Bitcoins need to be stored. A dedicated wallet is safer than keeping them on an exchange. However, the cold storage of a paper wallet is considered much more secure. It uses the same method of private and public keys. The private key is meant for your eyes only. A public key (public address) is used for transactions. These keys are merely strings of characters. Therefore, memorizing your keys, while impractical, serves the same function as dedicated wallets like Blockchain.info.
A Bitcoin paper wallet can be created fast and easy. These are common characteristics of the crypto space. However, securing this process remains a difficult problem. Preventing malware and other types of hacks are just as much a concern for cryptocurrency websites as any other online enterprise. One reason is that blockchains are not yet widespread on the Internet. Some innovative companies are even creating a new internet based around blockchain technology. Until then, conventional online security will be needed to secure cryptocurrencies.
Clearing up Misconceptions
The very first cryptocurrency blockchain was named Bitcoin. The currency being exchanged are called bitcoins. A bitcoin (public) address is an efficient version of the public key. It points to a specific value of bitcoins stored on the Bitcoin blockchain. The potential for confusion is one reason why some cryptocurrencies use different terms for their blockchain and currency. This may not seem very important. Still, it is very easy to clear up. For those new to cryptocurrencies, it is helpful to know that even technical papers take this terminology for granted. Throughout the rest of this guide, a capitalized “Bitcoin” will refer to the underlying blockchain technology and not the coins stored at an address.
Keeping a private key offline can be done on a hard or paper wallet. A hard wallet kept in cold storage simply refers to a digitized version of your bitcoin address and private key that is kept offline. There are new hard wallet devices surfacing all the time that promise greater and more convenient security. However, an old computer or flash drive would also be considered a hard wallet if all access to the Internet has been removed. A paper wallet is just what it implies.
Paper wallets offer a place to store cryptocurrencies in a non-digitized format. It is considered a safer alternative to online storage. It is also considered better than cold storing on hard wallets. Paper wallets involve printing out a private key. This a common option when storing large amounts of bitcoins.
Bitcoin Paper Wallets
Let’s begin with how to create a quick and easy paper wallet. This will help you notice the differences between transactions on the blockchain and those we have come to know over the Internet. Please note that this “easy method” for creating a paper wallet is not secure. We look at security in the following section Securing a Paper Wallet.
The Easy Way to Create a Paper Wallet
To quickly obtain a paper wallet, we begin by creating a private key. The objective here is to assign a unique string of characters to your bitcoin address. Coindesk lists a few paper wallet generators. For this guide, we’ll be using BitAddress.
Creating a private key on BitAddress is simple. Follow the instructions on the website that requires either moving your mouse around or pressing random keys. Once your private key has been generated, click on “Paper Wallet”. You can now print out the results to have the private key on paper as your cold storage wallet. To load your “paper” bitcoins back into digital form, just use the public key on the left of the printed material.
But remember, this method is not secure. Hackers can obtain your private key by compromising either your security or that of a wallet generator. For instance, your physical screen might be seen by another person. Malware is probably a more common way for hackers to bypass your security. Maybe a hacker is more creative than any of us have considered. After all, private keys for bitcoin addresses are considered valuable and worthy of more extensive hacking efforts. So unless you are disconnected from the Internet, please consider the security of your bitcoin wallet to be less than optimal. Unlike banking transactions, once lost, you cannot get your bitcoins back.
When you are met with an issue in the crypto space, know that you are not alone. Challenges are not uncommon. For this reason, you are very likely to find a streamlined solution to your problem. News headlines have made the world astutely aware of the common occurrence of hacking cryptocurrency exchanges and other sites. Without a blockchain secured internet, websites that offer cryptocurrency services are subject to the same hacking issues that have always plagued online transactions. The major blockchains, like Bitcoin, have put together security measures that are easily accessible to you.
Securing a Paper Wallet
Three downloads will be required:
- Ubuntu – you will be asked to choose your operating system
- Linux Live (LiLi) – installs Ubuntu on a flash drive
- BitAddresss (obtained from here) – offline version of the private key generator
Be certain to obtain the latest version of each before moving on to the next step.
Before Disconnecting the Internet
There are several things you need to confirm prior to disconnecting from the Internet. You’ll first need to use a flash drive for the Ubuntu download. Be aware that everything on your flash drive will be erased. However, it is an important measure toward preventing malware. You may even want to obtain a separate flash drive dedicated to this bitcoin transaction. Follow the steps below prior to copying the BitAddress file onto the flash drive.
- Open LiLi and insert your flash drive. LiLi will prompt you to select your flash drive. Refreshing this first step may be needed before you can see your flash drive in Step 1 of the LiLi installer. This completes the first step (of the LiLi installation).
- Next, select the source option “ISO/IMG/ZIP” and then click the Ubuntu (ISO) file you downloaded.
- Bypass the third step in LiLi.
- In Step 4, check the box “Format the key in FAT32”. Make sure that only this box is checked. This formatting option will erase all data on the disk.
- Click the lightning bolt and, when the dialog box pops up, confirm formatting in FAT32.
This is all that is required for the installation process. Before disconnecting, be sure to unzip and copy the BitAddress file to your flash drive.
Now Disconnect the Internet
Only disconnect your computer from the Internet once you’ve confirmed that LiLi has formatted your flash drive in FAT32 with Ubuntu installed and the unzipped BitAddress file copied. This process is the same for both Wi-FI and Lan connections. Be sure that you’re completely offline and that there are no permissions for remote access. Before moving on to the next step, test your printer to make sure it is operational.
