The "Scariness" of Bitcoin
Written by Jamie Redman.
Bitcoin is to some people considered “scary” to the non-technical mainstream right now.
Every now and then they hear so much about the great thefts involved with centralized exchanges. They hear about wallets being compromised by hackers. They hear about so much theft and loss on a great number of media storms about Bitcoin. The media wants this to be the case. The media works for the state 98% of the time. The state wants to keep the Federal Reserve bolstered. It wants you to use its dollar, that’s why the media portrays bitcoin in a shady way. Is Bitcoin really to blame though?
Bitcoin is not scary. The protocol called Bitcoin is actually the most secure computational encryption service ever designed. If Satoshi was ever to reveal himself he would deserve many awards. For he created a revolutionary system on paper and applied it to the digital world. Thus changing technology forever.
Brute-force attacks against 256-bit keys will be infeasible until computers can break the grounds of quantum computational theory. They will have to break the laws of the universe. This means there is nothing at all that can ‘currently’ hack the protocol known as bitcoin.
Just as in the real world banks, merchants, services and general people can be robbed in cyberspace. So there are things you do when you bank for yourself the same as you would banking in the “real world”. Like remembering your bank passwords, account number. Check your balances and such. You do your best to protect yourself from fraudulent activity don’t you? You’re not depositing your money with the local crack head, you’re researching a local trusted banking system or credit union. Bitcoin is not much different. The only difference is you represent yourself instead of leaving assets in another’s hands. You yourself take the precautionary methods to protect your wealth. It’s called individual responsibility and it’s not much different than the everyday banking system of today or stuffing a few bucks under the mattress.
One of the first steps of Bitcoin is getting to know passwords. I’m not going to get much in to the logistics of this one since I think everyone should be well acquainted with it. You make passwords all the time. I for one remember all of mine in my head. Others write them down. Just don’t leave these writings out in the open. Common sense.
The second step in getting familiar with securing your wallet is two-factor authentication.
Two-factor authentication (2FA) is a method of computer access control which a user can pass by successfully presenting authentication factors from at least two sources. Typically this involves what’s called two steps of verification. You can set up two-factor authentication in a number of ways. Through email, via text message. I use an app called Google Authenticator which produces a series of tokens or numbers and changes every 60 seconds. I use two-factor authentication on every wallet I hold. Every exchange I do business with trading or buying bitcoin. I use it with every email account associated with my funds and exchanges. You don’t lock one set of doors in your house and leave another open.
Backing up your wallet is pretty much like opening up your leather pouch and making sure all the greenbacks are in there. Except it’s not worthless fiat. This is real money were talking about here. Anyway when using a wallet client like blockchain.info make sure you always back up your wallet. Whenever you add new funds or have them send it to your email. This goes for using a QT wallet of any crypto currency as well. Back up your DAT. It’s a tiny little file that takes less than a second to download and will save you many many headaches. For instance if you ever got locked out of your blockchain wallet. You can go to blockchain.info support and basically drag and drop your DAT file into a new address and recover all of your bitcoin. The same can be said with a QT wallet as well.
Leaving your money on exchanges is never a good idea. Always get wallets of the coins you are collecting and make sure if you are collecting quite a lot to move them to your home base. Now I’m a trader and I do leave some money on exchanges. Purely to save a little time on trades and not having to wait for confirmed deposits. I know how it is. But I only keep what I am 100% willing to lose on any exchange. You should accept this is as a fact that if you leave your money in someone else’s hands it could be lost or stolen. Know that.
This also applies to buying services as well. Such as Circle or Coinbase. Leaving your money with them is no different than leaving a few bucks on Mintpal the now defunct exchange. Over time these exchanges will become decentralized and some of them who are third party will insure your assets. This was already the case with Circle financial when they started and Coinbase followed suit insuring losses.
Cold storage is another method of protecting your assets. Probably one of the greatest tools you can use to protect yourself. Cold storage is the method of keeping bitcoin reserves offline. One of the first steps is to get yourself a private key. You can get them from a few places like BIPS, blockchain.info, and Mycelium. You can even make your own. If you flip a coin or some dice 256 times. You write down that number. You’ve then created a new number or binary code no one has ever seen before. If you don’t show it to anyone no one will ever see that number. It can never be duplicated or copied unless you show that number to someone or give it to someone to view. Creating a bitcoin key is essentially the same as pick a number between 1 and 2^256. Many people create private keys this way. This is creating a number in the Quindecillions.
When you create a private and public key these two numbers are mathematically linked. The private key is what stores your bitcoin. You can keep your private key in a USB flash drive, print it on paper, even carve it into some wood. Some use what’s called a brain wallet and memorize their key. I don’t recommend this method unless you have great memory. Most people write everything down and keep passwords, secret phrases, and all security requirements written down. All you have to do is keep this out of public view. Whatever you do is your choice and ultimately your own individual responsibility.
If you use some of these steps I mentioned your crypto assets will be very well protected. Remembering strong passwords, using two-factor authentication, backing up your wallet, not keeping large amounts of funds on exchanges or on/off ramps. Also keeping large reserves offline with the use of cold storage. All of these things will help you keep your bitcoins very safe. Bitcoin is not scary at all and no different than securing your email, private files or current bank accounts.
The best thing about bitcoin is it can save you tons in wealth transfer and remittance fees. Many merchants offer discounts for using BTC. It’s peer to peer and decentralized. There is no company, corporation, government or middle man involved. Complete protection against charges to your balance without your consent. No charge backs from payment processors, no hidden fees anywhere. It’s a complete transparent, public transaction record everyone on the planet agrees upon at all times. Ability to store bitcoins in something as tiny as a thumb tack. Not to mention the millions of 2.0 blockchain technologies ideas and sidechains that are yet to come.
Bitcoin is the lasting guarantee of my control over my money. One of the most elegantly secure computational masterpieces ever created so far. Thank you Satoshi.
Editors note: There is an entire wiki section dedicated to Bitcoin – en.bitcoin.it/wiki/Bitcoin. It contains a lot of useful information on how Bitcoin works, what encryption it uses, cold storage, private and public keys and basically everything you need to know about bitcoin. This article is not meant to be a direct ‘how to’ tutorial or guide. Please research more thoroughly on all things I described above on the wiki bitcoin section. Thank you. Be safe. Keep calm and crypto on.