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Author Topic: Can somebody explain to me how Electrum works offline ?  (Read 464 times)
nonameavailable55 (OP)
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August 11, 2017, 01:53:55 PM
 #1

First of all I wanted to say that I am completely new here and therefore I am not sure where to exactly post my questions but I hope I am at the right spot...
So i decided to jump on the Bitcoin train aswell but unfortunately too late and instead of 2400euro/btc I had to pay 2800euro/btc. At the moment I don't want to use any hardware wallet and therefore I had to create a wallet as secure as possible because otherwise I am always scared about virtual theft and I have too much to lose. I created a bootable USB drive and downloaded the newest tail from the official website, I verified the version through the firefox addon and furthermore through Kleopatra and some SHA-256 Hash (instruction from the internet) but I heard there are still ways to have downloaded a infected version through something called man in the middle attack, is that possible or am I just paranoid? After that I booted from the USB and had my WIFI turned off the whole time and created a standard wallet in Electrum, encrypted the persistent storage and Electrum and wrote down the seed words on paper. I created a watch only adress with the public key from Electrum to watch transactions. I already sent some amount to my public adresses and recieved them successfully but my balance on tails obviously shows 0 because it was never connected to the internet. What I want to know now is that how am I able to restore my wallet from any given computer if my seed words have been created offline and therefore have never been able to be sent to electrum servers? So how do I exactly verify that I own the coins without connecting my offline wallet to the internet?  Furthermore I wanted to ask if my wallet is 99.99% safe from any virtual theft since my intentions are to hold btc for long term purposes? Also in order to satisfy my mind that I will always be the owner of my btc I need to know what will happen if Electrum somehow vanishes and all the servers are shutdown how will I be able to restore my wallet from the seeds because no other program except Electrum would accept those seed words and only if they have been transmitted to the internet before, right ? So basically I need to understand the concept about the way I actually stored my bitcoins and if it is safe enough for 5-10 years from virtual theft or any problems that might occur if electrum servers are shut down?
I would highly appreciate any help and sorry for my bad English in terms of the technical explaining but I am from Germany.
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Swagtoshi
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August 12, 2017, 01:25:54 AM
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If your computer is offline it can't connect to the blockchain and you can't check the status of your coins through your wallet. Instead, you have to use sites like https://blockchain.info/

Your bitcoins will always be safe in your wallet (even if the electrum servers shut down) if you don't give away the private keys. If you need to restore an address you use the private keys (Wallet => Private Keys).
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August 12, 2017, 03:08:03 AM
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~ is that possible or am I just paranoid?
it is not exactly a "man in the middle" attacks but it is possible. and that is why you must verify the signature of what you download, just like you did here.

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~What I want to know now is that how am I able to restore my wallet from any given computer if my seed words have been created offline and therefore have never been able to be sent to electrum servers?
So how do I exactly verify that I own the coins without connecting my offline wallet to the internet? 
with bitcoin you create "key pairs" these consist of the private part that you should never share, called "private key" and a "public key" and a hash of that pubkey called "bitcoin address". this process is a one way thing meaning you can get the pubkey from privkey and address from pubkey but the reverse is impossible.

in bitcoin you don't receive bitcoin the same way you receive fiat. there is a big database called blockchain which contains transactions. and what transactions do is that they transfer value to another key (your bitcoin address). and these transactions are included in the blocks by the miners.

now to "verify that you own coins" you need to look at that database. you do it with a wallet. the wallets searches that database for your address and gives you what can be called "balance".

this link is good to read: https://bitcoin.org/en/how-it-works

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Furthermore I wanted to ask if my wallet is 99.99% safe from any virtual theft since my intentions are to hold btc for long term purposes?
as long as your wallet stays offline and never used it is 100% safe.
when you use it like connecting the USB to your PC, you just need to make sure you don't connect it to the internet or infect it in any ways and you will stay safe.

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Also in order to satisfy my mind that I will always be the owner of my btc I need to know what will happen if Electrum somehow vanishes and all the servers are shutdown how will I be able to restore my wallet from the seeds because no other program except Electrum would accept those seed words and only if they have been transmitted to the internet before, right ?
So basically I need to understand the concept about the way I actually stored my bitcoins and if it is safe enough for 5-10 years from virtual theft or any problems that might occur if electrum servers are shut down?
those keys that i talked about (the private key) is universal and can be used in any application.
the seed is a special way to create those keys all from a "master key". the code for electrum is open source and available to all. in case some day Electrum stopped being developed (like Multibit which happened recently for example) you can always find safe tools online that will accept that seed (like what electrum does for Multibit users) and if not (in worst case scenario) you can always ask a programmer to make you a simple script to retrieve your keys from the seed.
here is the link to the code: https://github.com/spesmilo/electrum

also remember that these electrum servers that you connect to via your wallet are just bitcoin nodes that you are explicitly using to "check out that database for your balance"

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August 12, 2017, 07:17:49 AM
 #4

What I want to know now is that how am I able to restore my wallet from any given computer if my seed words have been created offline and therefore have never been able to be sent to electrum servers?

Seed words are never sent to electrum servers even if had you created an online wallet instead. The seed words are private information that you alone know. If anyone else got their hands on them they could steal your money.

Electrum is not a bank. Bitcoin is a peer to peer currency. There is no central registration authority or gatekeeper whose permission you need to get.

Bitcoin transactions are recorded in an open ledger called the blockchain. This ledger is secured by cryptography. Your transaction is simply recorded in this ledger as paying out x amount of coins to y address. Whether y address is in your control, somebody elses control or nobodies control isn't relevant at the time the transaction is recorded. That will only be tested when you go to spend your bitcoins. At that point in time you will have to sign the spending transaction with the address-specific private key which is derived from your seed words.

Anyway to answer your question about how do you know whether you own the coins or not. Two things. 1. look up the balance of your address on a blockexplorer like blockchain.info. 2. Open your wallet in tails, bring the addresses tab into view with ctrl+a, right click on the address with the coins and choose sign/verify message. Sign any arbitrary message and then verify the signature. If you can generate a valid signature for the address with the coins then you own those coins.
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August 12, 2017, 11:23:34 AM
 #5

... So how do I exactly verify that I own the coins without connecting my offline wallet to the internet?...
In your offline electrum wallet... you want to export the "master PUBLIC key"... (Wallet -> Master Public Key).... it will be a big string of characters that starts with "xpub".  Make sure you DO NOT use the private key!!

You then create a "watching only" wallet using Electrum on an online computer by importing that master public key (File -> New/Restore -> Standard Wallet -> Use public or private keys, then enter your xpub)... it will allow you to see all the addresses and transactions of the oflfine wallet... but it does not have the private key information (and can not be used to generate the private key information), so it is safe to have on an online computer.

That way you can see your balance and addresses etc without fear of your coins being stolen.

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