There are some specific measures you can take to avoid these risks. A few of them are simple, but some require technical knowledge and some time commitment. You determine how safe your coins are; if you don’t have many coins to protect or you are so rich that you don’t care, then you don’t need to feel compelled to follow these suggestions.
1. Have a Clean Operating System
Your operating system (OS) is the type of software you use to run your computer. There are three main OS used today: Windows, Mac OS, and Linux. Malware is most happy running on Windows, so it is the least safe client to run a Bitcoin client on. A Mac isn’t a whole lot better, but Linux is significantly safer to use for Bitcoin.
If you plan on keeping a significant amount of coins on a computer, I would recommend installing a Linux distribution and learning how to use it. They are free and have nearly all the same features that their expensive counterparts have, besides being safer.
In fact, I would recommend getting an older laptop, wiping the hard drive completely, and installing Linux. Finding an old laptop online, through Ebay or Craigslist, is usually simple and cheap. This gives you the most security, since you are certain the OS is clean and cannot have malware. If you are looking for a good distribution of Linux (there are many kinds of Linux to install), I recommend either Ubuntu or Mint.
Read More: How to Protect Bitcoin from Threats
2. Recognize the Internet is Dangerous
The internet is an accident waiting to happen, in terms of Bitcoin safety. Your computer—and coins—have a direct connection with anyone else in the world. You have a few options to mitigate this risk. You can operate offline altogether, by using a paper wallet or offline service (the Armory client allows for this). This is the best option for large amounts of Bitcoin, and it is generally true that the more you are able to do offline, the better. Storing Bitcoin offline is called ‘cold storage.’
Or you can carefully work on a computer connected to the internet. Using Linux, you will be somewhat safer, since it isn’t as easy for an attacker to directly access you, or contract malware. If you are using Windows, you need to ensure you are up to date on your protective software.
I recommend using Microsoft Security Essentials, a free program that gives excellent protection. Also make sure to regularly update your software and run the appropriate scans to make sure you are clean. Just remember that even if your scans show you are clean, it is possible to have malware on a Window system.
Whenever you are browsing the internet, be careful where you go and what you click on. The same is true for downloading files, and torrents. Malicious software is frequently spread through falsely labeled downloads.
3. Use 2-Factor Authentication
Online exchanges and wallets nearly all offer a service called 2-factor authentication. This means that when you try to log into your account, or when you try to send Bitcoin, it requires that an outside source verify the requests are genuine and not from a malicious source. Typically, this happens by sending you a text on your smartphone or by requiring you to input an authentication code generated by a program elsewhere.
You should always enable 2-factor authentication. I use the Google Authenticator app on my phone, which I prefer, but there are plenty of other systems like this.
4. Use Paper Wallets
I’ve mentioned paper wallets multiple times, and that’s because they are the most secure and simplest way to store your coins. To generate a truly secure paper wallet, you need to make sure that your private keys are never on an OS that isn’t clean and that they never see the internet. To do that, you need to follow these steps.
1. Find a paper wallet generator that is trustworthy. I would suggest using Bitaddress to create your wallet.
2. You can print off the paper wallet from Bitaddress above, but this is not truly secure, since the private keys are created by a third party while connected to the internet. You need to use their tools while offline. To do this, save the Bitaddress page (as an .htm file).
3. Put the file on a USB drive.
4. Open the file on a clean OS that is not connected to the internet—and preferably never has been.
5. Generate a new Bitcoin address using the Bitaddress service.
6. Print off the paper wallet.
7. Delete the file and make sure that there is no electronic record of the private key remaining on the computer or USB drive.
8. Ensure the printed paper wallet remains secure from theft, fire, flood, bugs, or other damage. If you lose your paper wallet, or is it not readable, you cannot retrieve your Bitcoin! Remember, to use Bitcoin, you must have a private key that corresponds to your public address. A paper wallet—properly created—ensures that the private key only resides on a piece a paper, and no one else can use the coins in that particular public address. That’s why if you lose your paper wallet, you lose your private key, and you lose the ability to access your coins too.
9. Send coins to the public address of your paper wallet. You’re done!
Now, if you want to use those coins, you import your private keys into whatever wallet you are using. Bitaddress, and most paper wallet generators, generate a QR code that allows for quick recovery of your private key when you need it by scanning the code with a smartphone or webcam.
