3. How to Protect Your Litecoin Wallet

 

In the last post, we talked about the

Pros and Cons of each type of wallet.

This article will go into detail about the different ways to secure them. But first, let’s talk about the different ways someone could steal your Litecoins because we can better prepare ourselves against attack if we know where it’s coming from.

The Different Ways to Steal Your Litecoins

  1. Keylogging- This is when you inadvertently download a software via email or website that allows a hacker to record everything you type. They steal your passwords this way.
  2. Remote Access Control- This is when you inadvertently download a software via email or website that allows the hacker remote access to your computer. This allows them to look at your emails and automatically send LTC if they gain access to your wallet.
  3. Social Engineering- They get you to give away important info or passwords via e-mail, fake websites, or phone calls and use that information to access your accounts.
  4. Brute Force- They make educated guesses based on your personal life that they’ve researched and begin throwing randomly generated passwords until they gain access to your account.
  5. They steal the private key to your address. If they do this, they can easily import or sweep your address into a wallet client and take your Litecoins.

If you haven’t noticed by now, all the points of attack come from being connected to the internet. This is why it is so important to turn our hot wallets into cold wallets.

What Are Hot And Cold of Wallets?

  1. Hot Wallet: These wallets are connected to the internet.
  2. Cold Wallet: These wallets are not connected to the internet.

Between the two, the safest wallet is the cold wallet because it isn’t connected to the internet. This prevents hackers from gaining access to it. You can also add another layer of protection through “encryption” by locking your wallet up with a password. This is an option that is available in some, but not all wallets.

The Different Wallets and How To Secure Them

Here are my suggestions on how to secure your wallets through the various wallet clients mentioned in my previous post:

A) Online Exchanges

There is no way to turn these wallets into cold ones because only the exchange has control over your private keys. Make sure you have different passwords and emails for different exchanges. Also, make sure to only use exchanges that authorize Two-Factor Authentification (2FA). There are two apps that I’d recommend to do this: Authy and Google Authenticator. If you have Fido authentication, then even better.

You can easily download Authy and Google Authenticator onto your phone. These apps then create and cycle through randomly generated #’s which you must input to access your online account. This creates an extra layer of security so that if your account gets hacked, you won’t lose your coins because the person must also know the 2FA code.

I highly recommend only using online exchanges for a short period of time. The reason is that there is no guarantee that these exchanges will be available when you need them to be. For example, popular exchanges such as GDAX or Poloniex have been known to occasionally be out of service either due to a DDOS attack or their servers being overwhelmed. Also, the F.B.I. shut out tens of thousands of customers from their cryptocurrencies when they seized BTC-E on July 28, 2017. When these things happen, there’s very little you can do to get your coins back. So use the exchanges to make your trades and then get off.

B) Website Wallets

You can’t turn website wallets into a cold wallet because they’re hosted online. Even though these website wallets will often require passwords to create an account to access your LTC, there’s not much else you can do to add security. However, some web wallets are starting to require 2FA as well

C) Desktop Wallets (Recommended Option for Newcomers)

You can turn Electrum LTC into a cold wallet by following these directions:

  1. Download and move Electrum onto a thumb drive.
  2. Back up your wallet by writing down your seed keys. Keep it safe and don’t show it to anyone else. You’ll need this if you ever have to recover your coins.
  3. Encrypt your wallet client so that the only way to access to your LTC is with your password.
  4. Unplug your thumbdrive from your computer.
  5. You have now turned your Electrum LTC wallet into a “cold wallet.”
  6. For detailed instructions, click this guide here.

If you want to use Litecoin Core, repeat the steps above except use an external hard drive (because it takes a lot of space) and back up your wallet with the .dat file instead. Make sure you do this after you encrypt it, or else you’ll have to back it up again.

In my opinion, this is just as safe as paper wallets as long as your thumb drive or hard drive doesn’t get corrupted.

D) Hardware Wallets

These have their own security measures, they keep your private keys isolated, and they require you to create a unique pin. Hardware wallets also fit into the “Cold Wallet” category because they are only connected to the internet when they are plugged into your computer. You can read more about the advantages of Hardware Wallets in Chapter 6.

E) Paper Wallets

These contain both your public and private keys and are printed on a piece of paper. You can encrypt your address before printing them for the most security. If you don’t, anyone can take your paper wallet, scan the QR code, and spend it. Some people choose to put the paper wallets in the bank or a home safe.  Learn how to make them here.

The Three Ways to Recover Your Litecoins

Mishaps are unavoidable. People can forget passwords, hard drives can become corrupted, and files can be accidentally deleted. Therefore it’s important to understand three different ways you can recover access to your address should you lose your wallet.

Importing, .dat File, and Seed Keys

  1. Importing/Sweeping your address- Write down your address, your private key, and store it in a place you’ll remember. Having the address and the private key will allow you to recover your LTC if you accidentally delete your wallet. You can do this by “importing” or “sweeping” your address, however only some wallets offer this service. Also, this is a double edged sword. If someone knows your private key, they can take your LTC from you. This is why you should NEVER share your private key with anyone! If you do, you can kiss your LTC good-bye.
  2. Backup “.dat” file- Many wallets offer the option for people to back up their wallets. What this does is it creates a “.dat” file with your public keys and private keys. If you delete your wallet, you can simply re-download it again and place this .dat file into the “applications” folder and your LTC should reappear. This is a bit more complicated but you can find instructions for this online. Also, the correct amount of LTC won’t appear in your wallet until you are fully sync’d.
  3. Seed Keys- Some wallets, like Electrum LTC, allow you to restore your wallet through Seed Keys. Seed keys allow Electrum LTC to retrieve the private keys to recreate your address. When you first open up Electrum, it’ll give you a sequence of words. It is IMPERATIVE that you write down the exact words IN ORDER. If you don’t, then you won’t be able to recover your LTC. So write this down and don’t share it with anyone. Keep it in a safe place.

Alright, that’s all folks! Click here if you want a better understanding of how wallets work in general. And here if you want to learn how to buy some LTC.

Recommended Reading

On the topic of security, Pay the Devil in Bitcoin by Jake Adelstein gives you a fascinating look into the depth of corruption in the infamous Mt.Gox scandal. Another reason why you shouldn’t trust exchanges with your cryptocurrencies for a long period of time.


Remember to share with your friends and donate below! Until next time, onwards and upwards. 😁


Discussion Questions

  1. Which wallet client will you choose?
  2. How will you back it up?
  3. How will you secure it from hackers?

 

L.S.C. Donation Addresses:

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BTC: 3HFCMjr6xQKSfmU7wCPzrZJVvgwrdf7Qzd (Segwit address. Legacy and Segwit chains accepted)