A wallet backup is a copy of your Bitcoin wallet (or your wallet's private keys) that you can use to recover your bitcoin if something bad happens to your original wallet file. "Something bad" can mean anything from someone stealing your computer, a hard disk failure or some other serious computer problem.
No, MultiBit Classic does this automatically in the background using special files that are described in detail in the File descriptions article. These files can often be used to recover your wallet automatically should a problem occur.
MultiBit Classic will place the backup files in a sub-directory created in the same directory as wherever you created the wallet.
The backups are encrypted the same as the original wallet.
Backups only work if you have access to them. If you rely on the default location for wallet backups then you are at risk if your computer is stolen or damaged beyond recovery.
A good backup is a copy of your wallet file that you store off your computer. That way if something happens to your computer you still have access to the backups. IT professionals have a saying: "Data doesn't exist unless it is in two separate places".
At the very least you should have the following in place:
You must use encrypted wallets if you are storing them off your computer.
You can restore from a backup as follows:
You can restore from a private key export using these instructions.
Please refer to the moving a wallet article.
Yes. You should try MultiBit HD so that you can take advantage of greatly improved backups and other features.
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