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The following guest post is courtesy of Alena Vranova, CEO of SatoshiLabs, whose projects include the TREZOR hardware Bitcoin wallet and myTREZOR Bitcoin web wallet.
All stores of money are targets for thieves; they always have been. Digital cash like Bitcoin has been a particularly attractive target for would-be burgulars, especially since they are typically accessible from afar.
Many LeapRate readers have invested or trade in Bitcoin, which has risen in price significantly in recent weeks. If you are among these traders, your own stores of bitcoins are perhaps more threatened now than ever before.
According to Kaspersky Lab research, there have been almost 6,000,000 attempts of viruses developed and issued to steal bitcoins from people’s wallets and computers. Moreover, as a trader, how could you possibly achieve a measure of true security for you and your clients if even big corporations and Bitcoin companies have been successfully hacked?
There are many things you can try, and they all have their own pros and cons. The majority of Bitcoin storage options fall into the following three categories:
Software wallets have the distinct advantage of being incredibly convenient: most simply require a process similar to logging into any banking website. Software wallets offering increasingly sophisticated measures of security, but essentially all are susceptible to keylogger attacks, which would compromise them completely, prompting the holder to lose all their bitcoins.
Paper wallets don’t have the same susceptibility to hacking as software wallets do, but they can be inconvenient, as most of the secure methods for keeping paper wallets involve locking them in a bank’s safety deposit box (or the equivalent) for redemption. You do, however, have the advantage of keeping your Bitcoin in a literal vault.
Hardware wallets have many of the advantages of both paper wallets and software wallets, allowing for both off-computer storage for Bitcoin and easy access to Bitcoins on the wallet. The most secure hardware wallets are many steps ahead just keeping keys on a USB drive. Indeed, for those with significant sums of bitcoin, hardware wallets have become a must-get for a reason: they are immune to keylogger attacks and yet they allow for a store of bitcoins to be much more easily accessible than printed stacks of paper.
The best approaches to security include keeping a low profile, outsourcing as little security as possible and protecting valuable assets yourself. Most importantly, stay informed: just as successful investors trade on new information swiftly, you should take advantage of the latest security technologies and news bulletins to prevent disaster from occurring.