Although Bitcoin’s blockchain is an immutable piece of magic that doesn’t allow any hackers to manipulate it in any meaningful way, the cryptocurrency is still something you possess. It’s a piece of money like any other that can be stolen from you. You keep it in a digital wallet, which is in some ways more dangerous than keeping it in a physical one. All of these things make it absolutely possible to lose your Bitcoins because someone got the better of you in a number of ways.
Almost Everything Used to Steal Your Fiat Money
Have you ever had your credit card stolen and had to spend a lot of time on hold with your issuer to tell them that they should cancel it? Yeah, that happens with Bitcoin, too. If you’re using a mobile wallet, all someone has to do is steal your phone. If you’re using a wallet with any NFC capabilities, they can steal it by just bumping into you.
Using your wallet only on a full node, securely stashed within your personal desktop computer at home? Hackers have network vulnerabilities, viruses, and a number of other tools at their disposal to use to get those coins off your hands.
If you want to offer maximum protection to your wealth, you’re going to have to start acting like your own bank. You can’t cancel a Bitcoin transaction or restore anything that’s been stolen. There’s no bank to call. You’re pretty much on your own, and wallet services do not have the liquidity to help you in any case.
The best thing you can do to protect your stash is to put it into an encrypted hard drive that’s completely disconnected from the Internet except in cases in which you need to use it to transfer some funds. And before you begin the transfer, make absolutely sure you’re doing it from a system that isn’t infected.
Bigger Services Get Hacked
If anyone’s been in the Bitcoin world long enough, they’ll remember the incident at the Mt. Gox exchange, which once had a quasi-monopoly in this niche. Hackers made off with almost half a billion dollars worth of the cryptocurrency at a time it was worth $32 per coin. Because of this incident, the famous exchange had lost its footing in the market, and the confidence in the entire currency went down with it for a long time before other (more stable) services began to appear.
This kind of stuff happens all the time in the fiat world. It was the first time it happened in the Bitcoin ecosystem which was shocking to many people who thought they were more protected with Bitcoin.
An analysis of wallet applications and providers has found that over 90% of them have vulnerabilities that present hackers with the opportunity to steal more coins.
If you want to protect yourself against massive attacks like these, consider using a wallet that you don’t have to connect to the Internet constantly. You can do this or run a full node through Bitcoin Core, which also acts as a personal wallet that only you control (as long as your computer is not infected).
There’s a new type of virus in town, and it’s targeting cryptocurrencies in particular. An exploit called CryptoShuffler uses people’s clipboard information to manipulate transactions before they go through.
To people who aren’t familiar with how Bitcoin works, when you send money to someone, you’re actually just sending it to an address like this one: 1GsXW7d9Vhw7bX7fdYwshhwNjXhZYY8dvN.
Can you memorize that in a few minutes? Of course not! Most people, when sending a transaction to someone, will just copy their address and paste it into a text field.
CryptoShuffler exploits this psychological vulnerability by scanning your clipboard for anything that looks like an address and replacing it with the virus author’s address. That way, whenever you send some Bitcoin to someone, you’re actually sending it to CryptoShuffler’s creator(s).
This is easy to prevent: Just look at the pasted address and compare it to the address you were given. If it doesn’t match, you need to disinfect that computer before making a transaction.
Just Be Extra Careful
In the Bitcoin world there is no Bitcoin Bank Hotline you can call to get your problems sorted out. Although this is liberating for some people, it might be a bit of a bummer for others. If you’re unwilling to exercise a high degree of prudence, then you risk losing everything you have. There’s no turning back from that.
Do you use Bitcoin? How do you secure it? Tell us in a comment!