Just like with other currencies, security is a really important part of bitcoin because without security, your money could easily get stolen.
Bitcoin developers have built certain features into the network and Bitcoin Core bitcoin wallets from the very beginning. One of these features is a possibility to protect your wallet with a passphrase.
Wallets other than Bitcoin Core use Bitcoin Core as a foundation, yet they may offer a different interface and other security features.
Having a passphrase allows you to lock your coins. This is important because even if someone obtains the device with your wallet on it, they would not be able to spend the funds unless they also know the passphrase.
The sensitive information about your wallet is in the file wallet.dat. By default, this file has no encryption. This means that the file has no protection if the only action you take is installing Bitcoin Core software on your computer or mobile device. In this case, if someone gains access to the device, they will also gain access to your wallet and your money.
For this reason, you want to make sure that you protect your wallet with a passphrase. You can also encrypt wallet.dat using third-party encryption tools. Most of these tools are widely available and free to use. If you do encrypt your wallet with a passphrase, you will need to enter it every time you want to participate in a transaction or get detailed information about your wallet. When you encrypt a wallet and don’t enter a passphrase, you will be able to check the balance and see incoming transactions, but you will not see details about any other information.
Tips about creating a strong password
It is best if you protect your bitcoin client with a password that includes numbers, lowercase and uppercase letters and symbols such as # and @. The longer your password, the harder it will be to crack. For this reason, you should get a password that has at least 12 characters.
The password should seem random to anyone else but make sense to you. You need to avoid full words, names, phrases, and sentences from books. You will need to enter your password manually every time you want to fully use your bitcoin wallet.
Because technology is evolving very quickly, hackers today use incredibly efficient tools and software to try and figure out a password. They use regular English dictionaries and dictionaries for names. They also use dictionaries with foreign words, They will try combinations of digits and words with common letter replacements such as symbol “$” instead of letter “S,” “1” for “L” and so on. This strategy can break about 60% of passwords.
Recent breaches of companies like Yahoo and Adobe show that most people use really insecure passwords. The list of most common passwords includes “123456”, “password”, “111111”, “iloveyou” and other extremely simple combinations of letters and digits. If you are curious whether your password is secure or not, you can run it through a website such as http://howsecureismypassword.net .
One of the best ways for coming up with a secure password is to take a long sentence that is meaningful to you and turn it into a long string of symbols. For example, “My first email in 1997 when I was making $50,000 a year was @ yahoo and contained digits 23” could become “Mfei97WiWm$5ayw@Yacd23”
Wallets on mobile devices
Encrypting a mobile bitcoin wallet is a bit different from doing encrypting a Bitcoin Core client or other desktop bitcoin software.
Mobile devices keep your personal information in the same wallet.dat file. They typically store the file on the device itself and offer a PIN-code protection. While this protection is less secure than passphrase protection, it does provide sufficient security for most users. At the same time, additional encryption and protection are available for mobile wallets, too. Look for solutions from companies such as 7Zip, TrueCrypt and Axcrypt.