthy, similar incidents occur on an almost monthly basis. There is no reason to suffer losses due to someone else’s negligence: never move your funds somewhere that you don’t have the keys to, and use a hardware wallet to make sure that you are the only one with the keys.

Self-custody is safest

Incidents like exchange hacks have led some to call for more regulations over cryptocurrencies, but regulators are more interested in targeting tax evasion and money laundering than protecting users. Identity checks have become part and parcel of the Bitcoin journey but they do not focus enough on creating accountability, something the space is sorely lacking, and instead choose to treat investors as potential criminals.

Some exchanges are taking it upon themselves to find ways to protect users’ funds against loss but as we have seen many times in the past, some unforeseen circumstances can always result in another insolvency investigation. Simply using a hardware wallet and choosing to buy your coins discreetly will protect you against loss more than any new laws or exchange could hope to.