8 bitcoin security threats and how to prevent them

8 bitcoin security threats and how to prevent them

Are you scared of losing your bitcoin?

A little fear is healthy — it means you care about protecting your wealth. Owning bitcoin comes with some responsibility, and that includes actively preparing against security threats. In this overview, we’ll cover some common threats and some tips for protecting your bitcoin.

Before we delve into each individual threat, please note the best security practice is to protect your bitcoin with multiple keys, a practice known as multisig.

1: Physical attack (theft, burglary, extortion)

We begin with the threat that makes the most headlines. Physical threats tend to scare us more than other security threats.

While bitcoin exists in cyberspace, keys are much more vulnerable in the physical realm, depending on how you store them. Someone can commandeer your phone. Burglars can break in and steal a hardware wallet. And some investors have been held captive and extorted.

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2: Accidental loss (fire, floods, misplacing)

Accidental loss is an especially sneaky security threat. As humans, we rarely expect accidents to happen to us, and accidents usually involve some factors we don’t account for, like our own forgetfulness and clumsiness.

We’ve heard countless stories of investors who accidentally lost their funds. In the early days, people stored bitcoin on computers and hard drives and disposed of them without knowing what they did. Others may have stored bitcoin on a hardware wallet and lost the device in a move — out of sight, out of mind.

Then, there are more intense accidents, such as fires and natural disasters. The reality is if you store your key on a single point of failure, there are unlimited forms of accidents that can happen to your bitcoin.

Tips for preventing:

3: Hacks

We live in an age where more and more communications are done online. It’s often less effort for a bad actor to try and hack you than it is to physically find you, and hacking allows attackers to target multiple users at once.

There is no one-size-fits-all hack. Rather, there are a variety of tactics they can use to compromise your key, such as spoofing, ransomware, and targeting your personal accounts, such as email or cloud storage. If your key is unencrypted and stored online or on an internet-connected device, it is highly vulnerable.

Tips for preventing:

4: Phishing attacks

If malicious actors can’t get to you, they’ll try to get you to come to them. Phishing attacks are a sly tactic where a thief will contact you in an attempt to deceive you and steal your bitcoin or login credentials. These attacks can come across many forms of communication: email, phone, and even social media.

Generally, they’ll ask you to click a link, send them money, or share information, and they often use clever ways to entice you, such as astronomical investment returns, a funny social media post, or even an offer to send bitcoin to your address if you’ll just send them a little bit first. Don’t trust — verify.

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5: Insider attacks (friends, associates, romantic partners)

When someone steals bitcoin, it’s often a crime of opportunity. They could be a friend, relative, or close associate. Sometimes, it’s just someone with access to your property.

The untrustworthy actor knows they can access your bitcoin, so they find an opportune time to snatch it out of greed or desperation. This could be as simple as slipping a device into their pocket. In extreme cases, they might incapacitate a victim to buy themselves time.

In all cases, the solution is simple: remove the temptation. Keep people honest by keeping your bitcoin under tight control.

Tips for preventing:

6: Device failure

Gadgets and electronic devices are helpful inventions, but even they don’t last forever. Hardware wallets can sometimes be defective, and the last thing you want is to be stuck with a bricked device and no bitcoin.

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7: Custodial risk (exchanges, lenders, third parties)

Not your keys, not your coins. One of the most fundamental security threats with bitcoin is leaving it in the care of someone else. Whether you leave bitcoin on an exchange, lend it out, or trust it with a custodian, the result is the same — you’ve given up control of your keys.

If you don’t proactively take self-custody of your bitcoin, the day might come when you won’t be able to. Exchanges could get hacked or go bankrupt. Lenders can make bad investments and lose your funds. And even custodians can lose bitcoin. All these unfortunate events have happened with bitcoin before. Don’t become another cautionary tale. Hold your keys yourself.

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8: Inheritance planning

While none of us likes to think about it, death is an inevitable part of life, and it represents a major segment of wealth security. You need to have a clear inheritance plan to ensure your bitcoin transitions to your loved ones upon your passing. Unfortunately, some investors have struggled to find and recover bitcoin after the death of a loved one.

Casa’s inheritance planning provides you and your loved ones with clarity around succession planning to keep your wealth safe when it matters most. This program also ensures you retain control over your bitcoin in the meantime.

Tips for preventing:

Closing thoughts

If this list has you feeling paranoid, fear not. With a little bit of time and thought, you can stay ahead of these threats and give your bitcoin the self-custody it deserves.

Casa makes it easy to secure your hard money. Our security plans protect your bitcoin from single points of failure, so one lost key doesn’t mean lost bitcoin.