Bitcoin Security

Posted by - Wednesday, March 20th, 2013

Bitcoin popularity has been ramping up, a testament to the age of digital everything.

But this currency – about as digital as you can get – has the same flaws of anything involved in the digital world: it's easy to hack and steal.

It's a growing problem among the growing community of Bitcoin users. Complete online security is almost nonexistent, and that means thousands or hundreds of thousands of dollars from Bitcoin users can be stolen almost as easily as a pickpocket can swipe a physical wallet. And just like that physical cash, the Bitcoins are long gone.

But that means the field of Bitcoin security is also burgeoning.

Users have found different methods of securing their Bitcoins, such as keeping private key numbers on encrypted USB drives, computers not connected to the Internet or another physical medium.

Charlie Shrem, for example, put his on a ring, as Wired reported. He had his father embed the key on a ring he could wear on his finger. And as an added security measure, he decided to leave one number out – a number only he has memorized.

casascius bitcoin sidebarMike Caldwell, meanwhile, started a business from the issue. He created what he calls Casascius coins – coins on which private keys are engraved.

He mints anything from coins to gold-plated bars for interested Bitcoin users in what started as a small business for what he thought would be a niche crowd.

But the interest was high, and Wired reports that he's minted $2.5 million to date.

Still, even with his method, Caldwell notes, there is the possibility that he, the maker of the coins, could have written down the private keys he creates. It's all based on the users trusting him.

From Wired:

With so much money now created, Caldwell says that – quite frankly – they shouldn't [trust him], but he said he's made it “deliberately unattractive” for him to steal. “I've published my identity. I've published my address. I've published a list of coins that I've produced,” he says. “There's no way that I can prove that I did not keep the private keys. But instead, what I've offered is basically people can have recourse against me if I were to have stolen from them.”

But even then there's no guaranteed security. For now, Bitcoins, like cash, can be stolen and never seen again. But these private keys give users some peace of mind in the way a security box might – not impossible to access, but pretty darn difficult.


More like this...

BITCOIN: On the Fringe of the Dominant Financial World
Bitcoin seems to be gaining traction and legitimacy among those who need to transfer their cash outside of the prying eyes of regulators...

Bitcoins Pose Major Threat to Central Banks
Bitcoins have created a very real "risk situation" for central banks. Take a look at today's chart of the day and find out how Bitcoins are stripping power from central bank regulators...

End the Fed: Hoard Bitcoins
If you're interested in getting rid of central banking I would recommend hoarding bitcoins by transferring your dollars...

Silver Pandas