$1.2M Hack Shows Why You Should Never Store Bitcoins on the Internet

Here’s your digital-currency lesson of the day, courtesy of a guy who calls himself TradeFortress: “I don’t recommend storing any bitcoins accessible on computers connected to the internet.”

That may sound like a paradox. Bitcoin is the world’s most popular digital currency, and it’s controlled by a vast collection of computers spread across the internet. But TradeFortress knows what he’s talking about. He’s the founder of a inputs.io, a company that used to store bitcoins in digital wallets for people across the globe. The site was just hacked, with the bandits making off with more than a million dollars’ worth of bitcoins.

Yes, bitcoins are digital. And, yes, bitcoin transactions necessarily happen on the internet. But you can store bitcoins offline, and that’s what the most careful of investors will do. A collection of bitcoins is essentially a private cryptograph key you can use to send money to someone else, and though you can store that key in an online digital wallet, you can also store it on an offline computer — and even on a physical item here in the real world, writing it on a piece of paper or engraving it on a ring. That’s why your money can’t be hacked.