Bitcoin Forum

I am currently using an old client and I dont have a good backup solution in place.

Can someone link me to some resources or explain how to do these things.

Thanks

It's great that you actually worry about wallet security before the worst happens. Kudos to you!
Here are my recommendations:


(0) Prerequisites: keep your machine up-to-date and malware-free!
An infected machine cannot be trusted. It can record your passphrases and send them along with the wallet file.
Never use a pirated version of an operating system! You can't be certain someone didn't add a little something extra to it.
Keeping your machine in good health is mandatory.


(1) Client upgrade technicalities.
The latest bitcoin client can be downloaded here: http://sourceforge.net/projects/bitcoin/files/Bitcoin/bitcoin-0.5.1/ (http://sourceforge.net/projects/bitcoin/files/Bitcoin/bitcoin-0.5.1/)
If you are currently using the old bitcoin client, chances are that the actual filename is bitcoin.exe
The new client is named bitcoin-qt.exe
Therefore, any shortcuts you might have created will have to be updated with the new name.
Installing the new client over an existing older one will not delete the old bitcoin.exe. You can remove it manually or just leave it.
Make sure you're not using the old bitcoin.exe by mistake.


(2) Wallet theft.
The new client has the option to encrypt your wallet (using the well-established AES algorithm) with passphrase of your choice. Come up with a decent passphrase, at least 16 characters long. You can use a sentence, like "The-Bad-Guys-Will-Never-Get-My-Bitcoins-Now". Don't use the example passphrase, of course :)

Make sure to write your passphrase down and put in in a secure place like a safe or a bank deposit box. Should you forget it, you'll want to have it somewhere.


(3) Wallet loss.
For maximum security, I suggest you create a TrueCrypt archive containing the ENCRYPTED copy of the wallet file. Don't re-use the passphrase. Keep the passphrase secure.
Once this is done, you can stop worrying about data theft and start worrying about data loss:
  +  keep an encrypted copy (a TrueCrypt archive containing the (already ancrypted with the bitcoin client) wallet inside it) of the wallet on your flash drive,
  +  copy it to your mobile phone,
  +  upload that encrypted copy to the internet (eg. mail it to yourself),
  +  if you own a file server, a NAS, or a VPC upload a copy there as well,
  +  burn it on a couple of CDs and send them to your parents, a sibling of yours, your parents-in-law...

This way, you are protected from data theft (someone obtaining the encrypted archive would have to break TWO passphrases instead of only one) and you are protected from losing the
wallet due to a hard drive failure of your house burning down.

Stay safe, stay secure, stay a happy member of the wonderful Bitcoin universe.

Great post. Thanks.  Can you also touch on what I should do with my wallet.dat before/during client upgrade?  Also once I make a copy of my wallet can I continue sending funds to addresses for that wallet?

Another thing to mention is having a separate checking wallet vs savings wallet.

The savings wallet should be uber protected and the backups obscured.

The checking wallet should be protected as well and backed up, but not obscured. This gives a thief something to find.

You may lose your checking if they can crack it, but at least they won't be trying to crack your savings wallet!

You don't have to do anything special with the wallet file.

However, if you have some bitcoins you're paranoid about, you could go to %appdata%\bitcoin⁽¹⁾ and manually copy the wallet.dat file somewhere (eg. to a flash drive)
Just remember to remove that copy of unencrypted wallet after you have encrypted the main one.

You don't need to do anything extra when upgrading the bitcoin client itself, just the standard housekeeping stuff: download the installer, terminate the old bitcoin client if it's running, install.
When the installation finishes, the new client will be automatically launched. It will most likely ask your permission to update the wallet to a newer specification. Agree.
When the client is done with wallet rewrite, it will close. Restart it.
Make sure you don't run the old bitcoin.exe when using a shortcut: the old client won't understand the new wallet file.

With the new client launches, click Settings -> Encrypt wallet, then follow the instructions.
From now on, you will need to input the passphrase when attempting to send bitcoins.
Everything else stays the same. The old addresses remain the same and valid. Your bitcoins are there. Earth still keeps orbiting the Sun.

Once you have encrypted the wallet, try generating a new incoming address. The client will ask for the passphrase. This way you can verify that your passphrase actually works.
Try sending a couple bitcents somewhere (you can send 0.05  BTC to the Bitcoin Faucet or to me :) ). You will be once again asked for the passphrase.

When you have satisfied yourself and are confident that your encrypted wallet still works as advertised, securely⁽²⁾ delete that unencrypted copy you may have made before the upgrade.
Should an adversary obtain that unencrypted copy, they can steal your bitcoins.


Having completed the upgrade and encryption parts proceed to section 3.
Truecrypt is a well-respected, free, open-source program and can be downloaded here: http://www.truecrypt.org/


Notes:
(1) Start Menu -> Run -> type %appdata%\bitcoin and hit enter
(2) Securely meaning: make sure it doesn't linger in the recycle bin.

To sk. just a little knowledge for you. That is, if your running say like the 0.4.0 beta and going to upgrade to 0.5.1.

https://bitcointalk.org/index.php?PHPSESSID=1bed1e89955cfb8b37fd1f61d9d4fb02&topic=58653.msg691013#msg691013

Heh heh, I already gave him that advice about bitcoin.exe vs bitcoin-qt.exe I'd given you earlier today :)
No need to link that.