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Hackernoon logoKeeping Your Cryptocurrency Safe From Hackers by@reuben-jackson

Keeping Your Cryptocurrency Safe From Hackers

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@reuben-jacksonReuben Jackson

I'm a blockchain security specialist and writer living in NY.

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During the Second World War, the Swiss military is known to have dug over 20,000 bunkers and fallout shelters across Switzerland to protect its people against potential nuclear attacks.

While the majority of these bunkers are still around, most have been abandoned and only a few have been preserved for historical purposes.

But now in 2018, the bunkers seem to have found a new completely unrelated to the purpose they were built for. Niklas Nikolajsen, a Swiss entrepreneur and the founder of Bitcoin Suisse is betting on the bunkers as the safest storage for crypto assets and mining equipment.

According to Bloomberg, the Swiss entrepreneur along with Phillip Vonmoos, his business partner, hopes to attract business from high net worth individuals and institutional investors.

The two through their company, Swiss Crypto Vault, are taking the idea very seriously and are even considering engaging the professional services firm PricewaterhouseCoopers to review the security of their vault.

Apart from the bunker protection, the company will also provide encryption and multi-sig authorization.

According to Nikolajsen, โ€˜the next level for the crypto community is for additional institutions to enter the space. They will only do so if there is a super secure way of storing the assets and private keys.โ€™

While this may be a good option for the big crypto holders, it is not a need for the ordinary crypto holder unless a nuclear attack is among their top concerns and then it would be better to dig a bunker in their backyard rather than pay a company thousands of miles away to do it for them.

The average crypto owner can protect their holdings from theft and loss by storing them in special offline devices made for this purpose.

A cold wallet is an offline storage device that can only be accessed physically. A hot wallet, on the other hand, is stored online and can be accessed through the internet. The advantage of a cold wallet over a hot wallet is that the latter is not accessible online and is therefore not prone to hacking.

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A good example of a cold wallet is a device known as Trezor Wallet, designed by Satoshilabs. The device calls itself a private bank in your hands and costs only $100. This review by ChainBits explains in detail how the Trezor Wallet works.

On the other hand, bitcoin exchanges such as Bitfinex, Kraken, and Bithumb utilize hot wallets to store their clientsโ€™ holdings.

According to the CNBC, Bithumb was recently hacked and over $30 million in coins stolen. Since the attack, the South Korea-based crypto exchange has announced that it is moving all usersโ€™ assets into secure cold wallets. This is just one example of security issues found in hot wallets.

However, this doesnโ€™t mean they are totally useless to crypto holders. The best way to use them is to have most of your crypto assets in a cold wallet and a few for day to day use in a hot wallet. This explains why Swiss Crypto Vault is providing the Multi-sig authorization option alongside the bunkers.

When it comes to hot wallets, the multi-sig authorization technology is considered the most secure option because it requires authorization from at least two private keys to allow a transaction. The wallet provider either gives the owner of the crypto two private keys and keeps one or engages a trusted third party to keep one key.

This approach is based on the premise that in case of an attack, the likelihood of the attacker gaining access to the three keys is nearly impossible. However, this approach also has its flaws, which we saw when hackers accessed multi-sig based wallets on Bitfinex and stole millions of dollarsโ€™ worth of Bitcoin.

As the crypto industry continues to grow, the cyberattacks directed to crypto exchanges are likely to keep rising. It is, therefore, necessary that you explore the various available hot wallet and cold wallet options to ensure that your assets are fully secure.


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