Bitcoin, Bank or Cash – Which to Choose?

When people think about cash, they often view it as a physical good which is theirs while it is in their possession and lost once they no longer have it.  It is a very straightforward and easy to comprehend form of money.  The primary issue with cash is that there is no back up if something goes wrong.  If you leave your $10 bill on a table and someone takes it, there is no recourse or means of getting it back.  Of course, this does not mean that you have no control over your money.

A bank account offers you a certain guarantee when it comes to the protection of your money.  If your bank card or information is stolen, you will have federal guarantees t get a refund for any of the fraudulent charges against your account.  Of course, this does not mean that you need to give the bank all of your money and that they will not lose the money or go under.  While there are federal guarantees regarding the loss of money from a bank, you will have to follow certain requirements.  The loss of money should also not be from some systematic failure.

Cash can easily be stolen, especially if you are carrying it or using it to purchase goods or services. Additionally, it can also be counterfeited, while Bitcoin can’t. US banknotes can be examined by hand for counterfeiting, but unless you’ve a scanner or counterfeiting pen you don’t know. However, Bitcoin doesn’t have these issues.

Bitcoin works in a similar manner to cash, but you will have a public and private key for the currency.  The public key is like a bank account number that money is sent to while the private key is a password that allows access to the bitcoins which have been sent to your public key.  If someone is able to get your private key, they will be able to send your bitcoin to a different public key.

Anyone is able to generate a public key and robbery of your bitcoin will be an anonymous robbery.  There is also no government backup when it comes to this theft so once the money is gone, you cannot reclaim it.  The security of your bitcoin will be up to you, much like the security of your cash.

However, it is important to note that unlike cash, your bitcoin keys are kept on your computer which exposes you to more potential theft.  This is why the bitcoin community has 2 pieces of advice for anyone working with the currency.  The first is to constantly move your bitcoin to different keys and to not keep all of your bitcoin in a single private key.  The idea is that when you use your funds, you should transfer what you need to a public key and then transfer again from this key while keeping the rest of your bitcoin in a different private key.

The second piece of advice is to use long-term storage to keep your private key offline.  In this case, you will have a private key that never comes close to the internet so there is no chance for digital thieves to get it.  This can be an interesting challenge for people depending on their level of theft paranoia.  The simplest approach to this will be to use a paper wallet service on incognito, take the computer offline, use the website to create your key pairs, print the key information using a printer that is not connected to the internet, quit the browser and then connect to the internet again.  Here are some good tips from Coindesk.

However, if you want to guarantee that there is no chance your private key will ever get to the internet is by using a Raspberry Pi.  You will need a Raspberry Pi that only offers a physical connection to the internet, update the software then disconnect it from the internet.  Before disconnecting from the internet, you will need to update the Raspberry Pi with everything you need to print.  After disconnection, you need to generate your private key, print the key then turn the Raspberry Pi off and destroy the SD card you have used to run your Pi on.

You should never connect your Pi to the internet after you have started the process of generating your private key.  This will ensure that it never comes into contact with the internet.  Destroying the SD card is also important and should be done immediately to guarantee that you will never accidentally leave your private key somewhere someone else could find it or expose it to the internet.

Once you have your printed key, you can secure it further with tamper-resistant stickers.  These stickers ensure that no-one is able to peek at your private code.  It is recommended that you make a few copies and distribute them to family and close friends to protect you against accidental destruction of the copy you have.

The ability that you have of creating a single piece of paper which represents any amount of money is one of the ways that bitcoin differs from cash.  Another difference is the ability to make physical copies of the key for safe keeping which is also something that you are unable to do with cash.

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  • Unfortunately, Bitcoin is mutable. If a majority of the miners and full node users decide to create a hard fork then it’s no longer “Bitcoin”, but something else forked out of Bitcoin. Of course, I will take BTC over USD or Bank accounts any day…