How not to lose Bitcoin and other cryptocurrencies

The article will talk about what rules you need to follow if you plan to buy bitcoin, but you don’t know anything about it. And in general, we heard about bitcoin only when it broke the $20,000 mark. If you plan to buy bitcoin, but you don’t know anything about bitcoin wallets, private keys, or mnemonic phrases, and for you, bitcoin is some kind of cryptocurrency that you can buy and get rich, then don’t buy it. Seriously. There is no need to do this. Most likely, you will lose these bitcoins, and if not, then you will merge cheaper than you bought.

Now, due to the huge price of bitcoin, all sorts of “collective farmers” rushed into it in the hope of getting rich. Naturally, most of them have no idea how this bitcoin itself works, and why it is needed at all. They are driven only by the possibility of getting rich quickly. So this article is not for them, but for beginners who want to understand bitcoin and not lose their funds.

Source: Unsplash.com, Cryptocurrency

Buying and storing bitcoin should be taken very seriously. Let’s explain why. Owning bitcoins, you are responsible for them yourself. All responsibility for their safety lies solely with you. There is no support and no hotline where you can call and cancel the transaction. Therefore, the first and most important thing before buying bitcoin is to learn at least at a basic level how bitcoin works, what private keys are, and what bitcoin wallets are. There is a lot of information on the Internet.

Only after you understand how bitcoin wallets and private keys work, you can start thinking about buying bitcoin. Perhaps for some of you, these things will seem quite obvious. But, believe us, there are a lot of people who don’t even know the basics but are already ready to pawn an apartment to get the “cherished” bitcoins.

Blockchain.com

The vast majority of beginners use blockchain.com to store their funds. Recall. This is a custodial wallet that stores your private keys at home, i.e. you have incomplete ownership of your funds. The second option is non—custodial wallets. These are wallets that are just an interface for interacting with private keys. They are owned only by the user himself. It is the possession of your private keys that is the most correct way to store bitcoin.

And the second important point. This is ensuring the security of these private keys. And if in some moments the wallet blockchain.com can be good for beginners as the first bitcoin wallet, that is, some moments make this wallet dangerous. We mean phishing advertising in search services. Because the wallet blockchain.com is a web wallet and is located on the Internet, then access to it is most often obtained through a search query. And in the search results themselves, there is an advertisement for a phishing site, which is in the first place. An inexperienced user enters a phishing site and enters all his data, thereby giving all his funds to the attacker. Such advertising can be configured for ordinary wallets such as Electrum, Bitcoin Core, etc. But it is web wallets that are most often used. Because they are the most popular among beginners.

Source: Unsplash.com, Business & Work, Blockchain

Important. If you are being led to phishing sites in the XXI century, then please think about whether you need this bitcoin at all. Maybe “well, fuck it”, divorce is probably a pyramid?

What is the conclusion from all of the above? We do not use custodial wallets and exchanges, but use, respectively, non-custodial ones. Note. Each wallet has its nuances that you need to know before you start using it. For example, a BIP39 password, which due to inexperience can lead to the loss of your funds. Therefore, study.

Hardware wallets.

This item is mainly dedicated to beginners. Wherever you look, hardware wallets are recommended for beginners as a favorite for security and reliability. Partly it is. Just keep in mind that for a beginner, a hardware wallet can be just as dangerous as custodial web wallets.

An example is the recent drain of the Ledger wallet customer base. Emails allegedly from Ledger support started coming to users’ email addresses. Different themes were used, but mostly they wrote that your device would be blocked soon. Therefore, extend the procedure to cancel the lock. Inexperienced guys, of course, ran to fill out a form where they indicated their mnemonic phrase. And it’s not difficult to guess what happened next. But, again, it all comes down to phishing and the fact that a person fell for this phishing.

We have to repeat it. If you are being led to phishing in the XXI century, then think about it, maybe it’s worth buying a book about working on the Internet, not bitcoin. But this does not mean that a hardware wallet is a bad option and it is not worth using it. Everything is individual. A hardware wallet is a great tool for securing private keys. Next item. Free bitcoins from Elon Musk and other public figures.

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Source: Unsplash.com, Bitcoin

We understand that this can be classified as phishing, and there will be no difference here. But you just can’t imagine how large the number of people who seriously believe that Elon Musk will send them two bitcoins if they send him one. It would seem a banal and stupid divorce that existed in the form of WebMoney “magic wallets” in 2007, but people are still being conducted. And they are conducted in huge quantities. Sorry, but let’s repeat it. If you think that someone will give you two bitcoins for one of yours, then, believe me, you don’t need bitcoin. Next item. Mnemonic phrase.

Based on all of the above, it becomes obvious that you can never enter your mnemonic phrase anywhere. Except when you deposit it into some bitcoin wallet.

In short, the mnemonic phrase is like the main key to all your funds. All private keys are created from the mnemonic phrase. Knowing the mnemonic phrase, you can access your bitcoins in almost any bitcoin wallet. And even without a bitcoin wallet through special tools. Recall that bitcoin wallets are only an interface for interacting with private keys. And there are no bitcoins in wallets. Bitcoins are stored in the blockchain in the form of records.

Also, it is not necessary to divide a mnemonic phrase into two or three parts, hiding them separately in different places. This increases the chances that you will lose access to your funds. There is no need to encrypt a mnemonic phrase on a hard drive using a complex password of a billion characters. There is no need to invent a special cipher when writing your phrase to confuse a potential attacker. All this increases the chance that you will simply lose access to your bitcoins.

There is a standard and optimal practice of storing a mnemonic phrase — it is a paper medium hidden in one place. And another additional copy. The most you can do is to purchase a metal carrier for your phrase. This is the most optimal and reliable practice of storing a mnemonic phrase. No need to come up with sophisticated ways to encrypt or hide the media. It will only hurt.

Test the functionality of wallets.

Different wallets have different functions and different schemes for deploying private keys from your phrase. Therefore, before choosing a wallet for yourself, test the import and export of your phrase. Check whether your addresses will expand if you take a mnemonic phrase from one wallet and import it into another. If only a part of the funds is displayed, then why did this happen? Study the derivation path. The more experience you have in interacting with bitcoin wallets, the more securely you will be able to store your funds.

All this, of course, comes with experience. Buy 10 or 20 euros worth of bitcoins. And just experiment with importing and exporting to different bitcoin wallets until you understand how it all works. Once you understand this, it will become obvious to you how to organize the security of your funds.

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