-=
Small Edit: If you need something which is very secure
and grandma-style easy,
go vote on this poll and add your thoughts to the discussion. =-
Also, there is an excellent article on the Wiki which should give you some ideas about the problem of security. This is meant as a more specific and simple straight-forward guide, i.e I won't spell out where you can find your wallet.dat and so on.Why?So, in light of the recent
/19BSM]Drama 
and my general feeling that some people are unsure about the security of their wallet (or their PC in general), I've decided to give you an idea how to create a secure savings account for you to deposit your hard-earned coins in.
ClarificationsSo, you crazy twat want to
invest all your savings in bitcoin, but you're not yet shit-for-brains enough to forget the security aspect of the whole thing? Here's the HowTo for you.
So, the first misconception to clear out, is the concept of the "wallet". The wording in itself is not ideal, since it is more like a key. Cryptographically speaking, it is actually exactly that: your private key.
Now this has the following implication: If someone steals your wallet.dat now, and you deposit coins in it later, the thief will be able to spend/transfer ALL your coins, including those you added _after_ the wallet was stolen! I'm sure a lot of you know this already, I just want to clarify this for everybody.
So, clearly, you have to make it impossible for anybody to _ever_ steal your wallet. Clearly, this is infeasible for your day-to-day transactions account, since encryption will be useless as soon as you want to access your coins (Since the decrypted wallet.dat
has to be stored in RAM at some point. There are ways, but for now, consider them a little tedious).
So the solution is the following: you have your spendings-account where you keep only low amounts of coin (much like a real-life wallet), and you have your super-secure savings wallet, which you only access on rare occasions.
How?I'll try to keep it short: You have to create your savings account under ideal security-conditions. I won't rant about you
cunts people using Windows in general, but note that Linux is in no way automagically completely secure. Everything depends a lot on your behaviour.
1. What you'll do is the following: Create a live-CD or a bootable USB with your OS of choice on it. I suggest using the
Ubuntu LiveCD.
The reason is simple. When you create your new wallet, you want to make abolutely sure, that your running operating system doesn't in any way log your keys or secretly save your files somewhere.
2. Boot your freshly-created OS, and install the Bitcoin client on it. Yes you can install software inside a liveCD environment. Optionally, also install some encryption software, but we'll leave that for now.
3. Your Bitcoin client will immediately generate 10 addresses for you, and with them, the corresponding wallet.dat.
4. Save your addresses somewhere, if you have to, write them down manually (if you do this, then I bow to your zeal and declare you crazy). I suggest you send them to yourself over email.
5. This is the important step. Copy your wallet.dat somewhere. Burn then on a CD or another medium. I for instance love those little 64MB SD-cards you sometimes get with a new camera. They rock. You might want to make multiple copies (on multiple cards/CDs, not multiple copies of the same file on the same disk you tart).
6. Now, eject whatever you just copied on, and guard it like your life depends on it. Not really, but here is the important step: If you encrypted your wallet.dat with an encryption algorithm you feel safe about, just keep it around your house.
7. Shut down. There will be no trace of your walled.dat on your harddisk, since it never actually resided there.
Important: You will want to keep another copy somewhere else, in a safe physical location, or at least one that is safe while your house burns down. You might already know it, but
losing your wallet.dat is worse than someone stealing it. It'll be gone
forever.
If you didn't encrypt the file (which I prefer), put the SDcards, CDs, whatever in a safe. That's right: a
real-world safe, like banks have, who also happen to lock their doors and are in general very anal about their security and all that jazz. You can rent small safety-deposit boxes in exchange for money. As a bonus, it'll be fire-proof as well.
8. In case it's not yet obvious: You will now only make day-to-day transactions like you used to do it, on your computer (are you _still_ using windows?) and every now and then, you will put some coins into your savings-account. Using the addresses from step 4). How much you want to keep in your wallet is up to you.
But how can I haz my money back?Okay, for those of you who didn't guess it yet: Whenever you want to make a transaction
from your savings-account to someplace else, get your wallet.dat out of the safe,
boot up your liveCD (don't you dare using your regular OS after all this work, or I'll come beat you up personally) and do the reverse: Install bitcoin again, install the encryption-software if necessary and copy your wallet.dat where it belongs.
Congratulations: you can now access your 25'000 bitcoins and nobody will have messed with them while you were asleep.
Possible attacksSo now, the _only_ way for someone to steal your coin, will be to steal your physical copy of the wallet. That's why you might want to encrypt it, although if you do,
don't forget the passphrase. Also, if you die, your family can still get your bank-safe opened, but they won't be able to pick through your brain and get the passphrase out of it. That's why I prefer to
not encrypt it.
There is one more possibility: a
physical keylogger: It will be able to intercept the password you use to encrypt your wallet.dat, which, if you keep a copy at home, can then be stolen and used. Another reason, why a regular safe is the best option in my humble opinion.
What else?EDIT: A little protip for those who don't know: You can of course use blockexplorer.com to keep track of your account while it's safely hidden away. Doing this will simply allow you to see how many coins are associated with a given address.
I suggest you also create new day-to-day wallets (even having a few coins stolen can be frustrating), as your current ones might already have been stolen. Of course, this requires a secure OS, so you better ditch that
infected piece of shit fine gear of yours. DON'T just create new wallets on the system you're using right now, since it won't solve anything in case you're already infected.
In addition, it doesn't hurt to read up on some technical details. Use the
Wiki. Learn the difference between the amount in your wallet, and the amount on the different block-addresses. If you handle a lot of money, ACT ACCORDINGLY. Don't get all crazy-enthusiastic-venture-capitalist and invest all your savings in bitcoin. Also, don't speculate too much on the price development, you'll make more money if you use that time to work at a regular job.
Now, if you happen to make/have made a significant amount of coins,
don't run around telling everybody like the self-satisfied vagina that you are. You wouldn't do that with real money either. At least I hope so.
Also, someone will probably make a bitcoin-specific liveCD, which should save some hassle in the steps above.
Also, take it easy and be a cool guy woh doesn't afraid of anything.
Also, pick up a book every now and then.
Yes, there are other ways to do this, and yes, some might be more practical and maybe just as secure. Write a comment about it.
If anyone has any clarifications, questions, suggestions, or wants to call me a moron, please feel free to do so, and I'll see if there is anything to be improved about it. Also, spelling mistaeks.
Also, in case anybody got all excited by this guide and/or seen the light of Jesus-Christ the saviour AND wants to thank me with coins (why on earth would you do that?), here's my address: 16VD78R8nxqJGesE7E9KS6A8TikQQpKNm5Have fun.
EDIT: Corrections and added a few insults just for you, dear anonymous reader.
wow, I am as paranoid as they come and I would not have thought of all this. So now I am going to go buy a couple small sd cards, burn ubuntu live cd onto a cd, and then create the new bitcoin account and all like you said. Thanks!
