Mark Frauenfelder is an editor at wired.com. In an article published in October, Frauenfelder detailed how he spent eight months in his attempt to recover 7.4 bitcoin, worth approximately $50,000 at the time this article was written.
Detailing his plight to recover the PIN for his physical bitcoin wallet after realizing he has accidentally lost the recovery strings, Frauenfelder wrote:
“I couldn’t escape the fact that the only thing keeping me from a small fortune was a simple number, one that I used to recall without effort and was now hidden in my brain, impervious to hypnotism, meditation, and self-scolding. I felt helpless. My daughters’ efforts to sneak up on me and say, ‘Quick, what’s the bitcoin password?’ didn’t work. Some nights, before I went to sleep, I’d lie in bed and ask my brain to search itself for the PIN. I’d wake up with nothing. Every possible PIN I could imagine sounded no better or worse than any other. The bitcoin was growing in value, and it was getting further away from me.”
This represents a nightmare situation with which many altcoin investors find themselves dealing every day. Imagine waking up to find the altcoin that you thought was in your wallet now gone or finding that you can no longer access your wallet. In light of skyrocketing bitcoin prices, it has never been more important to safeguard your bitcoin investment.
By following these simple tips, you can rest assured that your altcoins will be safe and will be waiting for you when you need them.
Protect Your Wallet
Bitcoin may feel safe because it is seemingly anonymous, transparent, and decentralized. Despite this, there is not a technology impervious to human greed. From phishing scams to hacking mining rigs to keystroke copiers, there is a growing list of ways a determined hacker can get your altcoins.
Fortunately, many of the techniques you can use to mitigate this risk to your bitcoin investment are simple, commonsense solutions:
- Know all you can about your vendors, including your exchange. Know about their security, when the last time they reported a vulnerability or attack was, and how they resolve complaints and lost funds due to hacking. Pay attention to customers’ complaints and other red flags that have been reported concerning the vendor.
- Change your PIN and passwords regularly and keep a secured copy of them. If you have a password vault, you may want to consider placing passwords there or keeping them stored physically in a secured place.
- Never use a smartphone app to store wallet keys or your wallet. If your phone is stolen or lost, so is your wallet.
- Move your wallet offline to a secure hardware wallet. Should the exchange or wallet vendor get hacked or change its service agreement, you may lose access to your wallet or your coins. Consider creating backups of your wallets and storing them on flash drives or external hard drives. Keep your keys, backup codes, wallet, and backup secured in different fireproof storage areas.
- If you must maintain an online wallet for everyday spending, keep a small amount in it – only as much as you feel comfortable losing. Invest in an app or wallet with robust privacy and encryption.
- Protect your email. If you are using a smartphone app, the key to gaining access your wallet may be through your email. Use the security features available to you, such as two-factor authorization, password managers, and PIN/passwords to your phone number to prevent simple password recovery.
- Use a VPN when connecting to your exchange and keep your antivirus and malware software updated.
- Only use your own personal computer to do altcoin transactions.
- Update your wallet software regularly.
Protect Your Family
Even if you are able to safeguard your altcoins, things can fall apart if you were to become physically ill or if you were to die. Unlike other securities where your executor or survivor can take possession with a will or other legal document, altcoin, by design, will be lost if you cannot properly input your key or recovery strings.
It may seem counterintuitive, but it is important that you tell the people you trust not only that you have an altcoin wallet, but where to find it, how to use it, and where they can find the key. Choosing the person with whom you share this information may be the most important decision you may make regarding your portfolio, but it is an important one. Your portfolio is a significant part of your estate; without this information, your wallet cannot be inherited.
You might also consider leaving this information in a sealed will. However, if altcoins are a part of your household wealth, you may still want to share your account information with your spouse.
Finally, stay in compliance with any tax requirements, including capital gains tax, and any other legal requirements in your state and country. Realize that any illegal bitcoin activity might prompt government seizure of your wallet. By obeying all applicable laws, you protect your bitcoin investment from such seizure.
Finally, it is important to be cognizant that your wallet is an active target. Just because you have an “unhackable” physical wallet, that does not mean you can relax. As Frauenfelder pointed out, it took about half a bitcoin and a few months of email tag to secure an exploit that ultimately unlocked his “unlockable” wallet.
Never leave your wallet in an unsecured place. Avoid transporting it in an unsecured way. Set a calendar reminder for yourself to update your passwords and check on the status of your software. Consult with an attorney to ensure that you are still in compliance with all applicable laws.
Ultimately, your wallet is only as secure as your posture toward proactive security. Maintaining a strong defense is key to not only protecting your altcoins but making sure they will be available for you and your family to use when you need them.