How to Keep Your Bitcoins Safe? avoiding scam, theft and fraud (2024 Updated)

Summary

In this Bitcoin Whiteboard Tuesday episode, Nate from 99Bitcoins addresses the topic of Bitcoin safety, debunking myths about the security of digital currency. He emphasizes that while Bitcoin itself is secure, the risk often lies with the user's handling of their private keys. Nate advises viewers to maintain sole control over their private keys and to use hardware wallets for storing significant amounts of Bitcoin. He also discusses the importance of backing up private keys, securing online accounts with strong passwords and two-factor authentication, and being cautious of phishing scams and Ponzi schemes. The video concludes with additional tips on transaction safety, including the irreversibility of Bitcoin transactions and the use of escrow services for trustless transactions.

Takeaways

• 🗝️ Always keep your private key to your Bitcoin wallet secure, as it is the key to accessing your Bitcoins.
• 💡 Do not rely on third-party wallets for large amounts, as they can pose a risk to your funds.
• 💳 Use hardware wallets for storing significant amounts of Bitcoin, as they offer the highest level of security.
• 📝 Maintain a backup of your private key in a secure, encrypted form to prevent loss of access to your Bitcoins.
• 🔒 Create strong, unique passwords for your Bitcoin-related accounts and enable two-factor authentication (2FA) for added security.
• 🚫 Avoid using public Wi-Fi networks for accessing Bitcoin services to prevent potential eavesdropping by hackers.
• 🔗 Double-check the recipient's Bitcoin address before sending transactions, as they are irreversible.
• 🛡️ Be cautious of phishing scams and use tools like the Bitcoin Scam Test to verify the legitimacy of websites.
• ⛔️ Do not trust emails or websites that appear to be from Bitcoin service providers without verifying their authenticity.
• 🔒 Use a VPN when connecting to public networks to secure your online activities and protect your Bitcoin transactions.
• ⏱️ Wait for multiple confirmations (at least six) for large Bitcoin transactions to ensure they are irreversible.

Q & A

What is the main topic of today's Bitcoin Whiteboard Tuesday video?

The main topic of the video is Bitcoin Safety, focusing on how to become a 'Bitcoin Safety' expert to prevent loss, theft, or scams involving Bitcoins.

Why do some people think Bitcoin can be easily hacked and manipulated?

People think Bitcoin can be easily hacked and manipulated because it is digital, and there have been cases of theft, leading to the misconception that Bitcoin itself is not secure.

What is the most common weak link in Bitcoin's security according to the video?

The most common weak link in Bitcoin's security is the people who handle it, rather than the technology behind Bitcoin, which has proven to be resilient against attacks.

Why is it important to keep the private key to your Bitcoin wallet secure?

The private key, or seed phrase, is crucial because whoever knows it can take control of your Bitcoins. It is like the combination to a safe, and it should be kept secret and secure to prevent unauthorized access.

What is the difference between using a third-party Bitcoin wallet and a hardware wallet in terms of security?

A third-party Bitcoin wallet is less secure because both the user and the third party know the private key. In contrast, a hardware wallet, which is a physical device, offers the most secure form of storage for Bitcoins, as it is solely in the user's control.

What is the best way to store a backup of your private key or seed phrase?

The best way to store a backup is to write it down on a piece of paper, or make a copy on a flash drive or another form of storage that can't be reached remotely. For maximum security, it should also be encrypted.

Why is it recommended to use a password manager when creating strong passwords for Bitcoin-related accounts?

Password managers help generate random strings of text, numbers, and symbols for strong passwords, which are hard to remember. They also securely store these passwords, making it easier for users to manage and access them.

How does two-factor authentication (2FA) help prevent unauthorized access to online Bitcoin accounts?

Two-factor authentication adds an extra layer of security by requiring both something the user knows (like a password) and something the user has (like a mobile device receiving a PIN code). This makes it more difficult for hackers to gain access even if they have the password.

What is the Bitcoin Scam Test on 99Bitcoins, and how does it help users?

The Bitcoin Scam Test is a tool that helps users analyze different websites to determine their legitimacy. It can identify Ponzi schemes and phishing sites, saving users from falling victim to scams.

What precautions should be taken when sending Bitcoins to ensure the transaction is secure?

Users should double-check the receiving address, avoid typing it in manually to prevent errors, and use a QR code or copy-pasting method. It's also important to trust the recipient and consider using an escrow service for added security.

