If you own a large sum of bitcoin, securing it may be your biggest concern. There are so many wallets out there. Each of them has its own security features. Some of the best wallets come up with new and improved security features to protect against hackers. But, unfortunately, it is not just the wallets that get better at what they do. Hackers today are sophisticated. Bitcoin is real money, and there is real motivation to hack someone’s wallet. If you are connected to the internet, you are prone to malware, keyloggers and phishing attacks. That is why having an offline wallet is the best way to secure your coins. An offline wallet is still not a perfect solution, but it is the safest option available right now. In this article, we will list out 4 types of cryptocurrency offline wallets:
1. Hardware Wallets
One way to store bitcoin offline is to use a hardware wallet. A hardware wallet stores your private keys in a hardware device. The private keys are generated by the hardware wallet. These type of wallets have major advantages in comparison to other wallets like cloud-based wallets, software, and mobile wallets. Advantages over other wallets include:
- Invulnerable to viruses and malware
- Offline security
- Open source
When you set up a hardware wallet, you are given a seed phrase. Write this down and store it in a safe place in case you need to recover your wallet. You are also prompted to set up a pin.
Since your bitcoins are stored in an offline setting, chances of getting hacked are minuscule. Some models of hardware wallets have a dedicated LCD screen, so if a hacker is secretly recording your computer, your hardware wallet is unaffected.
So, where can you buy a hardware wallet? There are so many hardware wallets out there. But, these two wallets are very popular among users:
- Ledger Nano – This wallet connects through the computer’s USB port. It can even protect your coins against physical attacks. Ledger Nano is so secure that you can even use it on a compromised computer. You can get one here.
- Trezor – This wallet is no second to Ledger Nano. Trezor has a unique way of protecting against key loggers. You are able to set a pin and multiple paraphrases with Trezor.
Complete list of hardware wallets here.
2. Cold Storage
Another way to store your bitcoins or any other cryptocurrency offline is to store in cold storage. This method involves storing your private keys on an air-gapped computer. An air-gapped computer is a computer that has no communication with outside networks, be it wired or wireless. The network interfaces are nonexistence.
You can create a cold storage manually from scratch or use BitKey to do the hard work for you. Bitkey is a small operating system containing all the tools needed to create a cold storage on an air-gapped computer.
How to Create Cold Storage on Bitkey
- Download Bitkey ISO image from BitKey site.
- Burn a CD or USD drive with Bitkey ISO image.
- Use computer’s advanced boot function to boot into BitKey Operating system.
- Use Electrum client to create a cold-offline wallet.
BitKey has many other tools like WarpWallet and paper wallet that can be used for various other purposes. But, creating a cold wallet is done using BitKey’s Electrum client as mentioned above.
For those who want to create a cold storage from scratch, here is how you do it:
- Download Bitcoin Core client. This is the original bitcoin client.
- Save it to a USB drive.
- Install Linux operating system on the USB drive.
- Boot into Linux with computer’s advanced boot function.
- Disconnect from the internet. Wired and wireless.
- Open bitcoin client.
- Click on Settings > Encrypt Wallet
- Enter a strong password and remember it.
- In your home directory, look for a hidden folder “.bitcoin” and copy wallet.dat to USB.
- Copy the public key from Bitcoin client and save it to a text file in USB.
- Shut down the computer.
- Backup wallet.dat file in several places.
This is how you create a cold storage from scratch. If you want to send bitcoins to this wallet, use the public key saved on your USB. Remember the password you entered to encrypt the wallet, as this is needed to restore wallet along with wallet.dat file.
3. Paper Wallet
A paper wallet is the third type of offline wallet. This is a wallet that prints your private and public keys on a paper. To create a paper wallet:
- Head over to bitaddress.
- Right click on the website and save the page as HTML.
- Close browser and disconnect from the internet.
- Open up the HTML file you saved.
- Follow instructions on the file and create the paper wallet.
- Print out the paper wallet.
This paper will contain your private and public keys. Store this paper in a safe place. You can copy the public key and save it to a text file for later use. For extra safety, give a copy of this wallet to your trusted family in case your one gets damaged.
4. Brain Wallet
Another way to store bitcoins offline is to create a brain wallet. This is the easiest way to store offline. A brain wallet hashes the paraphrase you enter and creates a public and private key. The SHA-256 hashing algorithm is commonly used to create these keys. The hash it generates is always the same for the same paraphrase. The only thing you need to remember is the paraphrase. It is incredibly simple to create a brain wallet:
- Head over to bitaddress or WarpWallet.
- Save the page as HTML.
- Disconnect from the internet.
- Open the saved HTML file.
- Enter a paraphrase and generate a public and private key.
- Save the public key to a text file.
Brain wallets have the option to add “salt” in addition to your paraphrase. This “salt” can be your email address or something that is personal to you. It can make your brain wallet stronger. Just do not ever forget your paraphrase and “salt” or your bitcoins will be lost forever.
How to Monitor Your Offline Wallet
Now that you have created an offline wallet using any of the above ways, your next step is to monitor your wallet. You can create a watch only address to monitor incoming and outgoing transactions. If you send bitcoins to your offline wallet, you will see it here. To create a watch only address:
- Head over to Blockchain and create a wallet.
- Click on import existing bitcoin address.
- Select “existing address generated outside this wallet” and enter your public key.
- Click on import.
- Now you will see all incoming and outgoing transactions on your offline wallet.
Storing bitcoins offline is tedious but it is the safest option available right now. The 4 main ways to do this is using hardware wallets, cold storage, paper wallet or a brain wallet.