Bitcoins are a Girl’s BFF!

Yesterday, The London Metropolitan Police carried out morning raids on twelve houses in and around London. The arrested nine men with the combined ages of 533 years were taken into custody on suspicion of conspiracy to burgle, three of whom are pensioners and the arrests were made in relation to The Hatton Garden Safe Deposit Company raid. Because of the combined ages of the arrested men, they have collectively been branded, “the Dads Army” and it is alleged carried out the raid to fund their retirement. Scotland Yard announced on Wednesday evening that eight of the nine men have now been charged with conspiracy to burgle, Terry Perkins, John Collins, Daniel Jones, Hugh Doyle, William Lincoln, Brian Reader, Paul Reader, Carl Wood have been remanded in custody to appear before Westminster Magistrates Court on Thursday. “The ninth man who was also arrested has been released on bail pending further enquiries“, police said.

Flying Squad Officers also recovered a “significant amount” of jewellery, gems and cash and that they were “confident” that these were indeed items taken during the daring Easter Bank Holiday weekend raid on the 72 safe deposit boxes stored at Hatton Garden where the losses were considered to be in excess of £60 million pounds.

Now, whilst I defy anyone not to appreciate the absolute magnificence of a beautiful high carat diamond and the joy that it can bring, particularly if I may say, to the feminine amongst us, the London raid again reminds us to the lengths and efforts those less scrupulous will go to relieve us of our precious valuables.

Bitcoins, however you may have come by them, whether it be through mining, purchase or trade have come through your own labour and are indeed precious and valuable, therefore, let us remind ourselves of the security which we should closely follow to ensure that they remain safe and closely deposited within our bitcoin wallets.

Ok, so let’s look at some collective thoughts and ideas for our own sparkles:- 🙂

Location of your funds: Give serious consideration to splitting the funds into two, the funds you will use on a day to day basis and those we you would prefer hold as longer term savings.

Day to Day funds: This is all about your own convenience. Just like cash, you always want to take care with it but, at the end of the day, the amount you are walking around with for your day to day use should not be so large that you would notice its’ loss. For these funds consider using your phone wallet, an online wallet or whatever works for you always remembering the value that you might be prepared to loose should the unthinkable happen.

Savings: This is a much trickier question. Do you want to hold the funds yourself or trust this to a third party? If you want to use the funds in any way for trading or investment purposes then, almost certainly, the funds will be held by a third party exchange or an investment provider.

Third Party: If you choose the third party option for the holding of your funds, then diversification has to be key. I would consider placing investments through a number of providers rather than stick to one. If possible pick providers that have an audit in place (for example Bitfinex is one provider that uses this technique to validate periodically that users bitcoins are present and accounted for) or, better still, find a provider that holds your coins in their own designated wallet so you can see your bitcoins on the blockchain. The only provider that I have seen using this particular technique, while still allowing you to trade, is First Global Credit. Because the coins are used for investment purposes they can be ring-fenced and held so you can see them on the blockchain 24/7 and that is a major reassurance for the location and safety of the sparkles at any point in time.

Self-Storage: If you want to hold your funds under your proverbial “digital mattress” then there are two alternatives for security, offline cold storage (brrrr) or multi-sig wallets.

Cold Storage: If you trust yourself to keep a secure backup of your key details then you truly cannot get much better than the armoury wallet software in cold storage (brrrr). This truly sounds more daunting than it is; you will need two computers to facilitate this approach. An online watch only wallet which will sit permanently or periodically on the internet, (but remember if you connect and disconnect periodically, then you will need to let your wallet software bring your blockchain transaction information up to date each time). This computer and wallet will show the balance held in your wallet and is used to create a new payment from your wallet. The second computer should never be connected to the internet after you have started using it for offline wallet purposes. When you need to transfer funds, the transaction created on the online computer is transferred to the offline computer using a USB fob and the transaction is digitally signed by the offline wallet. Once signed, the transaction is transferred back to the online wallet (USB fob again 🙂) and the transaction is published onto the blockchain. The key is to keep the offline machine off the internet at all times and also to keep the computer physically secure. Please do give serious consideration to the physical security of this offline machine as this is where your own personal “diamonds” are stored and therefore this machine is considerably valuable if, for any reason, it falls into unscrupulous hands 🙁.

Multi-Sig: If there is a second party you trust (or there are joint funds that you both want to control at any one time) then a multi-sig wallet can be used to provide added security. With a multi-sig wallet both parties (in a 2 of 2 configuration) need to sign a transaction before it can be released onto the blockchain. This added layer of security means that both keys would need to be compromised before the funds were at risk. The armoury wallet is, again, one of the better implementations of this approach that is available and allows various signing configurations (for example 2 of 3 for instance means any 2 of 3 people are sufficient to sign a transaction). There are definite benefits to multi-sig when we are talking about family funds. If there is a single key held and something happens to the key holder the funds are lost. With multi-sig it is possible to have the funds held in a 2 of 3 configuration, where the third key is held securely by a lawyer or other trusted advisor. This way funds can be withdrawn when both parties agree, or, if something happens to one of the individuals the 3rd signer can help to release the funds that otherwise would be lost 🙁 . This is the other aspect of security that is often overlooked when planning your strategy; not only are you protecting against the theft of the funds 🙁, but also protecting against risk from lost keys due to unforeseen circumstances. Not an easy balancing act which is why, in many ways, the same rule applies to the first suggestion of Cold Storage – consider holding some funds in cold storage, some funds with a family multi-sig and some funds held with various investment providers.

In summary and in reflective consideration, whilst some rules have changed with the advent of digital currencies others remain and the importance of diversification is as important now, as it ever was before, remember to give careful thought to the safety of your “sparkles” at all times so that they remain safely where you secured them for you and your family to enjoy into the future. And yes, for this girlie, Bitcoins are a girl’s BFF 🙂 😉!

The team here at Digital Finance News are very keen to hear from you as to your own thoughts and ideas on Bitcoin security and very much look forward to hearing from you soon 🙂

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