Today I will tell you what cold storage bitcoin is, and also show how to create a paper wallet. I advise you to read the entire article in its entirety and choose a convenient method for yourself.
To begin with, I would like to compare the hot and cold storage of crypto-currency, so that it is easier to understand these two methods:
- Hot storage (hot storage, hot wallet, online storage) is all online wallets that allow you to spend at any time cryptocurrency; they certainly should always be connected to the Internet. The hot storage method is great for operating small amounts in large quantities. The threat of losing such a purse and money on it is equivalent to the threat of losing any other data on the Internet: hacking attacks and server hacking, phishing sites, viruses, etc.
- Cold storage (cold storage, offline storage) is an offline storage method that involves storing a private key somewhere outside the Internet. This method of storage is mainly used to store large, if not huge amounts. In cold storage, a public address is used to receive funds, and a private key is used to output it. If funds have been withdrawn from such a purse at least once (it was lit online), then such a purse already belongs to hot storage (there are exceptions), after which it is no longer recommended to use it.
Methods of cold and hot storage
I think you already understand what will be discussed? This method of cold storage naturally implies the existence of a paper sheet on which your private key will be recorded. One of the most common ways for creating a paper wallet is using the bitaddress.org service.
There are 2 options for generating a purse for cold storage:
- Go to the link and start generating a wallet with the Internet turned on.
- Go to the link, right-click and click “Save As,” or use the keyboard shortcut CTRL + S, then save the HTML file on the computer, no matter where, since you just need to run that file without the Internet. That is, you save the page of the site first, disconnect the Internet and open the page of the website offline.
Now let’s proceed to create a purse, it does not matter, with or without the Internet, the actions are the same:
- Move the cursor in different directions, so you generate a private key until you reach 100%.
- Your purse is ready, quickly, huh? It looks like this.
On the left QR code and purse number (public key) for receiving funds, you can show this image and address anywhere; you can also check the balance by entering the purse address in blockchain.info.
On the right is the holy of holies, your private key. Anyone who will have access to this QR code or private key will be able to spend your bitcoins (and other cryptocurrencies if you keep it in this way). Since now I describe storage on a paper purse, that is, at least 2 options:
- You copy to your paper a private key and a separate purse address.
You switch to the Paper wallet and print a cool and trendy already filled paper wallet.
- But, you need to be careful that the printer suddenly does not save the document before printing, or you did not leave it on a USB drive, in the cloud or somewhere else.
Choosing the first option, you need to use a good pen and write in legible handwriting so that the ink does not deteriorate after some time to such an extent that it would not be possible to read your private key anymore. The same with paper, choose a dense and high-quality paper. It’s just not safe to store such a document because it can tear, get dirty, burn out and so on. For better security, it is worthwhile laminating the layer and putting it in a safe or another safe place.
The advantages of a paper purse:
- Storage does not depend on any technique (PC, flash drive);
- It occupies very little space; it can even be hidden between the pages of the book (the main thing is not to forget about it and not to give the book to the library).
Cons of a paper purse:
- Unprotected paper can burn, get dirty, burn in the sun, get wet, tear;
An error while writing the key on the sheet will spoil everything;
- Seeing such a paper, it can be stolen;
- Someone can take a picture or scan a QR code / private key;
- Years later you can not make out your handwriting.
If you protect the paper from the influence of elements and other people’s eyes, then in principle there is nothing to be afraid of. In addition to paper, you can use other material, for example, metal (then it’s a metal purse, not a paper purse), on which your private key will be engraved. Such a purse excludes some drawbacks of the paper purse. However some metals are corroded, and they can be melted. Therefore, it’s time to buy titanium.
To protect your private key, even more, you can encrypt it with a password that you have invented. To do this, check the “BIP38 Encrypt?” Checkbox and enter the password in the “Passphrase” field on the “Paper Wallet” tab. This password encrypts private keys in the wallet below. If someone suddenly finds your paper purse with a private key, it will not be able to use it without a password. I also advise you to make several copies of your paper purses, because if you steal one of them, you can quickly withdraw the bitcoins using a copy. Private keys encrypted with a password always start with 6P.
This method of cold storage of cryptocurrency implies the presence of a flash drive, preferably made of a durable protective material, ideally moisture / waterproof:
- You need to generate a new wallet; you can use the method described above, or download some software purse and generate it there.
- After that, write down the private key/phrase to restore/backup the wallet file to the USB flash drive.
- If you write down a private key or a phrase for recovery (since this is text), then you can save this information in a PDF file that you can close from reading with your password.
The advantages of using a USB drive:
- Also takes up little space;
- No need to manually rewrite something.
The disadvantages of using USB-drive:
- Can be mechanically damaged, burned, get wet;
- Data can be damaged due to a strong/rapid change in magnetic fields;
- You can catch the virus.
Storage on the computer
In this method, information about the wallet is stored on the computer. It can be a recorded private key/phrase to restore or backup a wallet. This is perhaps the most dangerous method of cold storage since the computer is not immortal and will probably live much less than a piece of paper, much less a piece of metal. Also, a computer is likely to often connect to the Internet, which can lead to the emergence of viruses or hacker attack. Thieves are more likely to steal a laptop than a biblical dusting on a shelf with a paper purse between the pages.
If you have a clean PC without an Internet connection and a good antivirus is installed on it – then why not?
Pros of storage on the computer:
- If necessary, you can quickly open the wallet;
- If this is a laptop, then you can carry it with you without any problems.
Cons for storage on your computer:
- A computer can break, burn, drown;
- Data recovery will be impossible or expensive;
- Exposed to viruses.
Physical bitcoin coin
There are manufacturers of collection bitcoins (and not only) coins that put a small layer/plastic inside a metal/glass/still some kind of coin, with a printed private key. One such manufacturer is Casascius. Previously, this manufacturer sold coins with already recorded bitcoins (before the rate rose) with a denomination of 1BTC, 10BTC…
Pros of the physical coin:
- You can finally hold the bitcoin in your hands!
- Takes up little space.
The cons of a physical coin:
- The manufacturer can copy a private key, select it carefully.
- An interesting shiny coin can attract a lot of unnecessary attention.
- Can put a bug and spy on you?
- The coin, like a piece of paper inside, is subject to physical damage, the effects of fire and water.
Standalone hardware wallet
Such a crypto-currency purse often resembles a conventional flash drive, sometimes with a button and a small display. A hardware wallet is used to sign transactions with a private key. If you want to send someone bitcoins, then you will need to connect such a purse to your computer via a USB port and confirm or cancel the transaction by clicking the button. The hardware wallet stores the private key offline is not vulnerable to virus attacks and is mostly made of sturdy materials. Often such private purses can store private keys for Bitcoin, Ethereum, Litecoin, DASH, DOGE and other common crypto-currencies. Popular wallets are Ledger Nano S, Trezor and KeepKey. Prices for hardware wallets are from a couple of dozens, up to several hundred dollars.
Pros of the hardware purse:
- Allows you to make a transaction quickly;
- Does not take up much space;
- Support for a large number of cryptotices;
- Protection of private key at a high level.
Minuses of the hardware purse:
- рщThe loss of the hardware wallet will deprive you of access to your money if the manufacturer does not provide recovery.
There are several other ways of cold storage of cryptocurrency, I will probably tell about them later.