The safest way to protect your bitcoins

[nak]

Apologies if this has already been asked, but as bitcoin gains more popularity and adoption, I'm increasingly concerned for the bitcoins I have.

Could someone please explain, in the simplest possible steps - the easiest way to protect your bitcoins. I've heard of "cold storage" and "offline storage" what's involved in this process?

Any help is much appreciated.

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[Cubic Earth]

It has been asked and answered many, many times.  But that's because it is important.  I have written a very detailed method, it was supposed to be the script to a how-to video.  I will copy and paste it in a PM to you.  Check your inbox.  Any feedback on it is appreciated but not expected.

[nak]

Really appreciate that, just about to read it - but out of curiosity, why would you not post it publicly on here?

[nak]

Would you mind me pasting the message, for the benefit of everyone else? Thanks a lot, really appreciate your help.

[Liquid]

Use cold storage end of story 

[balanghai]

Hey, think about a wallet left in a vault at home. That's the simple illustration for offline storage.

They easiest way to have one is to have another netbook, clean installed and hard drive formatted low level, no other application installed except the bitcoin wallet, a firewall and or security suite. And only turn it on or hook it online if you need to transfer funds.

A second hand laptop could also be used but be sure to scrape the hard drive and install an OS that is stable and genuine if you're thinking about windows.

[thddx]

I simply tossed mine on an SD Card.  The SD Card is not in a safe or anything, but of course, my wallet is encrypted (4096 RSA).

The private key I used to encrypt the the wallet is also encrypted w/ another key pair and stored offline.  Lastly, the actual encrypted wallet files are obfuscated in source code archives - basically hiding in plain sight.  Casual thieves probably wouldn't even find the encrypted wallet/key files.  Personally, I'm more concerned with fire, so I have things stored on Google Drive in a similar format.  When I have more funds transitioned to bitcoin, I'll think about picking up a fire-proof safe.

[mel2000]

I think all the strategies mentioned here are too convoluted for mainstream usage. Unfortunately, once the mainstream press gets wind of stories about hapless users getting their bitcoins stolen, it's going to throw cold water on bitcoin adoption. Bitcoins won't go widespread until brokers can secure bitcoins the same way banks secure customer deposits.

[Barek]

Armory should be mentioned here:

https://bitcointalk.org/index.php?topic=56424.0

[...]

• Offline Wallet Interface:  This is the holy-grail feature of Armory!  You can use Armory to create a wallet on a computer that will never touch the internet again, and then make a watching-only copy to use on the internet computer.  You can monitor transactions online, and sign transactions offline without needing the blockchain.  And since it doesn't need the blockchain, even a computer with 512 MB of RAM can be used as the offline system.  Please see the offline-wallet tutorial! (you will need a USB key to shuttle data between computers, but the entire process for offline transactions can be done in under one minute!).

[...]

[nak]

Armory should be mentioned here:

https://bitcointalk.org/index.php?topic=56424.0

[...]

• Offline Wallet Interface:  This is the holy-grail feature of Armory!  You can use Armory to create a wallet on a computer that will never touch the internet again, and then make a watching-only copy to use on the internet computer.  You can monitor transactions online, and sign transactions offline without needing the blockchain.  And since it doesn't need the blockchain, even a computer with 512 MB of RAM can be used as the offline system.  Please see the offline-wallet tutorial! (you will need a USB key to shuttle data between computers, but the entire process for offline transactions can be done in under one minute!).

[...]

Precisely; most people are lazy. It's easy for people to say "well the lazy ones just won't benefit from bitcoin" but as Barek says, in order for it to be adopted on a much larger scale - security needs to be easier.

Armory should be mentioned here:

https://bitcointalk.org/index.php?topic=56424.0

[...]

• Offline Wallet Interface:  This is the holy-grail feature of Armory!  You can use Armory to create a wallet on a computer that will never touch the internet again, and then make a watching-only copy to use on the internet computer.  You can monitor transactions online, and sign transactions offline without needing the blockchain.  And since it doesn't need the blockchain, even a computer with 512 MB of RAM can be used as the offline system.  Please see the offline-wallet tutorial! (you will need a USB key to shuttle data between computers, but the entire process for offline transactions can be done in under one minute!).

