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Ask CryptoVantage: Is There Such a Thing as Too Much Bitcoin Security?
As ironic as it sounds, there is a risk to having too much bitcoin security. If you are not a technical person, you can potentially lock yourself out of your bitcoin if you try to make your security setup too complicated. There are other factors that should affect the level of bitcoin security you use. For example, if you only have a small amount of bitcoin then it can be impractical to have a high level of security because of the inconvenience of accessing your bitcoin.
In this article, we discuss the different levels of bitcoin security, the factors involved in choosing your level of security, and the risks involved in having too much security.
Levels of Bitcoin Security
The first level of bitcoin security we will discuss is the “low” level. The most common example of this level is storing your bitcoin on a cryptocurrency exchange, or on a computer or mobile phone without any sort of back-up. If anything happens to the exchange or your computer, your bitcoin might be lost forever. This is okay if you are storing a very small amount of bitcoin that you are completely okay with losing (for example if your computer breaks or your crypto exchange gets hacked).
The second level of bitcoin security covered by this article is the “medium” level. One example of this level of security is having a backup of your wallet but storing it in the same geographical location as the wallet itself. In this scenario, the backup will protect your bitcoin in case your computer fails, however it will not protect you if your house burns down. This can be an okay method for small to medium amounts of bitcoin. If using this method, consider the impact of losing the bitcoin you’re storing because of a computer hack, or if your house burnt down.
The third and final level of bitcoin security is, unsurprisingly, the “high” level. A good example of high bitcoin security is using what is known as a 2-of-3 multisig set-up with hardware wallets, each stored in different geographic locations. The wallets never touch an online computer. If one of the hardware wallets gets destroyed, you can still access your bitcoin using the other two. If someone finds one of the hardware wallets, they will not be able to steal your bitcoin unless they find one of the other two wallets. This is good if you have a moderate to high amount of value stored in bitcoin, but should only be attempted if you are knowledgeable enough to do it safely. If you do not have enough experience, using high levels of security can also present risks, and you should consider using professional services to help you secure your bitcoin.
Risks of Having Too Much Security
The more requirements there are for you to unlock your bitcoin, the more likely it is that you might lose the ability to meet one of those requirements. For example, if using a 2-of-3 multisignature setup, you might mistakenly think you only need to back up your three private keys, when you also need to back up the public keys as well as some other information.
In addition to the risk of locking yourself out of your funds, each additional component involved in your security setup has the potential of introducing a vulnerability and putting your funds at risk. For example, if you are using a new type of software that coordinates multisignature signing, there is the risk that the software could have bugs or malicious code. This is another reason that you should keep your bitcoin security as simple as possible, while still maintaining the level of security that you need.
Conclusion
There are a few factors that you should consider when choosing your level of bitcoin security. First, the amount of value you have stored in bitcoin will affect the level of security you need. Second, it is important to consider the impact it would have to lose that bitcoin. And finally, your knowledge and technical abilities play into the level of bitcoin security that you can safely achieve.