How many confirmations are recommended for large Bitcoin transactions to ensure they are irreversible?

For large Bitcoin transactions, it is recommended to wait for at least six confirmations to ensure that the transaction is irreversible.

Outlines

00:00

🛡️ Bitcoin Safety Fundamentals

Nate from 99Bitcoins introduces the topic of Bitcoin safety, addressing common misconceptions about the security of Bitcoin. He emphasizes that the technology itself is secure and that the primary vulnerability lies with the individuals managing their private keys. Nate stresses the importance of sole possession of one's private key and the risks associated with third-party wallets. He also advises on the use of hardware wallets for large amounts of Bitcoin and provides tips on avoiding loss and theft, including the importance of backing up one's private key and using encryption.

05:01

🔐 Strengthening Bitcoin Security

The second paragraph delves into creating strong passwords and the use of two-factor authentication (2FA) to secure online Bitcoin accounts. Nate suggests avoiding password reuse and recommends using a password manager. He also touches on the importance of using secure networks and a VPN when necessary, as well as verifying SSL connections to prevent man-in-the-middle attacks. Additionally, he warns against phishing scams and Ponzi schemes, advising viewers on how to identify and avoid them, including using the Bitcoin Scam Test as a tool for verification.

10:02

⚠️ Precautions for Safe Bitcoin Transactions

In the final paragraph, Nate offers additional tips for ensuring safe Bitcoin transactions. He cautions that Bitcoin transactions are irreversible, urging users to double-check addresses before sending funds. The advice extends to trusting the recipient of the transaction and possibly using an escrow service for added security. He also suggests waiting for multiple confirmations before considering a large transaction complete. Nate concludes by encouraging viewers to apply the knowledge they've gained to become experts in Bitcoin safety.

Keywords

💡Bitcoin Safety

Bitcoin Safety refers to the measures and practices one should take to protect their Bitcoin holdings from loss, theft, or scam. In the video, it is the central theme, emphasizing the importance of safeguarding one's private keys, using secure wallets, and being vigilant against phishing and scams. The video provides various tips and strategies to ensure the safety of Bitcoin assets.

💡Private Key

A private key in the context of Bitcoin is a secret number that allows the owner to spend the Bitcoins from a specific wallet. It is likened to the combination to a safe. The video stresses that only the owner should know this key, as it is crucial for maintaining control over the Bitcoin wallet and preventing unauthorized access.

💡Hardware Wallets

Hardware wallets are physical devices that provide a high level of security for storing cryptocurrencies like Bitcoin. They keep the private keys offline, reducing the risk of hacking. The video recommends using hardware wallets for larger amounts of Bitcoin, highlighting their role as a secure storage solution.

💡Phishing

Phishing is a fraudulent method used by cybercriminals to obtain sensitive information, such as usernames, passwords, and financial details, by disguising themselves as a trustworthy entity. In the video, it is mentioned as a common type of Bitcoin scam where fake websites and emails are used to steal login credentials and, subsequently, access to the victim's Bitcoin holdings.

💡Two-Factor Authentication (2FA)

Two-Factor Authentication, or 2FA, is a security measure that requires two separate methods of identification before granting access to an account. The video explains that using 2FA adds an extra layer of security to Bitcoin-related accounts, making it harder for unauthorized individuals to gain access, even if they have the password.

💡Public Wi-Fi

Public Wi-Fi networks are wireless networks that are open to the public, such as those found in coffee shops, airports, and hotels. The video warns against using public Wi-Fi for accessing Bitcoin services due to the risk of eavesdropping and interception by hackers. It suggests using a Virtual Private Network (VPN) for a more secure connection.

💡Secure Sockets Layer (SSL)

SSL, or Secure Sockets Layer, is a security protocol for establishing encrypted links between a web server and a browser. The video instructs viewers to ensure that the websites they use for Bitcoin transactions employ SSL, as indicated by 'https' in the address bar, to protect their data from being intercepted during transmission.

💡Virtual Private Network (VPN)

A VPN is a service that routes internet traffic through a secure, encrypted tunnel to provide privacy and anonymity online. The video suggests using a VPN when accessing Bitcoin services, especially on public networks, to protect against potential eavesdropping and to keep one's online activities private.

💡Ponzi Scheme

A Ponzi Scheme is a fraudulent investing scam that promises high returns with little risk, using new investors' funds to pay returns to earlier investors. The video cautions viewers about such schemes in the context of Bitcoin, where they may appear as cloud-mining sites or coin doublers, emphasizing the importance of vigilance to avoid falling for such scams.

