Thursday, March 1, 2018

Save your Crypto Wallet with Boxcryptor

The end of 2017 and the first weeks of 2018 have witnessed what may be described as a great "Bitcoin Bull Run". Crypto currencies, especially Bitcoin experienced a dramatic, bubble-like explosion of value, with Bitcoin increasing its value 20-fold, in 2017. As a result of this dramatic wealth generation, assignable to the crypto currency Bitcoin, millions of people were jumping onto the bandwagon, buying and trading Bitcoin at one of the large crypto currency exchange platforms (e.g. Coinbase – more than 12m customers). Whether the evaluation of crypto currencies is justifiable, whether the price for Bitcoin is going to rise even further, whether big investors are going to participate in this market, or whether all of this was just a 2017 bubble, going to burst sooner or later will be determined by the market and the market only. This article is, most certainly no assessment as to which degree you should invest or devest in the crypto currency market. But the decision of whether or not to invest money into crypto currencies, is crucially to be paired with the decisions of how to store your crypto currencies and how to protect the coins and tokens.

Possibilities to Store Coins & Tokes

We would like to provide you with an overview of the possibilities to store your crypto currency and inform you about the pros and cons of the various options.

Storing Directly at an Exchange-/ Hot-Wallet

Exchange wallets are necessary in order to trade crypto coins or tokens, whether it is coin exchanged for another coin or coin/token exchanged for USD. Hence, in order to trade crypto currencies, there is no way around using an exchange wallet. When choosing an exchange wallet, a crucial security feature should be Two-Factor-Authentication (2FA). This increases security when a log-in to any account is attempted.

Pros

Exchange-/ Hot wallets are very easy to use.

No transaction fees for exchanging values. (There are exchange fees, but these are lower than the average transaction fees, in most cases.)

Possibility to store multiple different coins/tokens in one wallet with an accumulated overview.

Cons

There is no way to access a private key

Whenever the media is reporting about the vulnerability of crypto currencies towards hackers, they are referring to exchange wallets. The most prominent and probably biggest case of an exchange wallet provider being hacked, is Mt. Gox. Once the largest marketplace for Bitcoin, the exchange wallet provider had to file for bankruptcy, following the theft of 650,000 bitcoins, by hackers.

Exchange wallets are subject to possible scamming attacks, for example via phishing.

Most exchange wallets face issues regarding security concerning private key management.

Light Wallet (“Software Wallet”)

Light wallets are closest to be an “official” wallet. This is because the light wallets being developed by the foundations that are responsible for a certain crypto currency (there is no official foundation responsible for a crypto currency, due to the crypto currencies decentralized nature), companies and other developers. Light wallet means, you do not have to synchronize the complete Blockchain on your local device. Therefore, there are light wallets that can be used as an app, or web application (e.g. myetherwallet.com). With regard to light wallet apps it is advisable to ensure, the app is open source based. This increases transparency, which is crucial with regard to crypto currencies.

Pros

No local synchronization needed

Many light wallets offer different coins and tokens

Easy to use

Different applications available, with different approaches on UI / usability

Available for mobile devices

Many light wallets offer the option to create a paper wallet (printing the private key on a piece of paper).

Cons

Light wallets have been the target of scammers in the past. Therefore, it is crucial for users to inform themselves about possible security issues, before deciding on a light wallet.

Some light wallets do not offer the option of exporting the private key.

Light wallets do not offer any protection in case the hardware is compromised, by malicious software.

Hardware Wallet

The hardware wallet is the option of choice, for most crypto gurus, for hardware wallets being the least exposed to external threads. The private key of the hardware wallet is stored externally, on a device (like a USB-flash-drive or sometimes a fairly big external storage drive).

Pros

Highest security against external hacks.

Mostly very convenient and easy to use.

Offline storage of private key (additional security-increase)

Great for "hodling" (hodling is a term widely used, to describe the accumulation of coins and tokens, in the crypto scene) of a crypto currency.

Cons

Usually hardware wallets come with costs.

Support for all altcoins is not given. Therefore, hardware wallets are mostly eligible for storing Bitcoin and Ethereum.

Hardware wallets are exposed to the risk of being damaged or lost, due to the private key being saved offline. The key might be recovered, using a passphrase, but the inconvenience and costs of replacing the external device are not preventable, in case of loss or damage.

How Can Boxcryptor Help Securing Your Crypto Currencies and Private Key?

While a paper wallet (i.e. the private key printed out on a piece of paper) is great for security, this method carries some major flaws: Firstly, a paper wallet may appear to be very impractical. Secondly, the risk of losing or damaging the paper, with the key printed on it, is non-neglectable. And thirdly, one might encounter a situation where there is a need to conduct a transfer but the paper, containing the key, is out of reach. Hence, deciding on a paper wallet might result in a dilemma between security and convenience. Storing the private key in a file on a local machine or in the cloud is simultaneously a very dangerous solution. While this option might resolve the convenience issues, it exposes the wallet to a serious thread of being hacked, if the local machine or the cloud gets hacked.

The solution to solving the security-convenience dilemma?

Using Boxcryptor to save the private key in the cloud – encrypted. The private key is encrypted on your local machine, before it is synchronized with the cloud. By using end-to-end-encryption, Boxcryptor ensures the file, containing the private key, can only be opened on your own device, with your Boxcryptor account. This ensures both, accessibility and security of your private key. Furthermore, does Boxcryptor offer 2FA to its customers, for increased security. Boxcryptor will not only secure the private key of your crypto wallet, but all other files that contain sensitive or personal information. Whether you want to secure your bank account details, or the pictures of your last holiday, everything of value is protected by the combination of RSA- and AES-256-encryption, while Boxcryptor uses a zero-knowledge approach. This ensures increased security and very convenient accessibility of your files and your crypto wallet.

Our Recommendation for a Secure Crypto Wallet

We recommend choosing a wallet by a trusted provider, like myetherwallet.com or other “official” providers/developers, with an option to manage your own private key and storing the key on a cloud storage provider, encrypted via Boxcryptor.