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myarbrough@oreilly.com 2014-11-18 12:59:31 -08:00
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@ -57,11 +57,11 @@ Over the past three years, as a direct result of bitcoin adoption, we have seen
==== Balancing Risk
((("risk, security")))((("user security","risk, balancing")))Although most users are rightly concerned about bitcoin theft, there is an even bigger risk. Data files get lost all the time. If they contain bitcoin, the loss is much more painful. In the effort to secure their bitcoin wallets, users must be very careful not to go too far and end up losing the bitcoin. In the summer of 2010, a well-known bitcoin awareness and education project lost almost 7,000 bitcoins. In their effort to prevent theft, the owners had implemented a complex series of encrypted backups. In the end they accidentally lost the encryption keys, making the backups worthless and losing a fortune. Like hiding money by burying it in the desert, if you do it too well you might not be able to find where you buried it.
((("risk, security")))((("user security","risk, balancing")))Although most users are rightly concerned about bitcoin theft, there is an even bigger risk. Data files get lost all the time. If they contain bitcoin, the loss is much more painful. In the effort to secure their bitcoin wallets, users must be very careful not to go too far and end up losing the bitcoin. In the summer of 2010, a well-known bitcoin awareness and education project lost almost 7,000 bitcoins. In their effort to prevent theft, the owners had implemented a complex series of encrypted backups. In the end they accidentally lost the encryption keys, making the backups worthless and losing a fortune. Like hiding money by burying it in the desert, if you secure your bitcoin too well you might not be able to find it again.
==== Diversifying Risk
((("user security","risk, diversifying")))Would you carry your entire net-worth in cash in your wallet? Most people would consider that reckless, yet bitcoin users often keep all their bitcoin in a single wallet. Instead, users should spread the risk among multiple and diverse bitcoin wallets. Prudent users will keep only a small fraction, perhaps less than 5%, of their bitcoins in an online or mobile wallet as "pocket change." The rest should be split between a few different storage mechanisms, such as a desktop wallet and offline (cold storage).
((("user security","risk, diversifying")))Would you carry your entire net worth in cash in your wallet? Most people would consider that reckless, yet bitcoin users often keep all their bitcoin in a single wallet. Instead, users should spread the risk among multiple and diverse bitcoin wallets. Prudent users will keep only a small fraction, perhaps less than 5%, of their bitcoins in an online or mobile wallet as "pocket change." The rest should be split between a few different storage mechanisms, such as a desktop wallet and offline (cold storage).
==== Multi-sig and Governance
@ -69,7 +69,7 @@ Over the past three years, as a direct result of bitcoin adoption, we have seen
==== Survivability
((("bitcoin","death of owner and")))((("death of owners")))((("security","death of owner and")))((("security","survivability")))((("survivability")))One important security consideration that is often overlooked is availability, especially in the context of incapacity or death of the key holder. Bitcoin users are told to use complex passwords and keep their keys secure and private, not sharing them with anyone. Unfortunately, that practice makes it almost impossible for the user's family to recover any funds if the user is not available to unlock them. In most cases, in fact, the families of bitcoin users may be completely unaware of the existence of bitcoin funds.
((("bitcoin","death of owner and")))((("death of owners")))((("security","death of owner and")))((("security","survivability")))((("survivability")))One important security consideration that is often overlooked is availability, especially in the context of incapacity or death of the key holder. Bitcoin users are told to use complex passwords and keep their keys secure and private, not sharing them with anyone. Unfortunately, that practice makes it almost impossible for the user's family to recover any funds if the user is not available to unlock them. In most cases, in fact, the families of bitcoin users might be completely unaware of the existence of bitcoin funds.
If you have a lot of bitcoin, you should consider sharing access details with a trusted relative or lawyer. A more complex survivability scheme can be set up with multi-signature access and estate planning through a lawyer specialized as a "digital asset executor."