How do I keep my Bitcoin safe?

May 30
Blaise Blaise

Safely storing your Bitcoin is very important. Unlike other types of money that is controlled by banks, with Bitcoin you have many more options on how to store and control your money.

Remember your private key that you need to move your Bitcoin? Well that is literally the key to storing it. Whoever has the key controls the Bitcoin. These keys can be either in digital or even in physical format i.e. written down on a piece of paper.

How to store it then? You can leave the key in your pocket, but that’s not too secure. You can put it in a safe – that’s a lot better. But someone can still break into your house and steal it. Given you want to use your Bitcoin regularly, you might also want to put some or all of it in a digital version on your phone so you can access it easier. The only problem is that if you lose your phone it means you will also lose your key, and there is no way to get it back.

That is why digital asset exchange companies exist – not just to make it easier to buy, sell and use Bitcoin, but also to securely store it. Companies like Luno.com, coinbase, blockchain etc do this by taking your private keys and storing them in a physical bank vault with access controls like fingerprint and retina scans. In fact, it’s not just one vault, it’s a number of vaults across many continents. And they build it in a way that you have to access the keys from multiple vaults and put them together to actually be able to extract the Bitcoin, similar to the old movies where nuclear submarines need 3-5 ‘launch codes’ from different generals to be able to launch nuclear weapons. This is commonly knowns as ‘multisig’ (multiple signatures required).

Bitcoin is very safe when it is stored like this, but there is one potential weak link: you need to trust the people storing the keys on your behalf. There are many reputable companies like Luno, spectro or coinbase that you can rely on, but also many others that either don’t store it properly or might pretend to store it and then misappropriate it. The great thing about Bitcoin is that unlike old money, you have the choice – whether you store it yourself, in physical or digital format, or whether you rely on someone else to safeguard it for you (or even a combination of all of these).

The way Bitcoin is often stored is also one of the biggest ironies of Bitcoin – the world’s global currency that was designed to be used online, is mostly stored ‘offline’, in physical bank vaults and detached from the internet. Who would have thought!

 

Source: luno.com

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