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Best Practices to Keep Your Bitcoin Safe

11 November 2022

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Best Practices to Keep Your Bitcoin Safe
Choosing a wallet / Create secure backups of your private keys (seed phrase)  / Use strong passwords and two-factor authentication  / Don't store all your bitcoin in one place  / Don't keep your bitcoin on an exchange / Be careful of phishing scams / Don't tell people how much bitcoin you own / 

A guide on how you can keep your bitcoin safe and secure. These are the best practices that we recommend here at NOAH.

Congratulations on becoming a Bitcoin owner! Whether you use bitcoin with NOAH or another service, it's essential to take steps to keep your bitcoin safe from theft and scams. Here are some best practices to help you do just that.

Choosing a wallet

The first step to keeping your bitcoin safe is choosing a wallet that's right for you. There are many types of wallets, including online wallets, hardware wallets, and software wallets. Within these categories are subcategories delineating custody. Check out our previous blog post on self-custodial, non-custodial, and custodial wallets for a full review.

But as a refresher, self-custodial wallets allow you to hold your keys and have sole control over your funds, while non-custodial wallets shard private keys and spread them among different servers. As for custodial wallets, these are held by a third party like an exchange.

Generally, we suggest it's best to choose a self-custodial or non-custodial wallet. More specifically, we're partial to non-custodial wallets because they marry the security of self-custody with the convenience of not having to hold your keys. But ultimately, the best wallet for you is the one that meets your needs in terms of security, comfort, and features

Create secure backups of your private keys (seed phrase)

If you ever lose access to a software wallet or your self-custodial hardware wallet, the only way to get your bitcoin back is if you have a backup of your private keys. So, no matter what type of wallet you choose, always remember to create backups of your private keys. The importance of securing your seed phrase cannot be overstated and is one of the most important things you can do to keep your bitcoin safe. Don't know how to do this? Check out our blog post here to learn more.

Use strong passwords and two-factor authentication

Non-custodial software wallets and custodial wallets often use two-factor authentication (2FA) to help keep your account secure. 2FA adds extra security by requiring you to enter a code from your phone or another device before logging into your account. Most services require 2FA, but if yours doesn't, we strongly recommend you enable it.

Using a hardware wallet like a Ledger will require a password each time you try to access it. So, use a strong password that you won't forget!

Don't store all your bitcoin in one place

Diversifying where you keep your bitcoin is essential in the event of a hack or security breach. Of course, each service has its security protocols, whether it's an online exchange, custodial wallet, or non-custodial wallet. Still, there's always a risk that something could go wrong, so it's important not to put all your eggs in one basket. It's not worth it.

Don't keep your bitcoin on an exchange

"Not your keys, not your coins" rings incessantly throughout the crypto community, and for good reason. Not having custody of your private keys means you don't have complete control over your bitcoin. Custodial services like Coinbase or Binance might seem more convenient, but they've been known to be subject to hacks, government shutdowns, and other security breaches. Exchanges have also been known to freeze user accounts or restrict withdrawals for various reasons, so it's always best to withdraw your bitcoin to a self-custodial or non-custodial wallet as soon as possible.

Be careful of phishing scams

Phishing, or the fraudulent act of posing as a legitimate entity to acquire sensitive information like passwords or private keys, is one of the most common ways people lose their bitcoin. Be very careful when clicking on links, especially if you're unsure where they're coming from. If you're ever in doubt, always type in the URL of the website you're trying to visit to be sure you're going to the right place. Phishing scams grow more sophisticated daily, fooling even the most experienced bitcoiners, so it's always better to be safe than sorry.

Don't tell people how much bitcoin you own

One of the cardinal sins of bitcoin is talking about how much bitcoin you own. Not only is it considered bad manners, but it's also a surefire way to attract unwanted attention from scammers and thieves. If you must talk about your bitcoin holdings, always be vague and never give away exact numbers. It's just not worth the risk. Avoid discussing in person, but especially avoid discussing online in public forums or social media.

These tips decrease risk by making it harder to lose your bitcoin. We like the swiss cheese method of security; there are still holes (no one tip is perfect), but the more layers of security you have, the less likely someone will steal your bitcoin. Again, none of these tips is required, but we strongly encourage you thoughtfully consider each one to help keep your bitcoin as safe as possible.

Please be aware that:

  • Cryptocurrencies are unregulated in the UK;
  • Cryptocurrencies are not protected under Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS);
  • Profits may be subject to capital gains tax;
  • The value of investments can go down as well as up

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