How to Keep Bitcoins Safe
If you are thinking through the process of accruing bitcoins, you may be wondering where to keep them once you’ve done so. After investing time and resources into the digital asset, can you be sure they are locked safely away for when you want to use them?
In truth, bitcoins aren’t “stored” anywhere. As a purely digital entity, it is not as if they are held in bank vaults or stuffed under mattresses. They are accessible through Bitcoin addresses, which require a set of digital keys for entry. So, the question of how to securely store bitcoins comes down to the security of these keys.
Every Bitcoin address has two keys: a “public key” and a “private key.” Bitcoin addresses are derived from public keys, and these Bitcoin addresses are shared. Think of it like sharing your email address with someone: they can send you an email but can’t get into your inbox to read your mail. Similarly, nobody can get into a wallet and take bitcoins from it with a public key; it can only be used to send bitcoins. Therefore, it is safe to share.
A private key is what allows users to take bitcoins from a wallet or to send them to others, and it is what must be protected to keep a user’s bitcoins safe. Whoever holds the private key is considered to be the “owner” of the bitcoins at that address, although technically it’s possible to possess somebody else’s keys without owning the bitcoins they lead to. There are a few different methods that users employ for protecting their private keys.
To hold a private key, it’s possible to encrypt bitcoin wallets with a private password, but this is generally the most basic level of security and one that could potentially be breached by computer hackers or viruses. Others opt to keep their access offline completely. Instead, they hold private keys in disconnected databases so that they remain safe from threats on the internet.
As a different approach to protection, many users utilize multisignature addresses, which allow several parties to hold a fraction of an address to a key or to hold one of many keys that are connected to a single address. When one user wants to access the bitcoins, these other holders will have to approve the transaction as well. The number of signatures necessary can be customized and users can set it up so that the multiple verification is provided by individual devices that are each controlled separately.
Among the range of options available for securing bitcoin wallet private keys, each has specific pros and cons that users will have to weigh. The important thing is to make sure your investment is protected in a way that gives you access as you need it while keeping out everyone else.