Bitcoin, the first and most successful virtual currency has had an impressive year. Not only did its exchange value rocket up to over $1000 US, but also it expanded outside the world of online shopping into brick and mortar stores.
Whether you want to buy pizza online or a perhaps a Lamborghini from a car dealer, Bitcoin is there to help you avoid the troubles of cash, including high transaction fees levied by banks. Vancouverites are even getting the world’s first Bitcoin ATM. This short video explains Bitcoin, the currency as well as the network:
Bitcoins are stored in virtual wallets. These wallets can be software on your computer, mobile or web-based. Software wallets are kept and secured by the user on their own. Backing them up is also the user’s responsibility. Mobile wallets which come in the form of apps for a variety of smartphones provide the flexibility of a portable wallet and the apps can leverage a variety of features on the smartphones including cameras to scan QR codes or even use NFC (Near Field Communications) payments in stores. Lastly, there are Web-based wallets provided by online services such as San Francisco startup Coinbase, which now claims to serve 617,000 customer wallets, as well as 16,000 merchants.
Regardless of where your wallet is stored, it still counts as data at rest and you need to protect it using strong encryption to prevent unauthorized access and theft of your Bitcoins. So choose reliable and trusted third party vendors for all forms of wallets. At the same time, it is not good practice to keep large amounts of Bitcoins in an easily accessible manner such as a mobile wallet. Instead, keep small amounts on computer, mobile or online for everyday use and the remaining part on physical media, encrypted and locked away safely. In addition to encrypting your wallet, create redundant backups of it in order to avoid data loss. Bitcoin Wiki goes into great and technical detail about protecting your Bitcoin wallet including paper wallets!