Category Archives: Bitcoin security

The Top Six Reasons for Using Bitcoin, Alt coins

Bitcoin, along with all other decentralised peer-to-peer Crypto currencies, has a number of significant advantages going in favour of using it. These range from being free from “political risk” (national currencies) and “counter-party risk” (paper assets held at banks or brokerages) to providing some degree of financial privacy (not anonymity though unless additional measures are implemented), giving its owner back the control they deserve over what’s rightfully theirs.

The pros for using Bitcoin, Litecoin, Dogecoin, or any other P2P Crypto coin are summed up in the list below.

  • Bitcoin has value of its own due to steadily increasing worldwide demand
  • Bitcoin cannot be shut down due to its structural nature of decentralisation
  • Bitcoin cannot be — and never has been — “hacked” due to the secure nature of its underlying cryptographic technologies
  • An increasing number of countries are reckognising Bitcoin’s legality and general utility for economic and/or technical development
  • Bitcoin has proven legitimate simply by the fact of user adoption by hundreds of millions worldwide
  • In a world of high political risk and troubled banks internationally, Bitcoin as a new and wholly independent asset class provides an additional option

Misconceptions About Blockchain Technology and Bitcoin

There is a fundamental difference between the open and decentralised Bitcoin system and all other projects — whether in industry or government-backed ones — that are now claiming to “discover Blcokchain technology”, albeit 5+ years later than Satoshi Nakamoto…

These days, every would-be innovator and their grandmother believe it is “posh” to “do Blockchain technology” or what they believe to be it.

The most ridiculous attempt (so far) came out of that great City, where the Bank of England has ridiculed itself by presenting their shallow idea of “RSCoin” while claiming that this would be a “better Bitcoin”. Curiously, they have been echoed by some puppet newspapers in Britain who were fast to applaud the idea and “explain” why RSCoin, for being “backed by the trust of governments”, would be a “so much better Bitcoin”. Those explainers have only discredited themselves as to neither understanding Bitcoin technology nor doing proper news research (which would have shown why a scheme like that is stupid right away).

They should understand — or at least research until they do understand — that Bitcoin’s strength stems from solving the Byzantine General’s Problem and that this discovery is at the heart of Bitcoin technology as well as every other decentralised Crypto coin’s technology. Satoshi Nakamoto’s discovery is what made Bitcoin possible at all.

Bitcoin sacrifices a certain part of ledger efficiency for the sake of real-life decentralisation. This is made possible by using an autonomous and truly decentralised Blockchain recording Proof-of-Work calculations performed by miners who are also autonomous. As and added security feature, they are also anonymous. That way, they provide for a global, autonomous, censorship-free, and secure network.

If these features are not needed, then why use “Blockchain” technology in the first place, wasting efficiency features without any real need?

What “RSCoin” and similar not properly thought-out schemes are proposing is, in fact, a single-entity clearinghouse (run, not surprisingly, by the Bank of England in this case). The Bank of England apparently believes to be gaining some institutional advantage by pursuing this ridiculous venture, all the way failing to understand what it is they are really doing.

“RSCoin” is nothing more than a scheme built around a single-entity clearinghouse. A structure like this is known to be extremely vulnerable against all kinds of attacks, and it has already been said that cracking into this “would be a lot of fun”.

Bitcoin experts are also on record saying a single-entity clearinghouse is a ridiculously anachronistic and insecure idea that should have died two decades ago.

That would have been in the mid-1990s. The City of London’s “finest” are trying to build it now, in 2016, though. Funded by taxpayer money at that. They are also applauded by those parts of the British press even more stupid than that.

Well done.

 

Paper Wallets and General Bitcoin Security

With every security breach making it into the news, some people get the impression that Crypto currencies “weren’t safe” or even “had failed” or similar. Depending on the nefarious intent behind these headlines (as in the case of established banks bashing Bitcoin as part of their agenda) this may or may not scare potential users from even thinking about using Bitcoin.

The reality is that in the Credit Card Industry over 40% of profits have to be spent for “fraud prevention” (meaning they cannot prevent most cases of fraud anyway and need the amount for compensation). Still, this hasn’t prevented anyone from using credit cards nor similar “electronic” forms of payment — yet.