Keep the flash drive connected while restarting your computer. Ubuntu states that most computers automatically boot from a USB. You should be able to run the Ubuntu operating system from your flash drive by either re-inserting the flash drive, restarting your computer, and pressing F1 or F12 during the computer startup process. Pressing F1 or F12 during startup will bring up the boot setup screen. Once there, you’ll be given the option to use the Ubuntu operating system on your flash drive to run your computer.
Ubuntu will then need to load. Once it has, click “try Ubuntu”.
Ubuntu provides a tutorial for installation on Windows and Mac operating systems. If for some reason it does not boot from your USB, you can refer to the Ubuntu tutorial directly. Requirements and further information are listed in the section entitled Troubleshooting the Ubuntu Installation.
Securely Printing your BitAddress Paper Wallet
To print from Ubuntu, click the System Settings (in the Ubuntu operating system) and then on Printers. You will need to add your printer. Make sure your printer is directly connected to your computer. Test its operation by printing out a page.
- Once your printer is working on the Ubuntu operating system, open a private browsing window. You can use FireFox do this by right-clicking and selecting “Open a New Private Window”.
- Next, you will need to type file://cdrom/bitaddress.org-master/ into the address bar. Hit enter.
- Click on BitAddress.org.html to create your private key. This is the same process as initially explained in the fast, easy way to create a paper wallet. Once your private key has populated, select “Paper Wallet” in BitAddress.
Finally, print out a paper wallet that contains both your private and public keys. The public key allows you to load the paper wallet back into digital form.
This guide to paper wallets is written for those new to cryptocurrencies. Additional information is provided to help you on your journey. The 99Bitcoins article “How to Create a 99.9% Secure Bitcoin Paper Wallet”, CoinDesk’s “How to Make a Paper Bitcoin Wallet”, Ubuntu.com, and Bitcoin.org were used in writing this guide. Video illustrations of the LiLi/Ubuntu method are available at the 99Bitcoins article. CoinDesk offers links to other paper generators, as well as, its own tutorial.
Open source solutions include:
For more elaborate solutions, you can visit:
Ensuring your Address is Correct
You do not need an exchange to verify that your Bitcoin address has been broadcasted to the blockchain. Several websites provide this information free of charge and without creating an account. Two of the most popular are:
Troubleshooting the Ubuntu Installation
Ubuntu is made to boot from a USB. We used Ubuntu combined with LiLi in the section entitled Before Disconnecting from the Internet. In case this did not work, you can visit the Ubuntu tutorial and follow their concise setup instructions. The next paragraph outlines these instructions. This additional information also provides hardware specifications for using Ubuntu.
Ubuntu can be installed on either Windows and Mac operating systems. You can use a USB stick, flash drive, or DVD with at least 2GB of storage. To create a bootable USB on Windows, an operating system version of XP or later will be needed. A writing tool will also be needed to create a bootable USB drive. Rufus is mentioned on the Ubuntu site. It is free and open source. We had used LiLi for the initial installation in the section entitled Securing a Paper Wallet. Finally, the Ubuntu ISO file can be obtained from their download center.
This additional information is presented for troubleshooting Ubuntu booting from a USB device. Please verify that you followed the setup guide in the section entitled Securing a Paper Wallet.
Bitcoin Paper Wallet from an ATM
Bitcoin.org lists several ways to buy bitcoins. One of them is using a Bitcoin ATM. These machines will print you out a paper wallet in exchange for another currency. The global map of Bitcoin ATM can be found at Coin ATM Radar. Most of these are located in the United States and Europe. They are concentrated near major metropolises.
General Information from the Bitcoin Developers
Bitcoin, while the first blockchain, is just one of the thousands of crypto options. It is considered the most stable in a volatile market. It also has the largest market cap. Additionally, market prices tend to follow the price of bitcoins. As the market leader, its core developers have provided a website where you can find an introduction, some basic information of how it works, and for a more in-depth understanding, developer documentation that details the underlying technology.
Many who get serious about Bitcoin investing will run a full node. At this point, it is recommended to at least skim the developer section. Reading the original paper, “Bitcoin: A Peer-to-Peer Electronic Cash System” written by Satoshi Nakamoto, is still recommended by the developers. Ongoing events can be found on the Bitcoin website. These meetups give investors a chance to ask questions of the people building the blockchain.
The developers keep a dedicated page about how Bitcoin works. You can visit the developer documentation section for all your Bitcoin questions. There is also an FAQ page for common questions, like what are the advantages and disadvantages of Bitcoin. The developers also provide a page to help you choose your wallet.
Developer Recommendations: Offline Transactions and Signatures
The developers discuss offline transactions here. They mention how cold storage is the safest way to keep your bitcoins. Backups and encryption are among the recommended measures.
Signing transactions offline involves two computers. One will be entirely disconnected from the Internet or any other network. This will be the computer that is keeping the entire wallet and as such will sign the transaction. Armory can be used for offline signatures. More information about Armory can be found here. A second computer on a network creates unsigned transactions. The second computer merely acts as a messenger service. It is incapable of moving funds. The developers recommend using a USB for signing the transactions between the two computers.
Once you grasp the fundamentals of an offline wallet, you will begin to see why the developers highlight signing offline transactions. The advantages of this method cannot be overstated when considering some of the major crypto exchange hacks of the past. While this may not be prudent for everyday transactions, it is certainly something to consider for large BTC transactions, or in the event that hackers expose significant vulnerability in using the Internet.
Hardware wallets are recommended as well. They are incapable of installing software. One nice advantage is that, since that funds are backed up, lost funds can be recovered. A paper wallet is still more secure against digital theft, but advancements in hardware wallets are ongoing and have already proven their worth.