Securing your bitcoin: Part 1

Last week you hopefully got your first bitcoin(satoshis), it’s time to make sure no one runs away with it

In the internet world, you can come under attack at any time.

Bitcoins and other cryptocurrencies( with its underlying technology, BlockChain) have the potential of disrupting a lot of industries( from payments to governments) and the major reason why a lot of good minds are betting big on
its future.

Every new technology that can upend industries and also has the use case as a currency will always attract bad actors.

People who want to make quick bucks in the hype cycle and vanish with other people’s money.

Since you now own your first bitcoin( or satoshis), it is a good time to familiarize yourself with what are the different ways in which you can get scammed.

We are also outlining a step by step guide to secure yourself completely.

Let’s first get a sense of things that have been happening around us:

Phishing or getting scammed through real looking websites

The website Hall had logged into was a scam website copying a legitimate one. It was only a week after the incident that Hall was able to get into contact with website support. Unfortunately, all of his bitcoins were gone. As a result, Hall lost AU$1,600 to the hackers- as reported in cryptocoinnews

What happened with Hall above is phishing or getting scammed through real looking websites. We will come to it later with regards to securing yourself against these.

Exchange being hacked

At the beginning of 2014, Mt Gox, a bitcoin exchange based in Japan, was the largest bitcoin exchange in the world, handling over 70% of all bitcoin transactions worldwide. By the end of February of that year, it was bankrupt.

The victim of a massive hack, Mt. Gox lost about 740,000 bitcoins (6% of all bitcoin in existence at the time), valued at the equivalent of €460 million at the time and over $3 billion at October 2017 prices. An additional $27 million was missing from the company’s bank accounts. Although 200,000 bitcoins were eventually recovered, the remaining 650,000 have never been recovered- from blockonomi.com

The above is an incident of an entire exchange being hacked. What are your options if that can happen? Seriously, the entire exchange gets hacked and you can lose your money? We will come to it later on how you can secure yourself against this.

Phishing email

We apologize to you for our inconveniences appeared in result of security incident. We intensively work with the law enforcement agencies to find out guilty people to make answer. In near future our website will be restarted. We will strive to keep you as informed as we can

Unfortunately, our losses have a big scale. So, we cannot return you a total sum of lost money.

But we propose a solution.

We are planning to set electronic bonds which will let you claim for dividend payment from the common benefit of our company. You will receive the percentage of dividends, equal to the sum of lost funds.

If you accept our offer, please, check your personal information carefully, fill in the Application for refund and send it back to us.

Thank you for understanding and support.

The Bitfinex Team

Above is an example of a phishing email that came to users from people posing to be Bitfinex.

Now you know what Phishing is, don’t you? B-)

Is it getting scary out here? Don’t worry we are here to make your life safe and easy.

How do you secure your bitcoin?

In this part, we discuss securing your bitcoin through paper wallet that prevents you from the exchange getting hacked.

In the next parts, we will dig deeper into how to be careful against phishing.

1. Paper Wallet: Last time we explained that having a bitcoin address on Zebpay( or any other exchange) is like having your account with a bank. Let’s stretch that analogy to explain how paper wallets can be a savior when you have invested a handsome amount.

What the heck is a paper wallet?

What did you just say? Paper Wallet?

Let’s take the example of gold. In the world we live in right now, you can store your valuables like gold, jewelry, diamonds etc by having a locker at a bank or by keeping it at home( if you feel you are better at being vigilant).

What are the different ways in which you can lose your gold if it is in bank’s locker?

The bank gets robbed and thieves run away with your gold. It is the same as an exchange( Zebpay, Unocoin, Coinbase) getting hacked and you lose all your money( as in the example above about Mt. Gox).

The bank( exchange) is the place where your gold(bitcoins) resides.

How can you keep your gold(bitcoin) at home?

It is exactly what paper wallets are meant to do. Like we explained last time since you had a bitcoin address( at an exchange), you can send and receive bitcoins.

How do you convert it into a paper wallet?

When we store gold at home, we create a storage and move the gold from our bank(exchange) to our personal safe storage(paper wallet).

Creating the storage is like creating a paper wallet with your private keys and then moving all your bitcoin investment there.

You can go to bitaddress.org and generate paper wallet (online or offline).
Doing it offline( by downloading the HTML) adds one more layer of security.

Congratulations you have created your personal locker at home, that no one can
hack into.

You still haven’t moved all your gold(bitcoin) from the bank’s locker(exchange) to your personal locker( paper wallet).

Your paper wallet has an address as you can see above and last time you created an address for yourself on Zebpay. This means you can transfer all your investment from Zebpay to this address through the send button.

Below is how that works:

In the sell section, press the send button

You will see send to the Bitcoin address. Press the button in the down right corner.

Your paper wallet has an address and QR code. See above. Scan the same or type in the address

After scanning you will see the same address as your paper wallet. It means you are ready to transfer gold from your bank locker(exchange) to your personal locker( paper wallet)

You can transfer all your bitcoins to your paper wallet address or a part of it.

You are now safer and smarter with your bitcoins.

You are done. Congratulations!

No attack on an exchange can make you lose your investment.

Let’s end with a few notes:

1. When you store gold at home, you can continue to track its price in the market. The same goes with your bitcoins, you can keep yourself updated with how the market is moving on places like coinmarketcap.

2. When you need to sell your gold secured safely at home, you need to make sure that to get it out you never lose the key to the locker or someone else steals the key. The same goes with your paper wallet, you have your private keys on it(look at it once again) that is required every time you want to sell it or send it to someone

3. When you take out gold from your private locker, you sell it in the market. The same goes with your paper wallet. To sell or send you would need to go to an exchange( Zebpay, Unocoin etc) and for the same purpose you would need to have the private key( don’t lose or share it).

In the next part, we will talk about hardware wallets.

Cheers to the fact that since you bought your first bitcoin(satoshis) last week, it has been in the upswing.

If you want to know more, follow me 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

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.