The Idiot-Proof Vault: A Simple Cold Storage Guide
Keeping bitcoins safe is one of the most important responsibilities in the world of digital assets. As the price of bitcoin continues to climb, exchanges and wallet providers become more susceptible to theft. The best way to keep your bitcoins safe is storing them yourself offline in what’s called cold storage.
Also read: Russian Presidential Candidate to Accept Bitcoin for Campaign
Creating Cold Storage Using a Paper Wallet
In the bitcoin space, cold storage refers to various practices of storing cryptocurrency offline. Bitcoin users can opt to store their digital currency using encrypted media, a bearer instrument (physical bitcoin), a hard drive or USB drive, a hardware wallet, and a paper wallet. One of the most popular methods is the paper wallet because it’s significantly cheaper and acts as a cash-like medium.
Today we’re going to discuss how to set up a simple paper wallet to store your digital assets offline. Storing your bitcoins using a paper wallet can still have various vulnerabilities so always double check your steps while creating one. There are a few methods to follow to mitigate certain risks. First and foremost is keeping your paper wallet hidden and out of sight. Second is using a quality printer that doesn’t let the ink bleed and is not connected to the internet. Lastly, paper can be damaged so laminating may help quite a bit and storing in a dry fireproof atmosphere is a very good idea.
Getting Started
The first things you will need to begin is some bitcoins, a printer, and a bitcoin wallet with QR reading capabilities. In Bitcoin.com’s tool section, we have a paper wallet creator that is very easy to use and takes just a few minutes. There are other paper wallet providers that offer a similar experience for creating paper wallets. When you access our paper wallet creator tool, you start by generating an address. To do this all one has to do is move their mouse around the screen and the application generates a random set of keys.
As soon as the key generator reaches 100 percent, a public and private key will be displayed on the screen. The paper wallet creation can now be printed on paper, loaded with bitcoins, and a BIP38 passphrase can also be added. A BIP38 passphrase encrypts your paper wallet ensuring your funds will be safe if the wallet was stolen or somehow exposed. If a user decides to encrypt the wallet with BIP38 an attacker would need to enter the passphrase in order to obtain the funds. Using BIP38 encryption is not recommended for your first paper wallet unless you are comfortable with the process. If the passphrase is lost or forgotten the funds can never be spent. However, using BIP38 adds a second layer of protection on top of the safekeeping methods of storing your physical paper wallet.
Keeping the private key hidden is critical because if someone has access to the private key the coins can be easily spent. Backing up the private key is a good idea because you will need this information yourself to spend the funds.
The public key is used to load bitcoins into the storage address and to verify the funds using a block explorer. You can share your public key with anyone if you want bitcoin sent to you from someone else. If you decide to encrypt the paper wallet with a BIP38 passphrase, you will need the password to access your digital assets. Furthermore, you can also import your private key into a p2p client wallet at any time.
Practice Makes Perfect
Creating a paper wallet is very simple. The hardest part is the responsibility of taking care of the paper responsibly by using safe storage locations, backing up your keys and remembering your BIP38 passphrase. If the paper wallet creation is perfected utilizing it for cold storage is one of the safest methods possible.
Paper wallets can be a pretty cool bearer bond instrument and its one of the closest ways a person can emulate the aspects of cash with cryptocurrency. Moreover, the practice described above can work with other physical mediums as well such as engraving a piece of metal, printing plastic cards, and if you’re confident enough you can hold the keys in your brain.
The best way to practice perfecting cold storage is to always start with small amounts of bitcoins. This way if you suffer a loss from a mistake it won’t be that significant. The more you practice, the more comfortable you will be with cold storage practices.
Let’s Review:
- Visit a paper wallet bitcoin address generator
- Generate random keys by moving the mouse or typing on your keyboard
- After the bitcoin public / private keys are created you can then print
- Add BIP38 passphrase (optional), load public address with bitcoins, store private key in a secure location
- Store your savings offline or give some bitcoin cash to friends!
What types of cold storage methods do you use? Let us know in the comments below.
Disclaimer: Bitcoin.com’s paper wallet generator does not store knowledge of your private key. If you are familiar with PGP, you can download the key generation in an all-in-one HTML page and check that you have an authentic version from the author of the site by matching the SHA256 hash of the HTML with the SHA256 hash available in the signed version history document linked in the footer of our site. This method of verification can also be applied to other address generators.
Images courtesy of Pixabay, and Bitcoin.com
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