💡Bitcoin Transaction Confirmations

In Bitcoin, a transaction confirmation occurs when the transaction is included in a block on the blockchain. The video advises waiting for at least six confirmations for large transactions to ensure that the transaction is irreversible and secure, which is a measure to prevent double-spending and confirm the legitimacy of the transaction.

💡Escrow Service

An escrow service is a third-party that holds the funds in a transaction until certain conditions are met. The video mentions using an escrow service like Bitrated for added security in Bitcoin transactions, especially when dealing with parties that one may not fully trust, providing a layer of protection against fraud.

Highlights

Bitcoin's technology has proved to be secure against numerous attacks over the years.

The weak link in Bitcoin security is usually the people handling it, not the technology itself.

Private keys are crucial; whoever knows them can control the associated Bitcoins.

Using a third-party Bitcoin wallet means sharing control of your private key with that entity.

Hardware wallets are the most secure form of Bitcoin storage currently available.

Losing Bitcoins refers to losing access to the private key, which can happen accidentally.

It's essential to store a backup of your private key in a secure, encrypted form.

Strong passwords and two-factor authentication (2FA) are vital for online Bitcoin accounts.

Avoid using public Wi-Fi networks for accessing Bitcoin services due to security vulnerabilities.

Phishing scams and Ponzi Schemes are common types of Bitcoin scams that users should be aware of.

Always double-check the domain name and use secure SSL connections when accessing Bitcoin services.

Using a password manager can help generate and manage strong, unique passwords.

Bitcoin transactions are irreversible, so it's important to verify the receiving address before sending.

For large transactions, wait for at least six confirmations before considering the payment complete.

Escrow services like Bitrated can be used for added security in transactions with trusted parties.

The Bitcoin Scam Test on 99Bitcoins helps users analyze and identify potential scams.

Always be cautious of emails and websites pretending to be from Bitcoin service providers.

A VPN can add an extra layer of security when accessing Bitcoin services over public networks.

Transcripts

Hello guys and gals, I'm Nate from 99Bitcoins,

and welcome to Bitcoin Whiteboard Tuesday!

Every few weeks we’re going to send you a cool new video, just like this one,

explaining some basic concepts around Bitcoin.

This way you can learn about Bitcoin yourself

or forward these videos to friends or family members who have questions.

Today’s topic is Bitcoin Safety.

Throughout the years,

there have been numerous cases of people who have had Bitcoins lost,

stolen or scammed out of their hands.

In today’s episode, we’re going to talk about how to become a “Bitcoin Safety” expert

so these things don’t happen to you.

Before we get started though,

I want to bust one myth some people who are new to Bitcoin often have.

A lot of people think that because Bitcoin is digital

it can be hacked and manipulated.

Also, due to many cases of theft people sometimes think Bitcoin isn’t safe.

Well that couldn’t be further away from the truth.

Bitcoin, the currency and the technology behind it,

has proved to withstand numerous attacks throughout the years.

The weak link in Bitcoin’s security is usually the people who handle it.

Whenever you hear that Bitcoins were stolen,

it wasn’t because there was a problem with Bitcoin’s technology,

but because whoever was holding those Bitcoins wasn’t careful enough.

Saying Bitcoin isn’t safe because you hear a lot about stolen Bitcoins

is a lot like saying the dollar isn’t safe

because you hear that there are a lot of robberies going on.

With great power comes great responsibility,

and as long as you follow the steps we’ll go over in today’s lesson

your Bitcoins will be safe and sound.

So let’s get started!

If there was only one thing I could teach you about Bitcoin safety it would be this:

“You, and you alone, should know the private key to your Bitcoin wallet.”

As we discussed in our last lesson, the private key, or seed phrase,

is like the combination to a safe.

Whoever knows your wallet’s private key can take control of your Bitcoins.

If you’re using a Bitcoin wallet that is supplied by a third party,

it means both you and the third party know that private key.

If that company wants to shut down your account

or even just run away with your Bitcoins they can.

Storing your Bitcoins on a third party wallet is similar to putting your money in a bank –

you don’t control the money, the bank does.

At times you’ll need to use a third party wallet,

either from a convenience perspective or you want to buy or trade Bitcoins.

That’s totally fine.

Just make sure you’re aware of the risk,

put as little money as possible in these wallets

and verify that the company or website supplying the wallet

is trustworthy before doing so.

