All Financial Wisdom

Is it safe to use Bitcoins or is there always a risk of stealing purses from crypto-coins? (part 2)

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(continued from part 1)

Third option: a device like “Cold Storage”

The third option is beginning to be especially interesting from the point of view of those who favor the most strict security. In the heat of digital currency fever, various cold storage devices have emerged, named for keeping their Bitcoins on a stand without Internet connection, which is obviously an extra point of security. These cool wallets are small devices that fit in the palm of your hand, and allow you to transfer your Bitcoins, Ethers and others from your virtual wallet or from your broker directly to your cold wallet. There will be no trace of any online token, and all your virtual money will be saved only on your device.

But do not think that these devices are the panacea in security: they are not. In fact, cold wallets are also likely to be hacked. There are several characteristics of these devices to be fixed when assessing their safety, as they can also be if they have two input buttons, two microncontrollers, an internal clock and a secure enclave (where they are stored and generated) – private keys in accordance with banking security standards such as EAL6.

The possible “hacks” to these types of portfolios logically cover a wide range of attack vectors, ranging from a classic Man-in-the-Middle attack to an unauthorized reading of sensitive information resident in memory. For example, in the Man-in-the-Middle attack, uninvited software comes between you and your crypto-currencies, and when you do, for example, copy-paste one of those illegible hexatecimal strings that make up an address the one that transfers its tokens (and that often do not show in its full extension), they change it for another one that simply has a different ending that you won’t see on the screen.

There have already been attacks of this kind that have been collecting foreign Bitcoins. Another point of security very to take into account is the integrity of the device when it reaches your hands, and that could not be manipulated in its manufacture or in the supply chain.

Fourth option: specialized portfolios with own and professional cold support

There are wallets that have developed an extreme security system, by which the Bitcoins that their users deposit in their wallets end up saved under 7 keys (the seven is obviously a saying, but not far from the reality) in some secret physical enclave with strict extreme security measures of access and custody.

One of these enclaves is located in the middle of the mountain, in a former Swiss military bunker, and is managed by a well-known maximum security company. To access the facilities, it is necessary to overcome multiple biometric controls, as well as to cross several steel doors that are resistant even to a nuclear attack. In the safest heart of these extreme security installations is the “cold room,” where the cryptographic keys of the clients are stored. This cold room is lined with steel plates that allow the high security camera to be an effective Faraday cage.

There are several of these enclaves underground geographically dispersed on three continents, and the storage of sensitive information is done on offline servers that have never had access to the Internet, or any other type of network through which an attacker could reach to compromise the tokens of depositors’ crypto-currencies.

Obviously, all these security measures have a small drawback, and is that in order to withdraw their bitcoins (or a part of them), by complex security protocols, users must wait 48 hours until they have their Bitcoins available on their wallet, and thus be able to replenish its balance and continue buying in crypto-friendly sites.

Fifth and last option: a paper wallet or purse on paper

There is a fifth and last option, that although it occupies the last position in a list with incremental security, it would really be in parallel to the specialized portfolios with cold storage. Both options are in parallel because they allow a comparable level of security, each with its advantages and disadvantages.

This fifth option is the paper wallet, an option supported by many specialized portfolios, and which allows you to print a printable code on paper and where all the tokens of your favorite crypto-currencies reside.

On the one hand, in front of the bunker of the previous option, the paper purse has its advantages and disadvantages. The disadvantages are that paper for example can deteriorate easily, so we recommend keeping it away from risks such as water, in addition to printing it several times and doing it periodically to avoid degradation of ink or paper. On the other hand, it can be easily stolen if it is worn, or if a friend of someone else breaks into your home.

The advantages are that a simple piece of paper that literally can be worth millions is something that can be hidden very easily, in the classic “under the mattress” style, which we do not recommend because it is one of the first places where a thief will look.

But you can deposit that piece of paper in a high security box in a bank’s bunker. You will suffer the discomfort of having to physically look for it each time you want to spend part of your money from your paper wallet to your usual wallet to spend it, but in return you avoid being as clear an objective as one of those bunkers that Cyber-criminals have as a priority goal because they know perfectly well that there is a huge fortune on the inside.

Absolute security does not exist: you can only choose the one that best suits your profile

After this detailed analysis, I think that by now you will have realized that there is no 100% safe option to guard or store your Bitcoin tokens, Ethereum, or any other crypto currency. Absolute security does not exist, especially when it comes to the virtual or online world, which by its very nature covers digital currencies. You must choose one of the aforementioned options that best suits your preferences, needs, and characteristics, always bearing in mind that you run a variable risk depending on each option and your use of it.

Perhaps the problem is that today’s players in the crypto-sector do not have enough muscle today to be able to ensure something similar (without risking bankruptcy), something that the traditional financial sector should take good note of if it wants to compete.

But as long as the feeling of security of the common client is superior with a traditional financial institution, I am afraid that the crypto-economy still has an essential point on which to improve. It can not be more complicated for you to guard digital currency tokens than fiat money, or the same gold reserves in the gold standard era.

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