What Canada’s $190 Million Bitcoin Loss Teaches Us About Bitcoin Security

While hackers have managed to bypass security to unsecured or auto-completed Bitcoin wallets and steal millions from unsuspecting crypto noobs, QuadrigaCX is the perfect example of an impenetrable vault. Founder and CEO Gerald Cotton passed away, and the secure codes for the Bitcoin wallets went with him. As the largest Bitcoin exchange in Canada, this was not only a devastating loss to the family and dependents, but also those who had funds tied up in Bitcoin with the platform. While Gerald’s case is the extreme version of passcode security, it poses an important question: how do you keep your Bitcoin wallet passcode safe? 

Cold Storage vs Hot Storage Wallet 

For those who are wondering why investors no longer had access to their Bitcoins on the QuadrigaCX platform, the answer is cold storage. A cold storage wallet is kept completely offline and is impenetrable by hackers. While safe, it can pose a problem to investors if all of them decide to withdraw their funds at once. For this reason, many exchanges keep funds in a hot storage wallet to facilitate liquidity, and surplus funds are kept in cold storage wallets. Investors who want to keep their Bitcoin safe should consider a cold storage wallet; however, they should have their secure codes stored in safekeeping. 

Additional Encryption And Password Security 

One of the reasons investors seem to have a false sense of security when it comes to their Bitcoin wallets is because of the incorruptible nature of Blockchain technology. This means that no one can manipulate or disrupt the exchanges. This does not mean that the wallets can’t be hacked. Users who have low-security settings and choose default passwords are high risk. According to DSC, it’s important to enlist the help of security specialists that handle the various aspects of security. This includes network and infrastructure, which can save the heartache of unauthorized access. It also means keeping important passcodes offline and ensuring that there is additional encryption on the network to slow hackers down. 

Only Deal With Reputable Exchanges 

While QaudrigaCX was a reputable exchange, it did not prevent its investors from losing their money. With this in mind, imagine the damage that can happen when dealing with an exchange that doesn’t follow the rules? Apart from losing all your capital, there is also the chance that these sites embark on phishing expeditions and use your information to commit fraud and further theft. While some exchanges might not actively engage in bad conduct, they might not be equipped to handle the influx of investors. A good platform will have the means in place to reimburse investors if a hack occurs, meet the regulatory requirements, and safeguard customer information. It also means that there is enough liquidity to keep the business afloat even if the majority of investors decide to withdraw. 

Bitcoin theft can be prevented easily. When you simply add in extra layers of security hacking, bots and unscrupulous exchanges will be hard-pressed to get their hands on your coins.