For larger amounts of Bitcoins, always use hardware wallets.

They are the most secure form available for storing Bitcoins today.

They come at a price because it’s a physical item you need to buy,

but it’s worth the peace of mind.

Now let’s talk about how to avoid losing your Bitcoins.

Losing your Bitcoins is a term used for describing someone

who lost the access to his private key.

For example, there’s a known story about a British guy

who threw away an old hard drive that also contained his private key.

He later discover that the private key

belonged to a wallet containing 7,500 Bitcoins

which are now lost forever,

since there’s no way to recover the private key once it’s lost.

That’s over $10 million!

Because the private key is so important, you should store a backup of it somewhere.

This means writing it down on a piece of paper

or making a copy of it on a flash drive

or another form of storage that can’t be reached remotely.

For maximum security, make sure to encrypt it as well.

Many wallets today allow you to add an encryption

when you export the private key to a file through the use of a password.

Some wallets will supply you with a seed phrase of 12 or more words

instead of the private key.

If that’s the case, make sure to write them down in a safe place.

There are several reasons

why it’s so important to backup your private key:

For starters, if your computer gets hacked,

you may still be able to send your Bitcoins to a new wallet

if the hacker hasn’t gotten to them yet.

Also, in case your wallet gets damaged or destroyed,

you will be able to import the private key to another wallet and reclaim the coins.

To conclude, treat the private key

as you would treat a precious item like gold or jewelry.

Keep it hidden and safe.

Moving on, let’s talk about how to avoid Bitcoin theft.

Online wallets and exchanges are the weakest links

in terms of Bitcoin theft.

The easiest way to avoid theft from these sites

is not to keep any Bitcoins on them.

However, sometimes it’s inevitable to keep funds in an exchange

or an online wallet.

For example, if you want to trade frequently

or if you’re using a certain wallet for online games.

If that’s the case,

it’s important to secure online Bitcoin accounts

with a strong enough password.

Here are some general rules for creating a strong password:

1. The more characters the password has the better.

Aim for at least 8 characters.

Try to create a mix of lower and upper case letter

and non-traditional characters like exclamation marks, hyphens and so on.

And don’t reuse passwords from other accounts.

Of course, the best passwords are the ones that are just

a random string of text, numbers and symbols,

but they are also extremely hard to remember.

That’s why I strongly recommend you get some sort of password manager

to help you generate and keep track of your passwords.

There are several free options available on the market.

Another way of remembering strong passwords is

using numbers instead of certain letter as shown here:

These rules should be exercised each time you open a Bitcoin related account,

choose a PIN code for your wallet or choose a passphrase for encrypting a file.

For example, if you have the option,

choose a PIN code for your mobile wallet with 8 digits

instead of the standard 4 digit PIN.

Last, but not least, whenever possible try to enable Two-actor authentication

for your accounts.

Two-factor authentication, also known as 2FA,

is a method of confirming a user’s identity through two separate components.

In most cases, it would be something a user has and something a user knows.

Let me explain.

A good example from everyday life is the withdrawing of money from an ATM;

only the correct combination of a bank card (something you have)

and a PIN (something you know) allows the transaction to be carried out.

In the case of online accounts,

the something you know will be the password to the site

and the something you have

will be a mobile phone that will receive a text message containing a PIN code

when you try to log in.

This way, even if a hacker manages to uncover your password

he still can’t log in until he physically puts his hand on your mobile device.

HOWEVER, if you use a normal text message,

a hacker can still manage to intercept the message

as it’s being sent to your phone.

That’s why it’s important to use a dedicated 2FA app

that is much more suited for this task.

Some of the more popular 2FA apps today are Google Authenticator and Authy.

One thing we tend to forget is what network we are using to access

online Bitcoin services like exchanges and wallets.

Make sure to access sensitive information

only on trusted networks that are properly secured.

For example, use your password-protected home or mobile network only

and never use a public wi-fi network to access a Bitcoin service.

Of course the password for your router

should also follow the rules we just talked about.

Public wi-fi networks are extremely vulnerable

and hackers can eavesdrop on your session.

If you have to use a public network,

make sure to connect through a Virtual Private Network,

also known as a VPN.

VPNs are programs that hide your online footprint and encrypt your data

making life extremely hard for hackers.

We’ve recently listed some of the best VPNs available

and many of them also have a free service option.