[...]

The link to that tutorial doesn't work

[zeroday]

Just don't store all your bitcoins in a single place, even if it's "cold wallet", which can be physically destroyed by accident or confiscated.
Split it between three places, in example:

- paper printed private keys stored in bank safe (don't forget to mention it in your bequest).
- QT wallet encrypted with strong password on offline computer, then uploaded to many different online storage services, emails, etc.
- brain wallet generated key with a very long but very memorable passphrase (i.e. password made with combination of very rare and private words like your mom's birthplace + your grandma's maiden name + address where your family was living in 1985 + your usual password).

[BittBurger]

Anyone who doesn't use paper wallet is crazy in my opinion.

Even BitcoinQT - the most trusted of them all - started getting file corruptions on my wallet files.  You don't even need hackers when you've got software errors.

Hell to the no. 

[Barek]

The link to that tutorial doesn't work

My bad, I did not check the link in the quote. This seems to be the correct link:

http://bitcoinarmory.com/about/using-our-wallet/#offlinewallet


An interview with Alan Reiner, founder and CEO of Armory Technologies and lead developer on the open source Armory Wallet project, can be found at:

http://letstalkbitcoin.com/e55-happy-birthday-bitcoin/#.Unj_z-VX98E (around 16:00)

In that interview he talks about the existing features, the problems, and the vision. There is also a very important point about paper backups. He says "I think the most important feature of Armory is the backups. It's kind of difficult to describe, you know, what's really going on under the hood. The Satoshi client, BitcoinQT, or however you want to call it, I wish they would come up with a better name for it, randomly generates addresses. It generates a pool of them and when you run out of that pool it makes more. It's not deterministic, which means that if you were to restore your wallet to a previous version and regenerate these addresses, you'd get different addresses. That's a serious problem in terms of backups."

Now, what is that pool of addresses used for? It seems that when you send a bitcoin transaction, all the coins in the sending address are spent in that transaction, divided into the amount that you intended to send, and "change", which goes back to you, but at another (newly created) receiving address. If that "change" address is one that is generated after you made your paper backup, you have a problem. Armory solves this problem (see interview or website for details) and BitcoinQT supposedly will also in the future. Anyways, just something I wanted to point out.

[Kimowa]

Anyone who doesn't use paper wallet is crazy in my opinion.

Even BitcoinQT - the most trusted of them all - started getting file corruptions on my wallet files.  You don't even need hackers when you've got software errors.

Hell to the no. 

You mean even if you backup the wallet.dat files it can get corrupted???

[Barek]

You mean even if you backup the wallet.dat files it can get corrupted???

To my understanding, you need to backup the wallet.dat after every transaction. If you do not, there is a chance that newly generated keys will not be in your backup.

[Barek]

No need for an offline computer nor uploaded online.
A few SD cards or USB sticks will do

Devils advocate time!

• How do you verify that the wallet.dat is still intact? For a printout that is easy.
  
• The more cards/sticks, the more places you have to worry about for them to be found/stolen.
• What if you want to transfer some coins? Collect, update, and re-hide the cards/sticks?

[justusranvier]

Use Armory.

It's got cold storage that's easy to use, and permanent paper backups that can be encrypted and m-of-n split.

[Cubic Earth]

Really appreciate that, just about to read it - but out of curiosity, why would you not post it publicly on here?

Well, it's just a draft, and I only want to publish things when they are as good as I can make them.  I've only sent it to a few people who have asked specific questions about wallet security.  Did you find it helpful?  Maybe I should take a few minutes and clean it up into presentable form.

[countryfree]

I'm surprised nobody said it already, you may have several wallets. It's free! I have 2 wallets on blockchain.info. I have multibit too, on 2 computers.
I may lose one wallet, but I won't lose all my BTC.

[IsaacGoldbourne]

Anyone who doesn't use paper wallet is crazy in my opinion.

Even BitcoinQT - the most trusted of them all - started getting file corruptions on my wallet files.  You don't even need hackers when you've got software errors.

Hell to the no. 

I lost 1.9 btc to that. Still hurts.