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### Get crucial knowledge about safely storing your cryptocurrencies in this 3-part article series on wallet security.

# Part 1 of 3: The basics
### [Part 2 of 3: Hot and cold storage & Splitting and sharing keys](https://steemit.com/bitspace/@bitspace/are-your-cryptocurrency-tokens-safe-part-2-of-3-hot-and-cold-storage-and-splitting-and-sharing-keys)
### [Part 3 of 3: Online wallets and exchanges](https://steemit.com/bitspace/@bitspace/are-your-cryptocurrency-tokens-safe-part-3-of-3-online-wallets-and-exchanges)


## Introduction: Security in the cryptoeconomy
Do you feel confident that your cryptocurrency assets are safe from theft? Did you backup your wallet? No? Well, don’t expect your insurance company to cover you, should anything go wrong. If someone steals your private key you are basically screwed. Cryptocurrencies are not regulated in any way by the government, so you cannot turn to anyone for help should something go wrong. You alone are responsible for securing your assets. 

In this article, we will walk you through basic security measures and explain how cryptocurrencies and wallets work, so that you can take better care of your assets in a more secure way.

# The basics 
In this article we will explain everything based on the Bitcoin blockchain. However, many of the cryptographic terms that we use, e.g. ‘private key’ or ‘public key’, is something all cryptocurrencies are based on. You can thus consider these as useful principles for other cryptocurrencies as well.

To spend Bitcoin, you will need a private key to sign the transaction. Buying Bitcoin does not give you ownership of the coins. All you get is access to create transactions with your coins, given that you have the correct private key to sign with. So, by now you probably understand that this private key is important. But what is a private key? For starters, the private key is generated along with a public key. We call this a key pair. The public key is what you will know as your address which is used to receive coins. It is often represented by a string of text or by a QR code. The private key gives you access to spend bitcoins that are stored on the private key (which the key address is paired with).
 
Thus, security in the cryptoeconomy essentially boils down to securing your keys. The key is to have a good plan for securing and administering your assets. Consider the following principles: 

1. Accessibility: You can spend your bitcoins
2. Security: Nobody else can spend your bitcoins
3. It is practical and user friendly


### #1 The simplest (and most vulnerable) solution

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Store your private key in a file on your device (PC, phone, tablet):

**+** Very practical and user friendly

+/÷   As accessible as your device, but

÷  If you lose your device, or if it is wiped, you lose all access to spend your bitcoins

❔ Only as secure as your device

÷  Should your device be compromised by an attacker, your private key will be compromised as well, and the attacker can spend your bitcoins.

Even if this is the easiest and most practical way to store a private key, it is also the most vulnerable. It is a little bit like walking around with your wallet loaded with lots of cash in your pocket. When you use this method, be sure that you only store small amounts of value which you are comfortable with the risk of losing. A good rule of thumb is to never store more Bitcoin than you would store in your actual wallet.

Let’s look at the vulnerabilities. By this method, you will lose your bitcoins if:

- Your device crashes and you lose all your files
- Someone steals your device
- You lose your device somewhere
- Your device breaks and you lose access

You will also lose your bitcoins if:

- Your device is compromised by malware/virus which leaks the key to the attacker
- You are connected to a network where the internet router is compromised, which leaks the key to the attacker
- Someone gains access to your device when you are not watching (perhaps an unfaithful friend), they key is stolen and you lose your bitcoins


### #2 Wallets 
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A digital wallet, as opposed to your pocket-wallet, is a written software or a program that gives you a simple user interface to help you keep track of your keys, your addresses and your bitcoins.

A wallet gives you the tools to create multiple addresses so that you can store your bitcoins in multiple places. Now why would you want to do such a thing? Why not keep everything on one address? Because when you spread your bitcoins onto multiple addresses it will look like multiple ownerships to an outsider. Thus, it essentially increases your anonymity. Wallets also keep records of all transactions and act like a kind of accounting software.

A central element of wallet security is based on encryption by a chain of words. It is common to use 12 words, but many use 24 words as well. Some wallets let you choose the words, and other wallets will randomly generate the words for you. If you know the right combination of words, you can recreate the wallet with its private and public keys should something happen to it. 

This is your backup plan, a fail-safe, should the device the wallet is stored on fail or get lost. Most wallets support this, so always create a backup of your wallet, and write down these words. DO NOT write them down on the same device you store your wallet, but somewhere else, e.g. on a piece of paper. Then secure the paper somewhere safe. You could even split the paper in smaller pieces to separate the words and hide them in multiple places, so that even if someone finds a piece, they will not be able to gain access to your wallet. 

Lastly, if you are really confident in your long term memory, you could even consider not writing down the words, but memorize them instead. This will be easier if you can choose the words yourself. You could pick a poem that you like, a phrase from a book etc. that will help you remember the words more easily. If you are slightly less confident, you could also just write down the first 2 or 3 letters of the word, as long as you are sure you will be able to remember the rest of the letters at some point in the future. 

### [Part 2 of 3: Hot and cold storage & Splitting and sharing keys](https://steemit.com/bitspace/@bitspace/are-your-cryptocurrency-tokens-safe-part-2-of-3-hot-and-cold-storage-and-splitting-and-sharing-keys)
### [Part 3 of 3: Online wallets and exchanges](https://steemit.com/bitspace/@bitspace/are-your-cryptocurrency-tokens-safe-part-3-of-3-online-wallets-and-exchanges)

_____________________
*By [Pål Taule Bentebråten](https://steemit.com/@paalt)
Edited and translated by @Ola-Haukland
For @Bitspace AS*