Crypto coins are quite different though. The level of security only depends on whether or not prudent steps are taken by the user individually. Unlike credit cards where trust has to be given to third parties, the very nature of peer-to-peer technology means that everyone is in control of their own funds and security.

Increasing security for your Bitcoin holdings is always easiest through the use of Paper Wallets: simply move all portions of your savings to Cold Storage (i e into your paper wallet) and only keep smaller amounts needed for spending in a Desktop wallet, online wallets, or less-secure exchange portfolios and similar places.

(A paper wallet is a simple piece of paper run from your printer — preferably a “dumb” one without Wi-Fi or similar security loopholes — containing your public address for deposits along with its private key for retrieval.)

That way, you are not only “your own bank” but (at least!!) as safe as one as well.

The Safest Way to Store Bitcoin and Other Crypto Coins

Bitcoin has made headlines a number of times for some quite spectacular heists and thefts.

Out of over a million existing Bitcoin wallets, approximately a thousand or less than 0.1% have lost funds. Apparently, these have all been “digital” or software wallets stored somewhere on personal computers running general-purpose operating systems (not any kind of “hardened”, specialised OS-es) or maybe even web wallets offered by some Bitcoin service websites. Most certainly, they have not been properly designed “cold storage” facilities which are much more secure.

Even most recent press articles themselves suggest that casualties are mostly from the area of “hot” storage:

Since bitcoins are stored as software files in “wallets,” or folders on websites, personal computers or smartphones, that makes them susceptible to loss and theft, failure or cracking. And because the digital money was designed to be difficult to trace, any looting is akin to a cash plunder, and harder to track compared with real money held in bank accounts.

Even with “insured” banks and “traceable” deposits, it is rather hard to get one’s money back when stolen as banks (or their insurers) usually insist on inferring at least some partial fault on the bank customer’s part to prevent full (and for the bank costly) compensation. Also, it isn’t really fun to fight for that measly compensation, if you get it at all, so why bother…

Bitcoin’s value, having increased from $12 to more than $1,000 in 2013, has made the Crypto currency an even more tempting target and worth extra protection efforts on the part of reasonably educated users.

 

Real Cash

It is difficult to measure the percentage of wallet casualties more accurately, since bitcoins were designed to be similar to cash. They are not anonymous in any way, but the fact that transactions are irreversible makes it hard to get coins back once they actually happen to be apprehended by dishonest parties.

Bitcoin’s potential to be “cash for the internet” or rather for all kinds of transactions online and off is growing with a fast increasing user base. Created in 2008 by an unknown programmer or group of programmers, the supply of Bitcoin is regulated by the software underlying the currency, which can only be created by solving complex puzzles embedded in Bitcoin’s code. The digital money is being used to buy everything from chocolates to digital cameras on the Web.

 

Paper Wallet

The best and most effective method to prevent theft is “cold storage,” or offline Bitcoins. Andreas Antonopoulos, a Bitcoin evangelist and security specialist, has created the Safe Paper Wallet project making kits available that let users print their log-in credentials on a piece of paper, which can then be kept in a safe-deposit box.

“I keep 99.9 percent of my bitcoins in my paper wallet,” Antonopoulos said. “You don’t walk around with your net worth in your purse.”

The exact way of creating safe paper wallets involves a few more ingredients but can be done by anyone with a printer, preferably a “dumb” printer, and some common sense. A selection of simple tools, some of them free, as well as ready-made solutions are available. The important part is to not buy pre-printed plastic cards or fancy engravings where the Private Key is pre-produced by a third party which runs totally contrary to the “trustless” system of a Crypto currency.

There is even “deep cold storage” of Bitcoin paper wallets in geographically spread locations available where wallets (or even a mere copy of paper wallets) can be de-centrally stored to both secure them offline as well as mitigate all other conceivable systemic, sovereign default, or even natural disaster risks.

Whether for Bitcoin or any other Crypto coin, the availability of offline paper wallet generators and a way to easily create a paper wallet or similar true “cold storage” solution are essential for even considering use of that coin.

Exchange-like services, on- and off-chain investments, as well as safe-keeping services — possibly integrating several kinds of Crypto coin services into one flexible and easy-to-use security as well as investment or Asset Protection solution — could be developed to solve these fundamental challenges and further develop mass adoption of Bitcoin.