Have you invested in bitcoin? Check out these security tips

Due to the peculiarities and high price of cryptocurrencies, the best possible measures for protecting them should be taken to avoid irregularities.

If something is valuable, someone may be tempted to steal it. It is not the most edifying social principle, but it has been taking place since humans began exchanging goods thousands of years ago. That is why the rise of cryptocurrencies, and especially bitcoin, has brought with it the risk of theft.

But how does the theft of an intangible asset such as a cryptocurrency occur? As it is a digital asset, to steal a cryptocurrency you really only need to steal the private keys that prove its ownership and are needed to sign transactions. The responsibility of avoiding it falls entirely on the asset holder.

 

“Exchange” and “hot wallets”

The progressive sophistication of the cryptoasset universe has brought about new solutions to the market. And users are gradually acquiring more knowledge on the subject. The first lesson is to differentiate between a crypto exchange and a wallet, as the application or physical format in which private keys are stored is known in the digital world.

Cryptocurrency Exchanges are online platforms for buying and selling cryptocurrencies. The user creates an account to which a wallet is associated, with the keys to the cryptocurrencies with which he or she intends to trade. Given that users demand "usability" and that this implies a permanent connection to the internet, the risk is that these exchanges are frequently subject to attacks by hackers, who steal the keys and with them the cryptocurrencies.

This is an environment in which the user is, consequently, quite unprotected: storing private keys in an exchange is not a wise idea. They should only be used for immediate transactions and therefore for short term custody.

The next option, from least to most secure, are the so-called hot wallets. They are called "hot" because, to a greater or lesser extent, they present more risk because they have direct exposure to the internet. There are different types of hot wallets: from mobile web applications to desktop applications.

 

The importance of keys

All these options share a common problem: security. Connectivity is always a very tempting loophole for hackers and cybercriminals, especially in the case of assets such as bitcoin, which have a unit value of tens of thousands of dollars.

Many of the staunch believers in the virtues of cryptoassets are wary of these hot wallets when there is third-party custody of the private keys. For this reason, the saying "Not your keys, not your coins" has become popular, i.e., if the keys are not yours, the cryptocurrencies are not yours.

In order to have full control and ensure total security of private keys, one has to resort to the so-called truly cold storage wallets, which are hardware devices with no direct or indirect connectivity to the internet.

Adolfo Contreras, Business Development Director of Prosegur Crypto, warns that many of the so-called cold wallets on the market have more connectivity options than their users realise. These "not-so-cold" wallets are often sold on the market for prices ranging from €60 to €200. This indirect exposure is often via USB connections, QR codes or micro SD, which are, after all, also attack vectors.

This is why these "not-so-cold" wallets are a good solution for small personal funds for small companies but less so for the volumes handled by institutional clients.

For this reason, some specialised companies, such as Prosegur, have developed more sophisticated solutions for institutional clients. One of the most advanced solutions in the world is the one developed by Prosegur Crypto, which has a state-of-the-art cryptographic technology solution that operates outside the online environment and incorporates vaults specifically designed for the safekeeping of private keys, all of which make it totally inaccessible to any kind of unwanted.

But what advice would Prosegur’s expert give to bitcoin holders? According to Contreras, “for beginners, I don't think it's unreasonable to have a small amount of cryptoassets in a hot wallet, but only for learning purposes. As for the custody of small funds, it’s also not a bad idea to have them in a wallet with indirect exposure. But, if you are talking about financial investments or large amounts, you need much more sophisticated security solutions with zero direct or indirect exposure to the internet”.