Bitcoin’s popularity and use has grown astronomically since it was first released in 2009; now there is over USD 100 billion invested into Bitcoin with several billion USD of trading volume. However, most people do not take the proper steps to ensure that they fully control their Bitcoin by controlling the private key.
One of the key beneficial attributes of Bitcoin is that it gives control of money to its owner, as opposed to banks which can seize or freeze money at any time at their discretion. However, one does not fully control their Bitcoins unless they control their private key. This is an aspect of Bitcoin many users are unaware of, often resulting in mistakes and loss of funds.
Many new users buy Bitcoin on exchanges and just leave it there. This does not give them access to the private key, so they don’t control the Bitcoins at all. Bitcoin should be immediately withdrawn to a personal wallet after purchasing on an exchange. It is not good practice to leave Bitcoins on exchanges for extended periods of time even when trading, as exchanges can disappear or be hacked, losing user funds.
To ensure full control and safety of funds, it is crucial to use a Bitcoin wallet that gives the user sole access to the private key. This means that the private key is not available to anyone else or stored online in a server.
Most Bitcoin wallet services fail in these criteria. Even the most popular online or web-based wallets fail to give Bitcoin owners full exclusive control of their private keys if they store private keys on an online server. No matter how secure one makes these wallets, even with a strong password and 2-FA, the private key is vulnerable to hacking.
Bitcoin Core is the original Bitcoin wallet and is fully self-sufficient, it is not dependent on any online server to operate since it downloads the entire blockchain into a user’s computer and connects with the actual Bitcoin network. It gives Bitcoin users full control of private keys and doesn’t store those private keys anywhere else. As extra security, a Bitcoin Core user should encrypt the wallet with a strong password that they won’t forget.
A downside of Bitcoin Core is it can take a long time to download since the blockchain is over 170 GB of data, and growing. However, it is definitely worth the wait to ensure Bitcoin safety. A big upside is that Bitcoin Core is a full node, so any user that is running it is running 1 of about 10,000 Bitcoin nodes in the entire world, helping secure the network.
If a computer running Bitcoin Core is destroyed then the Bitcoins would be lost, so as extra safety it is prudent to make a copy of the private key. Do not store this private key on a computer or device connected to the internet. If storing the private key digitally, it is best to put it into a USB memory stick and put a password on the file containing the private key, and then to keep that USB memory stick in a safe place.
Physically recording the private key is a good option too, which can simply be done with a pen and paper, but one must be extremely careful to get it completely right since missing a letter would make it useless. A polaroid camera that instantly prints out photos but does not store the photos is also a great option to record private keys. Any physical record of the private key must be kept absolutely safe, since if someone finds it they would have full access to the Bitcoins.
Electrum is another Bitcoin wallet that gives full control of the private key to the user, and is a lot faster to download than Bitcoin Core since it doesn’t download the whole blockchain. However, if Electrum’s servers aren’t working for whatever reason then a user would have to import their private key to another wallet service to gain access to their funds.
In any case, as long as the wallet only gives the user sole control of private keys, it is the first step to securing your Bitcoin and being in full control of your funds.
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