Don't put your bitcoin eggs in one basket

Wednesday 19 March 2014

We have all heard of the saying, right? Don’t put all your eggs in one basket. Well, that is a great thing to remember when Bitscan's tips on keeping bitcoin safetalking about bitcoin safety as well.

Believe it or not, many people own a safe at home, so to be safe, they keep all their money, jewelry and other valuables in this big, strong, expensive safe. Then a thief sneaks into the house while these folks are away on holiday, drills into the safe, and makes off like a bandit. Saddest part was the fact that these people placed their prized possessions in a safe, so they felt “safe.” But what this ultimately did was create a single focus area that all but yelled out, “Expensive stuff in here.”

You’d have to believe that if the contents of that safe were scattered in many drawers in the bedroom, a box under the bed and in a can in the closet, that the robber would probably have left the house with far few valuables than he did when he had access to a safe full of the best.

The same applies to bitcoin: if you spread out your bitcoin savings over multiple wallets in different locations, on a computer or better yet in different physical locations altogether, you'll be much better protected than with just a loaded single wallet. This way, if one is stolen, you will survive. This is a good habit to get into and also brings to mind the idea of sloppy wallets.

On my home computer, on my desktop, I have 3 or 4 “sloppy wallets” with anywhere from 0.0001btc to 0.001btc. I do this so that every day, I peek in on them and make sure that they are still there. The reason I do this is so that if ever, someone did gain access to my computer, the malware program or human hacker would not have time to check wallet contents, they would simply take the balances. If that were the case, I would at the very least know I have a bad program or a security hole that needs my immediate attention. At the same time, I might be out $1.00. That, I could handle for the reward of knowing that someone was in my computer and that I have a less than secure situation that needs addressing.

The other situation that can apply to the age old saying of “Don’t put all your eggs in one basket” is in regards to the amount of bitcoin you hold. A recent story told of an English gentleman who had lost his password to a bitcoin wallet and had over a half million pounds ($829,550 USD) in bitcoin in it. The story said that this man had no savings and nothing else to speak of to his name. He was desperate and looking for a Brute Force Attack tool but they are truly worthless in this case because he can’t remember any part of the password other than the length was over 15 digits. At this password length, and being random, the time for brute force to correctly guess the password would be somewhere in the billions of years.

Bitcoin is young and still largely unknown in the general population of any country, mysterious even to those who deal with them often, and of questionable legality and sustainability to everyone. So WHY did he have all his eggs in one basket? Many would advise that a portion of such bitcoin wealth should be put into other assets such as stocks, bonds, or gold.

Do you want to keep your entire life savings in this volatile currency? A shrewd investor rarely keeps all their wealth invested in one thing. Most have their money all over the place:  various banks, offshore accounts, private stashes of gold and other valuables in safes, with friends, or various real-estate and so on. The reason is because any company can go belly up tomorrow. A bank could go rogue, your safe stolen, or, without proper protection, your bitcoin wallet hacked.

Even though unlikely, these things can happen and if you have all your eggs in one basket, well one basket issue could send all your eggs to the frying pan.

So be safe, invest wisely and be smart. If you have an amount of bitcoin anywhere (online, home computer, USB disc drive etc) that is so much that if you lost it could cause you severe mental anguish, I suggest you better “diversify” your portfolio. Spread some around. This way if something goes wrong with any of those items, you don’t need to be asking for loans to buy yourself a rope for a noose.

Bitcoin is new and it is valuable and it is a great peer to peer payment system but it, like all other things in this world, is by no means perfect and by no means should it be depended upon 100% for your survival. By spreading your eggs, you are preparing for the worst, which is good, because rarely does the worst come to pass. Seems like the only time it does is when you’ve forgotten to prepare for it, and by then, it is much too late.

BE ALERT, BE ACCURATE, BE AWARE

Check out more articles on bitcoin safety


comments powered by Disqus