Another very important security measure is to make sure the site you’re connecting to

uses a secure SSL connection –

this means you should see https:// and not http://

showing up in the address bar.

Now let’s talk about how to avoid Bitcoins scams.

It seems like every other day another Bitcoin scam is exposed.

The most popular scams around today are phishing scams and Ponzi Schemes.

Phishing emails and websites pretend to be legitimate sites,

but they actually steal your information.

Let me start with an example.

Here you can see several sites that seem exactly like

one of the most popular Bitcoin wallet around, blockchain.info.

However, if you look at the address bar closely,

you’ll see that the domain name is not from the official site.

People arrive to these sites through malicious emails or ads

and will think they are on the official site.

Once they enter their username and password on the fake site,

the hacker who created the site will intercept them,

access the real site and steal their coins.

So how do you identify a phishing site?

First of all, take a look at the address bar

and make sure the domain is spelled out exactly as it should.

Second, make sure the site uses a secure SSL connection

as we’ve discussed before –

this means you should see https and not just http showing up in the address bar.

Most phishing sites don’t have an SSL certificate,

although there may be some exceptions.

Phishing emails work in a similar way.

The email seems to be sent from an official Bitcoin wallet or exchange,

however when you click on the link inside the email,

you’ll be forwarded to a phishing site

or have malicious software installed on your computer.

Whenever you get an email from any Bitcoin service make sure that:

1. The sender’s email is from the domain of that service

and not some closely-looking alteration.

2. Most services that you sign-up with know your name and use it in their emails.

So if you are addressed as “sir” or “dear customer”

see that as a warning.

3. If the there’s a link inside the email,

check that it leads to the official domain BEFORE clicking it.

This can be done by right clicking the link, choosing “copy link address”

and pasting the link onto a text document.

And 4. Don’t ever open any email attachments from unknown senders.

Other forms of scams include Ponzi Schemes.

A Ponzi Scheme is an investing scam promising high-rates of return

with little risk.

The Ponzi Scheme pays out the older investors by taking money from the new investors.

At some point the Ponzi Scheme operator

usually just disappears with the investors’ money.

Most Bitcoin Ponzi Schemes today

appear in the form of cloud-mining sites or coin doublers.

These are sites that will promise you a high-rate of return on your coins

on a daily basis and, after a while, they’ll disappear with your money.

So, how can you verify that a site is legit?

Well, we’ve created something called the Bitcoin Scam Test on 99Bitcoins

that helps you analyze different websites

and get a pretty good idea of which are legit and which are not.

It takes about five minutes to analyze a site and it will save you a lot of money.

Before we conclude,

here are some additional tips for Bitcoin safety:

Whenever you’re sending money to an address,

remember that Bitcoin transactions are irreversible.

Once the money is sent,

there’s no “insurance” and you can’t get it back.

For this reason, make sure to always double check

that the address you’re sending the money to is correct.

Never type the address in manually

since Bitcoin addresses have a lot of characters

and you may make a mistake.

Either copy and paste the address or use the QR code of the address to scan it.

Also, make sure you trust the person you’re sending money to.

If you don’t trust them,

you can always use a third party escrow service that you both agree on.

One very popular escrow service is Bitrated

where you can choose known figures

from the Bitcoin community as arbitrators in case of a dispute.

Finally, if you’re conducting small amount transactions,

one confirmation may be enough to send over the goods to a counterparty.

But if you’re dealing with large amounts,

wait for at least six confirmations

in order to be sure that the transaction is irreversible.

Well, that’s it for today.

If you’ve made it this far, you’re now an expert on Bitcoin safety.

But knowing is only half of the battle.

It’s now time to put all of what you’ve learned into practice,

so here’s a short recap: Keep your private key safe and back it up.

Large amounts of Bitcoin should only be kept on hardware wallets

and not in exchanges or online wallets.

Have strong, unique passwords and 2FA enabled for all of your online Bitcoin services.

Never connect to Bitcoin services through public internet connections.

If you have to, use a VPN.

Be cautious of emails and websites

pretending to be sent from Bitcoin service providers.

Use the Bitcoin Scam Test to uncover Ponzi Schemes.

Remember that Bitcoin transactions are irreversible,

so make sure to trust your counterparty, double check the address before hitting send,

and wait for at least six confirmations before shipping out any goods.

I hope you enjoyed this episode of Bitcoin Whiteboard Tuesday

and I’m looking forward to seeing you in the next one.

See you… in a bit.