Bitcoin has undoubtedly grabbed eyeballs for its unprecedented growth- a whooping 10 times since the start of 2017. The contention over the currency being in a bubble continues to have resounding nods from all directions.
Something, which is crystal clear is that those with a big stake with Bitcoin need to be safer than ever before with their digital investment. It is crucial to take an extra step to secure your funds, as Bitcoin wallets have been hacked earlier.
The easiest method for storing Bitcoins is by using an online wallet, which allows quick transfer of money in and out of the wallet or turn Bitcoins into alternative cryptocurrencies such as Ethereum, Monero, Litecoin, and others. The safest option for storing Bitcoins is “cold storage” which stores Bitcoins offline away from any Internet access.
Here’s how you can set up cold storage for your Bitcoin wallet:
- Paper Wallet
To store Bitcoins offline all you need is a paper and a printer. Yes, that’s true. A website such as Bitcoin.com or Bitaddress.org is also needed to create an offline Bitcoin address. These steps should be followed to create a Bitcoin paper wallet-:
- Open Bitcoin.com paper wallet or the Bitaddress.org page.
- Save the page locally to your computer as an HTML file.
- Now, close the page and disconnect your computer from the Internet.
- Open the saved version of Bitcoin.com paper wallet or Bitadress.org
- Create a new Bitcoin address, by following the instructions
- Once the pair of keys and QR codes have been generated, print the page. Ensure the printer is not connected to the Internet for added security.
- The new public address/QR code can be used to transfer Bitcoins from another wallet.
- Bitcoins can now be transferred from another wallet using new public address/QR code.
The printed page is the most valuable piece of document for your Bitcoin investment. The page can be laminated for protection and multiple versions of it can be created for safekeeping.
While taking your computer and printer offline can be a significant security measure, it’s not as safe as using a clean operating system. BitKey is a free bootable Linux distro that you can write to a USB drive or CD-ROM. Moreover, it can run live from computer’s memory (RAM) so you can eject the drive/ disc once it’s running.
BitKey comes pre-installed with multiple software options like Electrum Bitcoin client, WarpWallet (more on that later), and Bitcoin paper wallet among others. It has a built-in network, printer, and wireless managers so it can be utilized for necessary Bitcoin purposes. Creating a paper wallet with BitKey is a lot safer than using your existing OS. Here is how with Bitkey, you can create a bootable USB/CD.
- Download the OS image on the Bitkey website.
- Get the 64-bit version by clicking the download button.
- Choose between USB and CD-ROM.For USB sticks without write protection, it is practicable to remove them after boot.
- Burn a CD with your favorite program, or use a utility such as UNetbootin to write the BitKey ISO to a USB drive.
- Using your computer’s advanced boot function, boot into Bitkey.
The Bitkey can be used to create a paper wallet if the boot is successful. The electrum client can also be used to create an offline wallet. Bitkey provides three operation modes-
- Cold Online
- Hot online
They define whether the computer is offline and air-gapped. It also decides the convenience of the process. Cold- offline in Bitkey can be chosen for maximum security and least convenience, whereas hot-online can be used for lesser security and more convenience. The transactions can only be prepared in cold online, though.
An even more efficient and safer way to store Bitcoin is a brain wallet in which an address is generated by using a memorized passphrase. Taking a step further with “ salt,” an additional piece of data such as your email address, attackers are forced to target you individually instead of casting a wide net, WarpWallet seals the deal.
Thus, the private key isn’t stored anywhere physically or digitally, it’s in your brain. Thus, it is not required to take care of a piece of the document as long you don’t forget the passphrase(what about leaving cryptic notes around the house!)
Follow the mentioned steps to get started on WarpWallet-:
- Make a note of the SHA-256 sum in the URL, by heading over to the WarpWallet website.
- Save the page locally to your computer as an HTML file, and transfer it to a USB drive.
- Boot up a bootable Linux distro, such as BitKey from above.
- Copy the HTML file over to BitKey.
- Open sha256sum warp.html to verify the SHA-256 sum matches the one from step 1.
- Open the HTML file as a local file in Chrome/Firefox.
- Generate a passphrase that works on an entropy algorithm (anything with 58 bits or more of entropy is very secure.)
- Use the passphrase in HTML file, and your email address as “salt.”
- Scan public key QR code with the phone, and transfer it to a device with Internet.
- Shut down BitKey.
Now the Bitcoin can be transferred from your online wallet to your WarpWallet address. There is no need to store the private key anywhere, as it can be regenerated with WarpWallet’s website, with your passphrase and “salt”.Keep in mind the details, else all your Bitcoins are gone forever.
These were the most popular ways to store Bitcoin offline. If you are willing to spend more for convenience, options like TREZOR can be explored. Although it comes at a cost of Rs. 8,500 – they are easier to use than booting a Linux distro.