A quick note on paper wallets: If you do choose to ‘withdrawal’ from the wallet, make sure you take out all the coin from that wallet at once. A paper wallet that has been used once means it is no longer a paper wallet; you will need to create a new one to be completely secure again.
1. Have a Clean Operating System
Your operating system (OS) is the type of software you use to run your computer. There are three main OS used today: Windows, Mac OS, and Linux. Malware is most happy running on Windows, so it is the least safe client to run a Bitcoin client on. A Mac isn’t a whole lot better, but Linux is significantly safer to use for Bitcoin.
If you plan on keeping a significant amount of coins on a computer, I would recommend installing a Linux distribution and learning how to use it. They are free and have nearly all the same features that their expensive counterparts have, besides being safer.
In fact, I would recommend getting an older laptop, wiping the hard drive completely, and installing Linux. Finding an old laptop online, through Ebay or Craigslist, is usually simple and cheap. This gives you the most security, since you are certain the OS is clean and cannot have malware. If you are looking for a good distribution of Linux (there are many kinds of Linux to install), I recommend either Ubuntu or Mint.
Read More: How to Protect Bitcoin from Threats
2. Recognize the Internet is Dangerous
The internet is an accident waiting to happen, in terms of Bitcoin safety. Your computer—and coins—have a direct connection with anyone else in the world. You have a few options to mitigate this risk. You can operate offline altogether, by using a paper wallet or offline service (the Armory client allows for this). This is the best option for large amounts of Bitcoin, and it is generally true that the more you are able to do offline, the better. Storing Bitcoin offline is called ‘cold storage.’
Or you can carefully work on a computer connected to the internet. Using Linux, you will be somewhat safer, since it isn’t as easy for an attacker to directly access you, or contract malware. If you are using Windows, you need to ensure you are up to date on your protective software.
I recommend using Microsoft Security Essentials, a free program that gives excellent protection. Also make sure to regularly update your software and run the appropriate scans to make sure you are clean. Just remember that even if your scans show you are clean, it is possible to have malware on a Window system.
Whenever you are browsing the internet, be careful where you go and what you click on. The same is true for downloading files, and torrents. Malicious software is frequently spread through falsely labeled downloads.
3. Use 2-Factor Authentication
Online exchanges and wallets nearly all offer a service called 2-factor authentication. This means that when you try to log into your account, or when you try to send Bitcoin, it requires that an outside source verify the requests are genuine and not from a malicious source. Typically, this happens by sending you a text on your smartphone or by requiring you to input an authentication code generated by a program elsewhere.
You should always enable 2-factor authentication. I use the Google Authenticator app on my phone, which I prefer, but there are plenty of other systems like this.
4. Use Paper Wallets
I’ve mentioned paper wallets multiple times, and that’s because they are the most secure and simplest way to store your coins. To generate a truly secure paper wallet, you need to make sure that your private keys are never on an OS that isn’t clean and that they never see the internet. To do that, you need to follow these steps.
1. Find a paper wallet generator that is trustworthy. I would suggest using Bitaddress to create your wallet.
2. You can print off the paper wallet from Bitaddress above, but this is not truly secure, since the private keys are created by a third party while connected to the internet. You need to use their tools while offline. To do this, save the Bitaddress page (as an .htm file).
3. Put the file on a USB drive.
4. Open the file on a clean OS that is not connected to the internet—and preferably never has been.
5. Generate a new Bitcoin address using the Bitaddress service.
6. Print off the paper wallet.
7. Delete the file and make sure that there is no electronic record of the private key remaining on the computer or USB drive.
8. Ensure the printed paper wallet remains secure from theft, fire, flood, bugs, or other damage. If you lose your paper wallet, or is it not readable, you cannot retrieve your Bitcoin! Remember, to use Bitcoin, you must have a private key that corresponds to your public address. A paper wallet—properly created—ensures that the private key only resides on a piece a paper, and no one else can use the coins in that particular public address. That’s why if you lose your paper wallet, you lose your private key, and you lose the ability to access your coins too.
9. Send coins to the public address of your paper wallet. You’re done!
Now, if you want to use those coins, you import your private keys into whatever wallet you are using. Bitaddress, and most paper wallet generators, generate a QR code that allows for quick recovery of your private key when you need it by scanning the code with a smartphone or webcam.
A quick note on paper wallets: If you do choose to ‘withdrawal’ from the wallet, make sure you take out all the coin from that wallet at once. A paper wallet that has been used once means it is no longer a paper wallet; you will need to create a new one to be completely secure again.
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