Hi there! Today i’d like to speak about the mistakes that you must avoid when dealing with cryptocurrencies. Be aware, that you money will always be a target for thieves. So, the first thing you must do after you buy bitcoins is to keep your bitcoin wallet safe. Personally, I use two hardware offline wallets, backing them up every day or two, and I also use several online wallets for everyday transactions, since I am a successful bitcoin trader and make my living with it. I receive money from online bitcoin markets every day to my online wallets, and then I transfer the money to my offline wallet once a week, backing it up simultaneously. Also, i use random password generator and change my passwords daily.
So, first of all – choose your password wisely. It must be long, it must have both lower and upper case letters, numbers. Be also sure to use some special characters. A solid password will be hard to hack, but it doesn’t guarantee 100% safety, so be sure to change your passwords on a regular basis. I prefer to use special software for this, just google for “random password generator”, there are plenty of them on the web.
Use offline wallets
Offline wallets, or so called cold storage means literally what it sound like. It is just a wallet on any portable storage hardware that is disconnected from the internet. It may be a usb flash-drive, external hdd etc. My storage of choice is an external HDD (a pair of them actually, one backing up another). Nobody except me knows where I keep them, and I am sure that my money are safe. I am not paranoid, but I also encrypt all the info on my drives. I mean, you can never be too careful this days.
You can read more about cold storage and its choosing here.
In a nutshell, paper wallet is basically a record of two parts of both public and private keys on paper. A paper wallet is another solid way to store bitcoins offline. There is, of course, some special software to help you generate the paper wallet. There are plenty of paper wallet generators on the web, just download one of them and follow the instructions. Just be sure to update your antivirus and clean your PC from any possible spyware, this is crucial.
Spend some time choosing your wallet
There are several types of wallets today, including desktop, mobile and web ones:
- Desktop wallets – are installed on your PC. The pros is that you have total control over your wallet. The cons is that desktop wallets can be easily hacked (unless the aforementioned PC is disconnected from the internet).
- Mobile wallets, having all the pros and cons of desktop wallets, but giving you a great mobility.
- Online wallets – least reliable. Great benefit is that you can access your bitcoin wallet via any browser on your PC or smartphone. But they can be easily hacked, or some spyware can steal your password. Be aware. Or just spend some time choosing your web wallet.
You can find all about wallets in my article ‘Best Bitcoin Wallets‘.
In order to increase security level, Bitcoin has integrated multi-signature feature. Standard transaction can be called “single-signature”, since the transfer basically requires only one signature from the affiliated bitcoin address. But bitcoin also supports multi-signature for more complex transactions, that require signatures from multiple transaction participants. And the fact, it that there is no actually third-party required to complete the transaction, since you can possess two or more bitcoin wallets to do that. And the transaction will not be complete until every participant gives his signature. There are plenty of multi signature wallets online. Here are the best:
- Carbon Wallet
Also, the Coinbase and Coinkite also support multi signature!
Always backup and encrypt!
Remember me talking about backing up? Always do your backups. It would be a great habit to make a backup copy of your bitcoin wallet literally after every transaction. Even when using cold storage, you can always lose all your money due to a hardware failure. Here some tips:
- always encrypt your public keys
- if using online backup (not recommended) – always encrypt
- always make a backup copy after every single transaction
- have as much different types of backups as possible (hdd, usb flash drive, paper wallets) – it’s never enough of them.
- never store all the money in a single wallet, divide them among several wallets to minimise the possible loss.
Stay in touch, things will get interesting as I’ll tell you about online bitcoin trading next.