Three Ways To Keep Your Bitcoin Winnings Safe

Are your Bitcoins safe?So, you’ve got some Bitcoin.  Maybe you bought it, maybe you won it, but the point is: you’d quite like to keep it. Bitcoin security can be tricky for beginners, and it’s easy to pick a bad password to your brainwallet and lose everything.  Even if you’re careful, Bitcoin stealing malware exists, and, if you’ve ever downloaded even a single untrusted application onto your computer, you can’t be entirely certain that malware isn’t snooping on your every move.  So, how do you keep your money safe?

The good news is that, these days, you have a couple of exciting options for keeping your money safe with a minimum of work.

#1:  Use a Bitcoin Bank

The all-time simplest way to avoid theft is to entrust your money to an institution that specializes in not getting robbed.  Or, as they’re normally called, banks. CoinBase is the clear leader in the field right now.  This option is maximally convenient (signing up takes literally five minutes) and you can access everything from any web browser, but it requires a degree of faith in the (largely unregulated) institution holding your money. The Gox affair has taught us that large Bitcoin businesses and even free Bitcoin casinos can fail with little notice, so… caveat emptor.

#2: Use a Multisig Wallet

Multisig Wallets are extremely exciting, but they also require some explanation to understand why.  Essentially, it works like this:  it’s possible to create Bitcoin wallets that are structured such that it requires multiple signatures to open them.  In particular, it’s possible to construct wallets with three keys, such that any two will suffice to unlock it.  This is useful, it allows you to outsource your security to a third party, without having to trust them with your money.  One company that provides this service is called BitGo.

It works like this: when you create a wallet, three keys are generated.  The first is used to create a wallet on your computer or phone.  The second is given to the service handling your security, which will ask for your permission before it co-signs your transactions, giving you two-factor security.  The third key is also given to you, to be recorded in some offline storage format (preferably written down and hidden). The service can protect your money, but it can’t spend it without you — and, if it tries to hold your money for ransom, you can simply dust off your second key and retrieve your funds.

#3: Hardware Wallets

Another way of protecting yourself from Bitcoin stealing malware is to store your wallet on a device that’s too simple and single-purpose to get malware.  These are called hardware wallets, and right now the market leader is a company called Trezor, which manufactures small pocket hardware wallets.

These options have different tradeoffs, but all of them provide decent-or-better security in a form that’s accessible to the layman, which is very valuable for gamblers and Bitcoin users everywhere.