Private key’s disadvantage? The narrator who luckily won a Bitcoin draw and the less-lucky ending

TL;DR

• A recent conference hid Bitcoin wallets under the seats. Three lucky attendees won 0.1 BTC each.
• The Bitcoin was stolen from two of the three wallets, might be by someone involved in the ‘supply chain’ that made out the wallets
• As a conclusion, you must secure your private keys, and in case the wallet is not secured – transfer the funds to a 100% secure wallet.

As we try to explain Bitcoin and how it is going to change the face of the global economy, the buzz around Blockchain technology continues to gather momentum and many conferences are held around the world. The case that we will present to you happened at a conference held in Tel Aviv last week and included a valuable lesson for holders of Bitcoin and other cryptos.

Our story began on a sunny day when many of the local Blockchain industry made their way to a routine Blockchain event. While delivering the opening remarks, the conference moderator announced that an envelope was affixed to each of the participants’ chairs, containing a private key for a digital paper wallet.

Three of these wallets were loaded with 0.1 bitcoin, about $650 for the lucky winners. Among the hundreds of participants was Dael Shalev, author of the bestseller “Bitcoin and Your Economic Future.” To Dael’s surprise and delight, he discovered that the public address that appeared on his fancy paper wallet did indeed contain 0.1 BTC.

Paper wallets are considered very safe, so the hero of our story (and our book) was happy and continued his day thinking that he would pass his loot to his hardware wallet as soon as he got home. But then the story took a less favorable turn when the money disappeared from the paper wallet.

In retrospect, it turned out that a few minutes after the wallet distribution someone transferred the Bitcoin from the paper wallet, and the joy of winning was replaced by sorrow. It seems that Dael was not the only one holding a copy of the private key printed on his paper wallet. As we know, whoever owns the private key holds the Bitcoin. Dael will probably have to finance his next vacation from another source.

But he was not alone. There were three wallets loaded with Bitcoin and three happy winners. An inspection conducted by the event organizers revealed that another wallet had been emptied of its contents about half an hour later, suggesting that someone in the wallet ‘supply chain’ had access to the private addresses and had scanned them until they found the wallets with the Bitcoin.

All that was required was a copy of the wallets and a smartphone. The rationale is simple: go over each address, one after the other. Although the Bitcoin from the third wallet was not stolen, the organizers’ embarrassment remained, for their intentions were good.

Conclusion: Steps for security first

So, if you get a paper wallet as a wedding gift, work payment, lottery, debt refund from a friend or any other grant, the assumption must be that the wallet is insecure or hacked. Even if the source is honest and decent. They are only a person, and someone may have cheated them without their knowledge and photographed or obtained a copy a different way. Whether it’s the printing press, the delivery person or anyone else exposed to the private key they can effortlessly transfer the contents of the wallet to themselves.

Don’t be lazy. If you receive a paper wallet, immediately forward it to a local wallet where you are the only person who controls its private key. Do you have a paper wallet that you have made yourself and is safe in its durability?

Remember that a paper wallet is only good for as long as it remains completely confidential. If you have a maid, or friends of the children, or visitors or anyone other than you, and they see the private key of the paper wallet, even if only for a moment, the money could be lost.

It is complicated to produce a paper wallet that is safe from being hacked. There may be spyware on the computer, in the printer, or even on the motherboard chip.

In conclusion, in the world of cryptocurrencies, freedom comes with responsibility. Learn how to secure your Bitcoin best. And remember “Not your private key – Not your Bitcoin.”