Since the beginning of 2015, the bitcoin industry has seen an enhancing number of gegevens breaches targeted at bitcoin wallet service providers and exchanges, leaving the private keys of bitcoin accounts and user funds vulnerable to potential hacking attacks.
Leading bitcoin exchanges and wallet platforms have begun to implement backup encryption systems, the multi-signature technology and provide hierarchical deterministic (HD) wallets to secure user funds.
Deterministic &, Multi-Sig Wallets
Leading deterministic bitcoin wallet platforms include Electrum, CarbonWallet, TREZOR and Armory.
Doorslag Wallet is a web based deterministic bitcoin wallet which generates private keys from the passphrase that does not hold a server side storage. Transactions are signed locally te the browser and private keys are not collective with the server.
Doorslag Wallet requires users to control at least two private keys using the multi-signature technology. The web-based podium automatically encrypts private keys with the passphrase of the browser.
Furthermore, unlike popular bitcoin wallet platforms including Coinbase and Circle, Doorslag Wallet implements a unique Two factor authorization system called Out of Liaison Two Factor, which “means that users’ Two factor security is not open to social engineering.”
Most importantly, the wallet operators (Doorslag Wallet Administration Team) does not have any access to user funds. Thus, even if the podium is hacked, users will not lose their funds.
“The mechanism used by Doorslag Wallet is more complicated, replicating the one used internally by Electrum, but it shares the same capability to generate spil many addresses spil the user requires,” explains Ethereum founder and developer Vitalik Buterin.
Armory is an open-source, python-based, wallet-management application for the Bitcoin network that offers:
- An Encrypted Wallet
- SecurePrint for all Backup Types
- Message Signing
- Decentralized Multi-Signature “Lockboxes”
- Cold Storage / Wallets
- Fragmented Backups.
Armory has bot considered the most secure bitcoin wallet since its launch te 2011 and is known spil the “pioneer” of cold storage and distributed multi-signature technology.
“Armory pioneered lightly managing offline Bitcoin wallets using a pc that never touches the Internet. Users are empowered with numerous encrypted Bitcoin wallets and voortdurend one-time ‘paper backups’,” stated Armory.
Bitcoin users and investors who hold ems of thousands of dollars te bitcoin are advised to store their funds te an lightly accessible cold storage. Armory guides users ter creating paper wallets or secure cold storage for their funds and broadcast it to the network to store te an online wallet.
“Plus, Armory employs many security practices so that even if someone physically stole your offline system then it still may take centuries for them to get through the advanced wallet encryption,” explained the Armory team.
2015 Spring Bitcoin Privacy Rating Report released by the Open Bitcoin Privacy Project rated Armory spil the 2nd most secure wallet ter the world behind DarkWallet, providing 54/100 spil the overall rating.
Mycelium is a mobile bitcoin wallet awarded the prestigious “Best Mobile App” award by Blockchain.informatie te 2014. Mycelium is ranked the third most secure bitcoin application and wallet toneel by the Open Bitcoin Privacy Project mainly for providing users with 100% control overheen their private keys, which never leave the device unless exported.
Mycelium mobile application offers numerous security and privacy-focused features to secure user funds. Thesis include:
- Encrypted PDF backup and restore of single key accounts
- Watch-only addresses &, private key invoer for secure cold-storage integration
- Trezor enabled – directly spend from trezor-secured accounts.
- Directly spend from paper wallets (single key, xPriv or master seed)
- Mycelium Entropy compatible Shamir-Secret-Shared 2-out-of-3 keys spending
- Deterministic signatures for Bitcoin transactions (RFC6979)
Poor and Unsecure Bitcoin Wallets
Bitcoin users or investors that own a large number of bitcoins are very advised to avoid bitcoin wallet platforms including Coinbase and Circle that have total or partial access to user funds.
This could be an exceptionally dangerous if the toneelpodium or the operators are targeted with a series of hacking attacks spil it may leave users’ private keys vulnerable to hackers.
For example, more than 1,500 bitcoins were stolen from numerous hot wallets te bitcoin exchange Bitfinex te May 2015.
At the time, Bitfinex announced that 99.5% of its users kept their bitcoin ter a multi-signature technology implemented bitcoin wallets. However, the remaining 0.5% of users, who did not implement any extra security measures were targeted by hackers ter a gegevens breach.
“Dear Customer albeit wij keep overheen 99.5% of users’ BTC deposits ter secure multisig wallets, the petite remaining amount te coins te our hot wallet are theoretically vulnerable to attack. Wij believe that our hot wallet keys might have bot compromised and ask that all of our customer cease depositing cryptocurrency to old deposits addresses. Wij are ter the process of creating a fresh hot wallet and will advise within the next few hours. Albeit this incident is unfortunate, its scale is puny and will be fully absorbed by the company,” announced Bitfinex.
For best practice, it is recommended to use HD wallets, implement the multi-signature technology and store funds te a cold wallet or paper wallets.