How to keep your Bitcoins safe

Your Bitcoins are your responsibility. All Bitcoin transactions are irreversible! 



Bitcoin Addresses - Public Key and Private Key
There are no physical Bitcoins, only balances kept on a public ledger called Blockchain, and individual Bitcoin Addresses. You can have any number of Bitcoin addresses; one address for storing of large sums of Bitcoins in a paper wallet (cold storage), and another address associated with a hot wallet to keep small amounts of Bitcoins for day to day transactions. Each of your Bitcoin addresses consist of two parts -- a Public Key and a Private Key. These are long strings of letters and numbers. Public key is used to receive Bitcoins into the Bitcoin address while the private key acts as the "key" to that particular Bitcoin address. You can generate public key from the private key, but not the other way around.  Therefore, private key has to be kept absolutely safe. 

If you do not back up your private key and happen to lose it, you will never be able to access Bitcoins associated with that address again. It is a good practice to change Bitcoin addresses as often as possible if they had been stored on a computer connected to Internet, or used for any transactions. Also keep in mind that address reuse is not a god practice at all. It goes without saying that you must keep your computer used for Bitcoin transactions free from viruses, key loggers and other malware.

Bitcoin Wallets - Simple & HD wallets
In a simplified way, a wallet is a digital file where your Bitcoin addresses and their associated Bitcoin balances are kept. Wallets make the use of Bitcoin easier. Though you can make transactions with a simple wallet, you have to take extra care such as making backups each time you generate a new address. HD (Hierarchical Deterministic) wallets were developed to get over this difficulty as you only need to back up the 12 word master seed key it uses. Now lots of hardware and software (both mobile and desktop) wallets use this approach.

Hot wallets - Mobile, desktop, web-based, hosted & self-hosted wallets
Wallets come in all kinds of flavors and security levels. A software wallet is a computer app or a program that you keep in your PC or mobile phone (mobile wallet) and to which you add Bitcoins for transactions. Web-based wallets too can be thought of as software wallets. Due to the internet connectivity they enjoy, all these wallets are called hot wallets, signifying the risk associated with them.

A wallet can also be classified depending on whether it allows you access to the private keys stored in it (ex. self-hosted wallets). Hosted wallets or web wallets do not offer this facility, and as a result you have to depend 100% on the operator of the service for the security of your private keys.

Hardware wallets for best security
Hardware wallets are physical devices that do not allow any changes to be made to their program. They offer the BEST balance between VERY HIGH security and EASE of use. They are easy to use for any Bitcoin and cryptocurrency transactions.

Ledger Nano S - The secure hardware wallet


Full-node vs Lite and SPV wallets
Certain wallets keep a full copy of the Blockchain, and this would require over 100GB of memory. But, those full-node wallets have certain advantages over lite or SPV wallets.

Cold wallets - Paper & Brain wallets and Passphrases
Cold wallets are not connected to the Internet and are used for long-term storage (cold storage) of Bitcoins. They are absolutely safe from malicious activities of hackers, but they have to be kept in an absolutely secure place which is safe from the discovery by unwanted people. Paper wallet is a pieces of paper with your private and public keys printed on them. Similarly, you can also store your private keys in encrypted formats in USB pens and put them on cold storage.

Due to the difficulty associated with securing private keys, Passphrases have been introduced as an additional layer of security for paper wallets and other types of wallets. Brain wallets come with human-friendly passphrases that are supposed to be memorized ant not kept anywhere. However, some discourage their use due to the possibility of cracking. In any case, the user is responsible not only to keep passphrases and passwords safe but also take care not to "lose" them as "too much of security" could also be confusing. 


If you don’t own your Private Keys, you don’t own your Bitcoins

Guidelines for securing your wallet
https://bitcoin.org/en/secure-your-wallet

Understanding Bitcoin traceability & protecting your privacy
https://bitcoin.org/en/protect-your-privacy

How to make a Bitcoin Paper Wallet?
https://coinsutra.com/make-bitcoin-paper-wallet-spend-bitcoins/

How to create a 99.99% secure Bitcoin Paper Wallet?
https://99bitcoins.com/create-99-9-secure-bitcoin-paper-wallet/

How to send Bitcoins from a Paper Wallet?
https://99bitcoins.com/know-more-send-from-paper-wallet/

Choosing your Bitcoin wallet : Different wallet types and OS's
https://bitcoin.org/en/choose-your-wallet

Best Bitcoin wallet review and comparison - 2017
https://99bitcoins.com/best-bitcoin-wallet-comparison-review/

Top 10 Bitcoin Security And Safety Tips
https://bitcoinexchangeguide.com/top-10-bitcoin-security-tips/

7 Bitcoin Scams You Need To Be Aware Of
https://btcmanager.com/7-bitcoin-scams-you-need-to-be-aware-of/


Important: Lessons for newbies on sending (spending) Bitcoins


Understanding Bitcoin Change Addresses so that you will not lose money
http://bitzuma.com/posts/five-ways-to-lose-money-with-bitcoin-change-addresses/

Using paper wallets and understanding change addresses
https://www.reddit.com/r/Bitcoin/comments/1c9xr7/psa_using_paper_wallets_understanding_change/

A lesson in storage - "Just lost 160 BTC from address managed with blockchain.info"
https://www.reddit.com/r/Bitcoin/comments/1czrua/just_lost_160_btc_from_address_managed_with/


Bitcoin Transaction Fees


(1) Bitcoin Fee Estimation for a given number of Blocks
https://estimatefee.com/

(2) Current Fastest and Cheapest Transaction Fees (given as satoshis/byte or BTC/byte):
https://bitcoinfees.earn.com/
  • This fee is the lowest fee to ensure zero delay, which means the transaction will likely be confirmed with the next Block that could take around 5-15 minutes. 
  • If you are not in a hurry for an immediate confirmation, you can experiment with a fee lower than this rate. However, dropping the fee below 50% of this rate could cause long delays.
(3) Current Cheapest Transaction Fees (given as satoshis/byte and BTC/KB):
https://btc.com/stats/unconfirmed-tx
  • This is the lowest possible fee to get a transaction confirmed within a few Blocks and within about 30 minutes. 
  • However, depending on the network congestion, payment confirmation could delay for several hours and up to 10 to 25 Blocks. 
  • Also please note that any lower fee than this could result in quite unpredictable confirmations that could take far too long.
(Note: Many wallets use satoshis-per-kilobyte or bitcoins-per-kilobyte, so you may need to convert units).

1 comment:

  1. Live cryptocurrency chart that shows the latest price movements of hundreds of cryptocurrencies.

    ReplyDelete