A Bitcoin wallet should be kept safe and secure, much like a physical wallet. Security in the digital world can be daunting, with almost every day a new ransomware breach or hack is published. And while blockchain is recognized in cryptocurrency trading as the ultimate safety mechanism, digital currencies are only as secure as the digital wallet in which they are held.
As well as a piece of hardware, a Bitcoin wallet may be a desktop, tablet, or web app. Nobody can store, send, or receive digital coins without it. In order to understand the key idea behind the wallet, you do not have to go through loads of technical literature: it stores Bitcoins just like your physical wallet stores your cash. Technically, Bitcoin owners have a protected private key that enables them to get access to any wallet-encrypted Bitcoin address.
Returning to the types of a Bitcoin wallet, it should be noted that desktop ones are the most common because they give complete control over it to users
Wallets for smartphone, internet, or hardware also have their pros and cons. Hardware wallets, for example, are considered the most reliable, while web wallets pose some questions about digital money being stored online. And there is restricted functionality for mobile apps to store Bitcoins.
Here are some safety practices that will help to secure your investment in Bitcoin.
Make sure there is encryption in your Bitcoin wallet. Encryption is a process in which information is transformed into code. The aim of this is to prevent access to it by others. Always use a strong password that's at least 16 characters long and includes letters, numbers and punctuation marks. Don't share it and don't forget it with someone. Bitcoin, unlike banks, has restricted password recovery options.
Using dual authentication adds to your Bitcoin wallet an extra protection layer. In multiple ways, this can be achieved. A 6-digit code is given by the Google Authenticator app that changes by the minute and is unique to the user. Another alternative is to add a fingerprint-like biometric identification step. If you are using your wallet for online purchases, this is especially important.
It is still vulnerable even if you hold digital currencies in a wallet installed on your personal device, since Bitcoin wallet apps usually store data in predictable locations. At least two digital wallets are best kept, one to trade and transact with and the other to store savings. This wallet should be stored in a safe position away from internet access, in what is known as cold storage, which means storing Bitcoin offline.
Using the new version of your Bitcoin app allows you to get updates on security and stability that are designed to help keep your wallet secure and avoid all sorts of problems. Many veterans of cryptocurrencies think it's best to turn off auto-updates and wait a few days after publishing an update to see if it has any bugs.
Make regular backups of your private and public keys and hold copies with limited access in various secure locations. This could be on a portable hard drive, a flash drive, an optical disk, or even on paper. You may also store it on a backup system like Dropbox that is cloud-based. Only make sure to encrypt any data you upload to the cloud.