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How To Keep Your Bitcoin Wallet Secure

By Paul Liu
Monday, June 9th, 2014

Bitcoin is a digital currency that has gained immense popularity in the last few years. Bitcoin offers a fast, secure and anonymous way to send and receive money and on top of that, it is free from government regulations and control. Due to unprecedented rise in the value of Bitcoins, it is more important than ever to keep your Bitcoin wallet secure. This article will suggest few tips on how to do that and keep your Bitcoins safe from theft.

1. Encrypt Your Wallet

The Bitcoin client makes it easy to encrypt your wallet and there is no reason why you should not use this facility. To encrypt your wallet, just click on “Encrypt Wallet” option available in the Settings menu of the Bitcoin client. Choose a strong password to encrypt your wallet so that it cannot be cracked even by brute force attacks. It is also important to select a password that you can always remember because there is no way to recover your Bitcoins if you happen to forget your password.

2. Backup Your Wallet

Apart from encrypting your wallet, it is also essential to backup your wallet at regular intervals. It is not enough to backup you wallet on a computer, Smartphone or USB drive since these are prone to theft and hardware failures. Also, you should not rely on online wallets or Bitcoin exchanges to keep your Bitcoins secure as even big names in the industry (example, Mt. Gox) have suffered security breaches and closures. Even if decide to use an online wallet, make sure that it has sufficient security measures in place (encryption, 2-step verification) so that your money remains safe.

For 100% security of your wallet, you should keep your wallet backup file at multiple places as well as encrypt the backups. Also, you must backup your entire wallet and keep only a small amount of currency on your Smartphone or local machine so if there is a security breach, you won’t lose your entire Bitcoin savings.

3. Update Bitcoin Software

Bitcoin issues security fixes and updates to its client from time to time so make it a point to update the software regularly. If you do not update the client, you could fall prey to latest security threats that may have been already patched.

4. Use Paper Wallet

If you are constantly worried about losing your Bitcoins, you can turn your Bitcoin wallet into a paper wallet and store it in a non-digital format. The paper wallets allow you to print a copy of your private key without which your Bitcoin wallet cannot be accessed. However, you need to store the paper copy carefully since losing it could mean losing your entire collection of Bitcoins. For enhanced security, you should split the key into multiple parts, encrypt it with a password and keep the paper wallet at an extremely safe location (such as a bank locker).

5. Offline/Hardware Wallets

Offline wallets store Bitcoin wallets on machines that are not connected to any networks. This provides a very high level of security since there is almost zero chance of hackers breaking into such systems. Alternatively, you could also use a hardware wallet (such as Pi-Wallet) to secure your currency since they are encrypted at the chip level. A hardware wallet comes in the form of a memory stick but it is not possible to install any software or store any other kind of data on it. However, it is possible to backup and recover Bitcoins from a hardware wallet in case it suffers from a hardware failure.