Last week we went into the details of securing your bitcoin through paper wallets, this week we discuss two-factor authentication and hardware wallets.
You now know that your Bitcoin(Satoshis) is stored in a wallet (either in an exchange or as a paper wallet). What if someone gets hold of your wallet?
Scary, right?
You know how to secure your bitcoin when they are in your custody. But what if you want to keep the bitcoins in an exchange. If you are on an exchange( think bank from our previous examples), what if someone else gets the authority to make transactions through your bank account(wallet)? How can you secure yourself against this eventuality?
How can you make sure that all of your bitcoin transactions are valid?
This is where two-factor authentication can be a savior
Think of it as an additional layer of security especially when you want to withdraw or transfer your bitcoins.
There are multiple ways in which you can enable two factor authentication, depending on the exchange you use. Two of the most common ways are SMS Verification and Google Authenticator.
In Zebpay, there is provision for SMS verification for all withdrawal transactions.
From the menu go to your settings tab.
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Click on lock outgoing bitcoin transactions.
Now whenever someone (even you), tries to withdraw bitcoin from your address, they will need to enter an OTP that you receive on your phone.
It is a very simple but effective way to safeguard yourself from losing your bitcoins(satoshis).
Now let’s come to the most effective way of securing your bitcoins(satoshis) i.e hardware wallets.
What do you mean by Hardware wallet for a virtual currency?
Remember what paper wallet is from our last article?
Can you recall the analogy of a paper wallet being similar to you not keeping your money in the bank(exchanges like Zebpay, Unocoin etc) rather keeping it at home?
This is how it looked,right?
When you secure your bitcoin(satoshis) through a paper wallet, you are still prone to the risk of losing all your holdings.
Because all the information is on a paper, if someone runs away with it due to your negligence/ignorance at home, whatever you own is gone as your private key is printed on the paper wallet and it is everything someone needs to access your account!
What if you can store your bitcoins(satoshis) offline in the same way as a paper wallet but with the added security that to access anything there is a layer of code(pin). This means even if someone runs away with it, they can’t do anything as the private key is prevented through a pin.
It is exactly what Hardware wallets are. You store your bitcoins(satoshis) on a USB type hardware that you can connect to your system for transactions(sending/receiving). You don’t have the burden of thinking what if someone steals the hardware?
So if paper wallets is like keeping all your cash at home instead of a bank(exchanges like Zebpay, Unocoin etc), then hardware wallets are like keeping it at home in a vault.
Even if someone runs away with it, they can’t open the vault( because they don’t have the pin) and consequently you are always safe.
Where do you get hardware wallets?
You have to buy them online.
The three most popular and best Bitcoin hardware wallets are:
Most of them will cost you around $100. If you have invested a significant amount into bitcoins, it is a good idea to have one.
This is what Trezor hardware wallet looks like
When you have a hardware wallet, all the setup happens offline( without being connected to the internet), so there is no possibility of you being attacked.
Setting up a hardware wallet is a straight forward job even if you are completely non-technical.
Congratulations, you now know more about securing your bitcoin than most out there :)
If you want to know more, follow us as we come out with a series highlighting every aspect of investing in bitcoin and Cryptocurrency.
Drafted with love by Nagesh Bansal and [Prashant Sharma (https://medium.com/@nitprashant)
PS: We are not investment advisors( whatever we detailed above is based on our experience), it is only you who will always be responsible for every investment you do.