NEW YORK (InsideBitcoins) — Over the past year, millions of dollars in bitcoins have reportedly been stolen, illustrating the importance of securing bitcoin wallets from hackers. Bitcoins users should understand the various security risks they face.
There are various reasons hackers find bitcoin wallets appealing targets. Unlike credit card payments, bitcoin transactions are irreversible. The anonymous nature of bitcoin also often makes proving theft difficult.
Securing your bitcoin wallet should be a top priority. The following steps will help protect your bitcoins by thwarting would-be hackers.
Always backup your bitcoin wallet offline. In November, an individual going by the name “TradeFortress,” the founder of inputs.io, a former bitcoin wallet server, announced hackers stole over $1 million in bitcoins from his company. TradeFortress admitted that storing bitcoins on servers was a serious mistake. “I don’t recommend storing any bitcoins accessible on computers connected to the Internet” he told WIRED.
Bitcoin keys should be backed up on an offline computer or written down on a piece of paper. You should always store physical copies of bitcoin keys in a locked safe or other secure location.
Access to bitcoin wallets should be carefully restricted. A white paper from Secure Works states businesses with multiple employees should limit privileges with access controls. “Bitcoin supports the concept of “m of n” transactions, where multiple persons can sign a transaction but not all parties are needed to move the funds,” the authors write. “This feature can prevent a single person from either freezing or stealing funds from a company account, and is a highly recommended part of any Bitcoin wallet access policy.”
Be Wary of Malware
Bitcoin users often seem oblivious to the threat keyloggers, randomware and Trojans pose. Earlier this month, Kasperky Lab released a report showing bitcoins are targeted in over 20% of all malware attacks.
“Bitcoin miners account for 14% of all financial attacks,” the authors wrote. “Criminals also use keyloggers to collect user credentials for online banking and payment systems in another bid to access bank accounts.”
Joe Stewart, Dell SecureWorks’ director of Malware Research, states that the simplicity of bitcoin wallets makes them attractive malware targets. “There’s no sophistication involved in the storage of bitcoin in wallets,” Stewart told Reuters. “As for malware, it’s some of the easiest stuff to write.”
Hackers regularly use keyloggers and ransomware tools such as CryptoLocker to target bitcoin users. Update your anti-malware software regularly and monitor your applications for suspicious files.
Encrypt Your Wallet
Encrypting your bitcoin wallet will also reduce the likelihood it will be compromised. BestCrypt, DiskCryptor and other third-party providers offer services to protect online bitcoin wallets. Deep Cold Storage offers similar means to protect bitcoin wallets stored offline.
Use Multiple Wallets
Storing all of your bitcoins in a single wallet is inadvisable. Creating multiple wallets minimizes losses if any are compromised.
Just as you wouldn’t keep large amounts of cash unsecured and out in the open to tempt thieves, a little planning can help keep your bitcoin safe, too.
Written by Kalen Smith