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Everything You Need to Use Bitcoin Safely, From Beginner to Expert

Everything You Need to Use Bitcoin Safely, From Beginner to Expert

This is a promoted article provided by SatoshiLabs.

To succeed, Bitcoin must be attractive and intuitive to all kinds of users. Making an ecosystem that serves everyone’s needs equally is a significant undertaking, but it’s made much easier through collaboration. There are four fundamental tiers of user that need to be defined if they are to be protected, each building on the foundations set by the one prior. It is these tiers which will help model the future of the ecosystem, constructed on the principles of security, usability and privacy.

Nowadays, Bitcoin has a lower threshold for entry. With some straightforward, basic onboarding to cryptocurrencies, anyone can take control of their money, without hidden conditions, and retain full ownership of it, indefinitely. This is a pivotal moment in society and there will be pushback. Decades of a speculative fiat economy has siphoned wealth away from communities with low financial literacy, and concentrated power in the hands of the wealthy. Basic financial skills are not part of school curricula, leading to generations of people trapped in a spiral of debt due to mismanaging their finances. Rather than continuing this trend of credit, loans and inflation, Bitcoin users are united in their pursuit of a more practical, auditable and accessible currency. 

Before we get started looking at the tiers of expertise that might apply to individual users, it should be stated that it doesn’t take a hacker to steal cryptocurrency. Theoretical models of attacks on Bitcoin or the SHA-256 encryption that secures it are interesting, but mostly irrelevant. The person who owns the keys to it is the single greatest attack vector. For this reason, it is important to be aware of what information you give away when talking to people on the internet or in real life. Operations security, or “OpSec,” is the term used to describe a conscious approach to regulating what information you share with others, and will help make you less of a target. 

In the next section, we explore how sharing your seed means losing your funds, but even revealing a word or two of it makes a brute force attack many times easier. If you happen to have memorized your seed phrase, or even just a bit of it, make sure you don’t ever raise it in conversation. This may seem obvious, but good OpSec extends further: don’t even mention owning cryptocurrency. As soon as this kind of information is revealed, it raises more questions, like how much you own, when you bought it and how you store it, all of which can be leveraged against you. 

Basic Competence Makes A Bitcoiner

It doesn’t take much to look after your bitcoin. Protecting coins for the long term is a matter of following best practices, and becoming comfortable adhering to them. There are lots of ways to improve privacy and make use of advanced functions, but the only critical step is to know how to look after your recovery seed. This is the main reason Trezor exists and why we discounted our products for the whole month of November, to make sure newcomers are equipped to enjoy crypto safely. 

Modern security is based on probability. The recovery seeds used to generate Bitcoin keys are considered secure because the chance of generating one at random is almost as unlikely as picking one particular atom from the whole universe. The only way to lose your bitcoin is through mishandling or fraud, both of which can be avoided through proper education. As long as users are correctly onboarded at the start, they will have all the knowledge they need to HODL as long as they see fit. 

Education is key to using Bitcoin safely but, to get through to everyone, it must be made easy and fit a universal mantra. New users need hand-holding and a simple proposition: they need to know the basics of transactions and how to securely backup their wallet. All else can come later, though it needn’t have to. 

Security fundamentals: 

  1. Only ever keep physical copies of your seed. By making digital copies, you are replicating a number that has never existed before on a machine that could be compromised, defeating the whole point of encryption. 
  2. Not your keys; not your coins. Whenever you keep your crypto in an exchange wallet, it is at high risk of being lost forever. As long as your keys (derived from your seed) are in a wallet you do not control, your coins can be taken at any time, leaving you with no recourse. 
  3. Transactions are final. If you give your crypto to someone else, it is not your crypto anymore. There is no way to reverse a transaction, so many scammers will try to lure in novice Bitcoiners by posing as a celebrity and offering to double any funds they receive, only to keep them.  

For a vast majority of the individuals who come to Bitcoin, this is all that matters. For others, this initiation is a point from which they can continue their education alone, learning about enhanced privacy, running nodes or even going so far as to develop their own blockchains. 

The hardware and software that is used for Bitcoin is also intrinsically safe. Trezor hardware wallets store your seed safely by isolating it from network communications, with strict rules as to when it can be used. Bitcoin itself is also, at present, uncrackable. The cost of brute-forcing a private key without knowing at least a portion of it would cost more money than has ever existed in electrical costs alone. While quantum computers will one day change this, it will take decades and development of quantum-resistant cryptography is ongoing.

Building On Fundamentals

Once someone has this basic security framework in place, more interesting functions, features and side effects can come into play. If tier one of being a Bitcoiner is all about security, namely securing your seed words, tier two is about privacy. To become more competent, it is important to understand that, while a bitcoin address is an anonymous sequence of characters, any data you associate with that address can be used to identify you as the holder of those coins. 

Anyone who uses the Bitcoin network can see every address and the exact balance they are holding, as well as where funds are transferred. This is essential to how the network operates, so it is up to the user to limit the amount of data they share. This is generally good practice anywhere on the internet, but especially important to Bitcoin. Without knowing who owns the keys to an address, the chance of a social engineering attack is mitigated.

