Bitcoin Wallet Security: A Guide for New Investors

What is a Bitcoin wallet?

A Bitcoin wallet is a digital tool that helps you securely send, receive, and store BTC. 

Each Bitcoin wallet has a public wallet address and a private key. 

Wallet address: Your wallet address is like an email address for your Bitcoin. You can share your wallet address with others to send and receive Bitcoin. 

Private keys: Your private keys can be used to access your wallets. Do not share your private keys with anyone, and store them securely in a safe place. 

Bitcoin is a fully decentralized system — and your wallet is owned solely by you. If your wallet is compromised, there is no bank or institution to call for help. That means you should follow best security practices and be cautious of theft and hacks. 

Types of Bitcoin wallets

There are several types of Bitcoin wallets, each with its own security features and trade-offs. Understanding these types can help you select a wallet that aligns with your security needs.

Hot Wallets: Hot wallets are connected to the internet and provide easy access to your cryptocurrency. 

• Desktop Wallets: Desktop wallets are typically secure, but are vulnerable to malware if your computer isn’t well protected.
• Mobile Wallets: Mobile wallets are great for convenience, but storing your wallet on your phone comes with risks like phone theft and malware exposure.

Cold wallets: Cold wallets remain offline, offering stronger protection from online threats.

• Hardware Wallets: Hardware wallets are secure offline devices that keep your private keys safe from online hackers. Hardware wallets are a great choice for investors with significant holdings. 
• Paper Wallets: Paper wallets are a printout of your keys that can be stored securely. While offline, they can be easily damaged or lost if not handled carefully. Paper wallets were popular in the early days of Bitcoin, but have since fallen out of favor because they are inconvenient. 

What’s the best wallet for security? 

Typically, using a hardware wallet is the best option for security. We’ll dive into recommended hardware wallet options later in the article. 

Is Bitcoin safe from hackers? 

Is the Bitcoin network safe? 

The Bitcoin network itself is secure. Bitcoin uses the Proof of Work system to ensure that all transactions are verified by the network — which means that miners solve complex mathematical equations to ensure security. 

An attacker would need to have the majority of mining power to successfully hack the network — which would be incredibly expensive and difficult. 

Is my Bitcoin wallet safe? 

It’s up to you to secure your Bitcoin wallet. By taking the proper safeguards, you should be able to defend yourself from potential hacks. 

Is it safe to keep my Bitcoin on an exchange? 

It’s generally recommended to keep BTC in your own wallet. 

In the past, investors have lost access to millions of dollars worth of BTC and other cryptocurrencies after exchanges like BlockFi, Celsius, and Voyager went bankrupt. 

Keeping your BTC in your own wallet helps protect you from losing your cryptocurrency in events like an exchange bankruptcy, an exchange hack, or an exchange banning your account. 

Why do Bitcoin wallets get hacked? 

In 2023, a group of researchers focused on computer systems and security released a study — Security Aspects of Cryptocurrency Wallets—A Systematic Literature Review. Here’s what they learned: 

• Operating systems and software risks: Wallets on devices with outdated operating systems are more prone to attacks, especially on Android. Issues like weak passwords, brute-force vulnerabilities (manually guessing passwords), and unencrypted key storage are some common factors that lead to hacks. 
• Usability vs. security: Tools like encryption and multi-factor authentication offer strong defenses against hacks, but many users don’t adopt them because they’re difficult to set up.

What can I learn from this study? 

Make sure you turn on security features like two-factor authentication in your wallet. While this does take a little bit of effort, this simple step can help protect your assets for years to come! 

How safe is a Bitcoin wallet on my phone?

Mobile wallets are convenient and accessible, which is why they’re popular among beginners. 

However, storing a wallet on your phone can expose you to unique risks, including theft and malware. If you’re using a phone wallet, you should follow the security guidelines in the next section. 

Tips to keep your Bitcoin wallet secure 

Here are a few tips to ensure that your BTC wallet is secure. 

• Transfer Crypto Out of Exchanges: It’s recommended that you transfer your cryptocurrency out of centralized exchanges and into a secure, self-custody wallet. 
• Use Strong Passwords: Avoid having commonly-used passwords for your cryptocurrency wallets. Make sure to change them often. 
• Enable Two-Factor Authentication (2FA): Turn on two-factor authentication using an app like Google Authenticator. This is an extra step in the sign-in process that may prevent potential hacks. 
• Keep Private Keys Private: Make sure you keep your private keys safe in any circumstance. One common scam is a hacker posing as a customer service representative asking for your private keys. 
• Backup Your Wallet: In case something happens to your primary device, make sure that you keep a secure backup of your wallet. 
• Update Software Regularly: Many hot wallets offer software updates — which can fix vulnerabilities and keep your wallet secure. 
• Use Security Software: Install reputable security apps to detect malware — such as Bitdefender, Norton, and Avast. 
• Avoid Public Wi-Fi: Accessing your wallet over public Wi-Fi can increase the risk of a hack. Be cautious when using public WiFi for crypto transactions. 

Is it safe to share your Bitcoin wallet address? 

Yes. Your public wallet address is safe to share with others, and cannot be used to gain access to your account. It’s common to share your wallet address to send and receive crypto. 

However, you should keep your private keys safe and secure. You should be suspicious of anyone who asks for your private keys. 

Are hardware wallets a secure storage option?

Hardware wallets are one of the most secure options for long-term storage. By keeping private keys offline, hardware wallets protect against most hacking attempts. 

However, it’s important to keep your wallets physically secure and backed up — if the wallet is lost or damaged without a backup, you may lose access to your BTC. 

What is the best Bitcoin wallet for security?

For beginners, choosing a secure hardware wallet can be overwhelming. Here are some options to consider: 

• Ledger: Known for its ease of use and fantastic security features, Ledger is one of the popular hard wallets on the market. Ledger supports thousands of cryptocurrencies including BTC — and its cheapest model is currently $79! 
• Coldcard: Coldcard MK4 is a cold wallet designed specifically for BTC. The Coldcard MK4 currently costs $157. 
• D'Cent: D’Cent is a cryptocurrency wallet that uses biometric authentication — which means you have to use your fingerprint to access the wallet. D’Cent supports thousands of cryptocurrencies and currently costs $119. 

Conclusion

To be a responsible Bitcoin investor, it’s important to focus on wallet security. By choosing a secure wallet and following best practices, you can protect your Bitcoin from hacks and benefit from BTC’s appreciation for decades to come.