A recent report suggests that almost 4 million Bitcoins have been lost due to silly mistakes that could have been so easily avoided.
Bitcoin has its advantages over physical traditional cash, but it takes precaution when handling the currency. Exchanging currency or information in general on a regular basis via internet subjects the user to hacker’s schemes and loss or stolen data due to lack of precaution.
The bitcoin blockchain is a public ledger that records bitcoin transactions. It is implemented as a chain of blocks, each block containing a hash of the previous block up to the genesis block of the chain.
Blockchain requires each and every user to download and verify the history of all transactions ever made, including amount paid, payer, payee and other details.This is important because Blockchain does not operate as a system of trust.
If bitcoin is even a small portion of your funds, it’s prudent to practice safe storage habits to prevent being victim to the three common mistakes when storing bitcoin.
3 Most Common Bitcoin Storage Mistakes
1. Using Online Web Wallets As A Permanent Storage Solution
There are plenty of wallets available and being recommended to store bitcoin and altcoins. Coinbase is a commonly used storage device. The problem with online web wallets is that they require a private key to access. It’s common sense to not share private key information, but the issue is that private keys can be lost when recorded on an offline document – or even stolen.
New users of bitcoin tend to believe that once their coins are in an online wallet, they can be accessed only through their keys. Online wallets are at a great risk because they are an easy targets for hackers. After purchasing bitcoins, move your coins onto an offline wallet. It’s the safest investment in storing your money.
Try to avoid using other online web wallets and blockchain info etc. In general, all wallets which keep the private key on their servers should be avoided as a permanent solution. Most importantly, do not give anyone your private key.
2. Losing Your Keys
Unfortunately, people lose things. Especially cryptocurrency because it’s highly targeted by hackers and often times negligently handled.
The only way to prove ownership of bitcoin is through cryptographic keys. Once your key is lost, all bitcoin funds are gone. There is no customer service for the blockchain so users can not request a new PIN or password.
The complexity of cryptographic keys makes them difficult to remember. On another note, it’s not a good idea to store this important information in a notebook, word document, or general PC storage.
It is highly recommended to print these documents. To avoid any storage space from being compromised or even lost or destroyed, secure keys in multiple safe places. Keep in mind that you’ll always have a backup.
Computers crash and hard drives burn. So do not rely on these. Always keep hard copies of vital information pertaining to your crypto assets.
3. Using App On Computer Or Phone Without A Secure Internet Connection
Another common mistake is using an app on a computer or phone which is used with a slow, unreliable, or unsecure internet connection. Not only are you subject to being hacked, but the data can be lost if the app shuts down – just like when you’re trading stocks online or accessing your bank account.
Perhaps the app can be used with small amounts to make payments, but should not be for storing bitcoin.
Cold storage is highly recommended because keeping a reserve of Bitcoins offline is easier to keep track of and avoids the risk of lost data due to the app crashing or hacked. Methods of cold storage include keeping bitcoins is a USB drive or other storage media, Paper wallet, a bearer item such as a physical bitcoin, offline Bitcoin hardware wallet.
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Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.
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