Few people can buy bitcoin without having to provide personally identifiable information. This means that, from the moment you pay for them, your coins are linkable to you, which is undesirable for many reasons. To restore privacy, a number of tools have been developed, notably mixers and network masks. Mixers such as CoinJoin, which will be part of Trezor Suite from 2021, take coins from different sources, mix them together in one transaction, and send outputs back in a way that means they are not directly traceable to the input. Network masks, such as the Tor Project, make it almost impossible to see your source IP address, meaning no transaction can be traced back to your computer. 

Another feature that should be explored at this level is Shamir backup. Once you have learned how to look after a seed, the most important part of qualifying as a Bitcoin user, you can consider using a seed that has been split into shares, known as a Shamir backup. This is a unique standard created by SatoshiLabs that creates multiple lists of seed words, which must be combined to generate the wallet. While it introduces extra complexity, it can be tailored to the individual to make sure that losing one or more seeds will not lock them out from their funds. 

In the past, the step from tier one to two was formidable. The tools described above have since been integrated into wallet interfaces like Trezor Suite in a way that anyone can use them, making it easy for even non-technical users to disconnect their identities and improve their backups. This progress owes much thanks to Bitcoin and Trezor being open-source technologies, letting experts develop intuitive ways for amateurs to use Bitcoin to its full potential. 

Take Control Of Every Little Detail

Where tier one and two are used to provide advanced protection with little technical know-how, users who explore categories three and four are exposed to mechanisms that can cause problems if used incorrectly. For this reason, it is recommended that they advance incrementally and perform their own research before making use of the advanced tools provided by Trezor. 

See Also

Insured custody provider Knox and Canadian cryptocurrency exchange Bitbuy have partnered to offer a third-party storage solution for bitcoin on an exchange.

At tier three, a user will already have a comfortable degree of privacy and security from the previous tiers. Tools such as locktime and running and connecting to one’s own node involve less intuitive steps, which leaves room for user error. The benefits of both are simply greater privacy, because even less data is shared. Connecting to a node that you operate lets you be sure that non-transaction data is never passed to a third party, while locktime achieves a similar result by letting you sign a transaction on one device and then broadcast it from a different network. 

The last and most advanced tier, number four, is a domain where usability drops off in some areas, but privacy and security are most leveraged. The tools offered by Trezor that will suit this level of user include the ability to tweak sensitive parameters such as return addresses, to use multisignature setups and overall take control of every little detail.

The more an individual learns about Bitcoin, the more likely they are to pursue greater privacy. Trezor has created an ecosystem that keeps users safe from day one, letting them buy directly from their wallet, hold with peace of mind and scrub any identifying information that might link them to the coins. From there, they are free to educate themselves without risk, letting everyone progress to the point where even tier four becomes intuitive, at their own pace. 

Bitcoin Serves Everyone Equally, Based On Their Needs

Trezor hardware wallets let users enter at tier one, fully protected from network attacks and malware and shielded from making easy mistakes like succumbing to phishing attacks. The diversity Bitcoin has started to see means users must be allowed to learn in a safe environment as they build up the knowledge associated with tiers two and three, if they find reasons to do so. No good hardware wallet manufacturer will hold on to your personal data but, if you end up with data tied to your coins through other means, you will have access to intuitive privacy tools such as CoinJoin, which will obscure the link, and Tor, which will mask your internet connections.

Eventually, these users can progress even further, to tier three, where they might need to control things like locktime, node routing and more. All of this is made possible and intuitive in the Trezor Suite interface. The fourth tier of users have access to even more granular detail, leveraged through the trezorctl command-line interface. Reaching tier four might be straightforward for those with technical backgrounds, such as developers, but it is not necessary to have this advanced knowledge to use Bitcoin. All anyone needs is to sit comfortably in the first tier, which can be done simply by using a hardware wallet. All else can be explored at their leisure. 

Becoming Part Of The Bitcoin Community

Open-source technology lets us band together to solve problems without assessing them for profitability alone. Satoshi Nakamoto gave Bitcoin freely to the world, and now sits on billions of dollars worth of the currency without showing any intention to cash out. SatoshiLabs invented the first hardware wallet, the Trezor Model One, to solve a widespread community issue: how to safely store highly-sensitive private keys. This even caught the attention of Vitalik Buterin, who co-founded Bitcoin Magazine before going on to create Ethereum. Continuous development has seen the company pool profits back into development, working with other respectable community builders to create an ecosystem that makes adoption easier. 

Trezor Suite, the latest software interface for Trezor hardware wallets, is the result of years of benevolent, cooperative development by some of the most admired names in the security industry, such as the Tor Project. To make sure no one is able to monopolize any part of Bitcoin, open-source development is crucial. This even extends beyond Bitcoin, where SatoshiLabs’ new company Tropic Square, is taking on the world of integrated circuits, by designing a truly open security chip, which lets anyone verify that it is, in fact, secure, something other wallet manufacturers cannot prove.

This dedication to open source ensures that anyone joining the crypto community will have access to a provably safe environment from which to learn more about the technology, or simply start taking advantage of the most accessible, dependable currency in history. For more experienced users, continuous focus on making tools more robust and intuitive is producing a suite of streamlined features that let you use your money your way, without interference. Once you’ve progressed through all of these tiers, and perhaps get an itch for exploring development, get in touch with SatoshiLabs and let’s build a community unlike any before.

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