Bitcoin The streak of breaking its own record price has been relentless for the past few months, with the cryptocurrency surging more than $ 14,000 (roughly Rs. 9 lakh) this week, having been less than $ 800 (roughly Rs. 51,600) this time the last year. This unprecedented growth, almost 10 times its value since the beginning of 2017, has drawn Bitcoin directly to mainstream attention.
Although the debates that the currency is in a bubble continue to have voices from all directions, what is clear is that those who have a large stake in Bitcoin should be more secure than ever with their digital investment. After all, what is at stake is real money. Bitcoin wallets have clashed multiple tricks in the past, so it’s worth taking another step to secure your funds.
The most convenient way to store Bitcoins is using an online wallet, which allows you to quickly transfer money in and out of the wallet, or convert Bitcoins into alternative cryptocurrencies such as Ethereum, Monero, Litecoin and others. But the safest option is known as ‘cold storage’, which stores your Bitcoins offline and away from any internet access. This is even more important if you have large amounts of Bitcoin.
Here’s how to set up cold storage for your Bitcoin wallet:
1. Paper wallet
The easiest way to disconnect your Bitcoins is by using paper and a printer. Yes really. You will also need a website that allows you to create a Bitcoin address offline, such as Bitcoin.com or Bitaddress.org. Follow these steps to create a Bitcoin paper wallet:
- Go to Paper wallet Bitcoin.com wave Bitaddress.org page.
- Save the page locally on your computer as an HTML file.
- Then close the page and disconnect your computer from the Internet.
- Open the local saved version of the Bitcoin.com or Bitaddress.org paper wallet.
- Follow the instructions on the page to create a new Bitcoin address.
- Once you have a pair of keys and QR codes, print the page. Make sure your printer is not connected to the Internet for added security.
- Now you can use the new public address / QR code to transfer Bitcoins from another online wallet.
The printed page is the most valuable document for your investment in Bitcoin. Ideally, store the printed page in a fire and waterproof container, such as a safe. If that is not an option, create multiple versions and submit them for a trusted family to keep, in case your version is corrupted. You can also laminate the page to protect it.
While unplugging the computer and printer is a good security measure, it is not as safe as using a clean operating system. BitKey is basically a free bootable Linux distribution that you can write to a USB drive or CD-ROM. Additionally, it can be run live from computer memory (RAM) so you can eject the drive / disk once it’s running.
BitKey comes pre-installed with multiple software options: Electrum Bitcoin client, WarpWallet (more on that later), and Bitcoin paper wallet, among others. It also has built-in network, printer, and wireless managers so you can use it for all necessary Bitcoin purposes. Creating a paper wallet with BitKey is more secure than using your current operating system.
- Here’s how to create a bootable USB / CD with BitKey:
- Go to BitKey website to download the operating system image.
- Click on the to download and get the 64 bit version.
- Choose between USB and CD-ROM. The latter is more secure as they are read-only by default. In the case of USB sticks without write protection, it is advisable to remove them after boot.
- Burn a CD with your favorite program or use a utility like UNetbootin to write the BitKey ISO to a USB drive.
- Boot into BitKey using your computer’s advanced startup feature (varies from F8-F12 depending on motherboard manufacturers).
If the startup is successful, you can use BitKey to create a paper wallet, and you can even use the Electrum client to create an offline wallet. BitKey provides three modes of operation: cold-disconnected, cold onlineand hot online – which defines if the computer is offline and out of air.
You also decide how convenient the process will be. Choose cold-offline on BitKey for maximum security and less convenience, and hot-online for less security and more convenience. However, you can only prepare cold transactions online. Follow the three links to find out which method works best for you.
For the even more paranoid, an even more secure way to store Bitcoin involves something called a brain wallet, which generates an address through the use of a memorized passphrase. WarpWallet takes that a step further with “salt”, an additional piece of information like your email address that forces attackers to target you individually rather than launching a wide network.
This way your private key is not stored anywhere physically or digitally, it is in your head (read: brain). That means you don’t have to deal with a document as long as you don’t forget the passphrase, which is why most people advise you to leave cryptic notes at home.
Due to the complexity and safe nature of this method, it has been described as how Jason Bourne stores his Bitcoin. Anyway, if you think this is the way to go, here’s how to get started with WarpWallet:
- Go to WarpWallet website and note the SHA-256 sum in the URL.
- Save the page locally on your computer as an HTML file and transfer it to a USB drive.
- Start a bootable Linux distribution, such as BitKey from above.
- Copy the HTML file to BitKey.
- Open sha256sum warp.html to verify that the SHA-256 sum matches the one in step 1.
- Open the HTML file as a local file in Chrome / Firefox.
- Generate a passphrase that works on an entropy algorithm, such as One will pass. Anything with 58 bits or more of entropy is very safe.
- Use the passphrase in the HTML file and your email address as “salt”.
- Scan the public key QR code with your phone and transfer it to a device with internet.
- Turn off BitKey.
You can now transfer Bitcoin from your online wallet / exchange to your WarpWallet address. You do not have to store your private key anywhere as it can be regenerated with the WarpWallet website, with the help of your password and “salt”. Just don’t forget any of the details, or your Bitcoin (and the money invested in it) will be gone forever.
These are the most popular ways to store Bitcoin offline. If you want something with more convenience than BitKey and WarpWallet, and are willing to spend on it, look for hardware wallet options like TREZOR. They cost a lot: TREZOR costs more than Rs. 8,500, including shipping to India, but they are easier to use than starting a Linux distribution.