Over the past few months, Bitcoin’s efforts to break its record price have been unremitting. This week, the cryptocurrency climbed more than $14,000 (approximately 900,000 rupees), compared with less than $800 (approx. 51,600 rupees). This unprecedented growth-whose value has been almost 10 times its value since the beginning of 2017-has undoubtedly brought Bitcoin into mainstream attention.
Although the debate about currencies in a bubble is still spreading in all directions, it is clear that those with significant interests in Bitcoin need to be safer than ever in digital investments. After all, this is the real money. Bitcoin wallets have encountered multiple hacks in the past, so it is worth taking extra steps to protect your funds.
The most convenient way to store Bitcoin is to use an online wallet, which allows you to quickly transfer money in and out of your wallet, or convert Bitcoin into alternative cryptocurrencies such as Ethereum, Monero, Litecoin, etc. But the safest option is called “cold storage”, which can store your Bitcoin offline, away from any Internet access. This is especially important if you have a large amount of Bitcoin.
This is how to set up a cold storage for your Bitcoin wallet:
1. Paper wallet
The easiest way to take Bitcoin offline is to use paper and printers. Yes really. You also need a website that allows you to create offline Bitcoin addresses, such as Bitcoin.com or Bitaddress.org. Please follow the steps below to create a Bitcoin paper wallet:
- Go to Bitcoin.com paper wallet or Bitaddress.org page.
- Save the page as an HTML file locally to your computer.
- Next, close the page and disconnect the computer from the Internet.
- Open the saved Bitcoin.com paper wallet or the local version of Bitaddress.org.
- Follow the instructions on the page to create a new Bitcoin address.
- Once you have a pair of buttons and QR code, please print the page. Make sure that your printer is not connected to the Internet to improve security.
- You can now use the new public address/QR code to transfer bitcoins from another online wallet.
The printed page is the most valuable document for your Bitcoin investment. Ideally, you should store the printed pages in a waterproof and fireproof container (such as a safe). If this is not an option, please create multiple versions of this version and provide them to a trusted family for safekeeping in case your version is damaged. You can also laminate pages for protection.
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Although taking the computer and printer offline is a good security measure, it is not as secure 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. In addition, it can run in real time from the computer’s memory (RAM), so once the drive/disc is running, you can eject it.
BitKey comes pre-installed with multiple software options: Electrum Bitcoin client, WarpWallet (more on this later), and Bitcoin paper wallet. It also has a built-in network, printer and wireless manager, so you can use it for all necessary Bitcoin purposes. Using BitKey to create a paper wallet is safer than using existing operating systems.
- This is how to create a bootable USB/CD using BitKey:
- Go to the BitKey website to download the operating system image.
- Click on download Button and get the 64-bit version.
- Choose between USB and CD-ROM. The latter are more secure because they are read-only by default. For USB memory sticks that are not write-protected, it is recommended to remove them after booting.
- Use your favorite program to burn the CD, or use a utility such as UNetbootin to write the BitKey ISO to the USB drive.
- Use the computer’s advanced startup function (depending on F8-F12, depending on the motherboard manufacturer) to start BitKey.
If the startup is successful, you can use BitKey to create a paper wallet, or even use the Electrum client to create an offline wallet. BitKey provides three operating modes-cold offline, cold online and hot online-to define whether the computer is offline and whether it is in a blank state.
It also determines how convenient the process will be. Choose the cold offline in BitKey to get the greatest security and the least convenience, and choose the hot online to get lower security and convenience. However, you can only prepare transactions in a cold online manner. Click on the three links to find out which method is best for you.
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3. Warp wallet
Even more paranoid, a safer way of storing Bitcoin involves something called a “brain wallet” that uses memorized passphrases to generate addresses. WarpWallet further uses “salt”, which is an additional piece of data, such as your email address, which forces an attacker to target you alone instead of throwing a huge network.
In this way, your private key is not actually physically or digitally stored on your head (please read: brain). This means that as long as you don’t forget the passphrase, you don’t have to deal with the document, and most people advise you not to leave mysterious notes around the house.
Due to the complexity and security of this method, people describe it as how Jason Bourne stores his bitcoins. In any case, if you think this is the way to go, here is how to get started with WarpWallet:
- Go to the WarpWallet website and write down the sum of SHA-256 in the URL.
- Save the page as an HTML file locally to your computer, and then transfer it to a USB drive.
- Boot a bootable Linux distribution from above, such as BitKey.
- Copy the HTML file to BitKey.
- Open sha256sum warp.html to verify that the SHA-256 sum matches the value in step 1.
- Open the HTML file as a local file in Chrome/Firefox.
- Generate pass phrases suitable for entropy algorithms (such as “one pass”). Anything with 58 bits or more of entropy is very safe.
- Use the password in the HTML file and use your email address as the “salt”.
- Scan the public key QR code with the 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 don’t have to store the private key anywhere, because it can be regenerated through WarpWallet’s website with the help of a passphrase and “salt”. Just don’t forget any details, otherwise your Bitcoin (and the money invested in it) will disappear forever.
These are the most popular methods of storing Bitcoin offline. If you want something more convenient than BitKey and WarpWallet, and are willing to spend money, please check hardware wallet options such as TREZOR. Their cost is high-TREZOR’s price exceeds Rs. 8,500 includes shipping costs to India, but is easier to use than booting a Linux distribution.
For more tutorials, please go to our methods section.
Bitcoin has reached an all-time high, but should you still invest now? We discuss this on the weekly technology podcast Orbital. You can listen to it through Apple Podcasts or RSS, or you can listen to this episode by clicking the play button below.