Crypto-savings paper wallet what, when, how and why

Posted in Articles on Mar 10, 2014

Hey folks!

I was asked to provide a guide on what, when, why and how to use a paper wallet to cold-store your crypto-currency savings. Rather than posting it as a comment on that particular thread, I thought the entire community could benefit from knowing the ins and outs.

WHAT?

A paper wallet, in the context of crypto-currency is one of the most secure methods of storing it. This is because the public and private keys for the paper wallet are unique, as every other, but if used correctly, will never have touched a computer connected to the Internet, and therefore have a far lower likelihood of digital theft. Think of it like a safety deposit box, to which only you have the key. Now this doesn't give you a free ticket to stick your coins in there and forget about them, but at least you don't have to stress so much about hard disk failure.

Long story short, if you've invested any savings at all in crypto-currency, a dark wallet is the best way to ensure you don't suffer like this guy.

WHEN?

You should consider using a cold-storage wallet when you've got savings of any kind, that you will rarely if ever need quick access to. The reason you need to be fairly convinced of not needing access is that with a paper wallet, it's designed in such a way that to send the coins anywhere else, they must first be imported onto an online machine. While Bitcoin has programs like Armory, designed to allow the running of a totally offline wallet, leaving the online machine to simply sign the transactions, many cryptos don't have such widespread adoption. For those, I suggest a well secured paper wallet.

WHY?

Well as I'm sure you're aware, it's pretty important for you to secure your investments. Also, having a minimum hassle method of keeping your coins in view and out of reach can't be a bad thing. You should note that an important part of cold-storage security is regular rotation, so it's not like a savings account at the bank where you can leave your money for many decades - because technology is progressing (and being broken) at such a rate, you should rotate your cold storage wallet relatively frequently. It's up to you to decide a rotation protocol though - it's a fine balance between security, effort and transaction fees.

HOW!?

Ok, now on to how. I'll give an example using my own instance of the setup here. If you don't trust my copy (and as the instructions state), feel free to download from my Github fork and perform a manual code-review to ensure I haven't altered anything but the Darkcoin-specific fields.. I've deliberately made it as transparent a change as I can to facilitate your reviews.

For testing purposes, using the site above will suffice, but I suggest you do not use my site for generating real addresses. For that, please download the official software and do so via a clean computer that isn't connected to the Internet (for example Debian Live).

Now, go to the site, and click "Skip" to go straight to the menu. Then select the type of coin for which you'd like to generate a key pair. It will reset itself back to the first page, but this time do not skip the first step unless you plan on using a different method of random number generation. The site is designed to require a minimum level of trust by the user, so there are alternatives if you don't want to use that random generator. Instructions are inside for using any random generation you like (dice rolling etc...).

For an unencrypted paper wallet, this is pretty much as far as I think I need to take you. There are simple steps in the menu at the top that should guide you the entire way through the process. Be sure to check out cantonbecker's store for supplies to keep your paper wallet in the best shape it can be.

ENCRYPTION

This process is actually really simple. When you go to print the wallet, you can select "BIP38 encrypt", which asks you for a passphrase (use a strong and long password). Make sure you cannot lose this password, or your paper wallet will be worth less than the paper on which it's printed. The encryption process takes a few seconds, and it may look like your browser has hung but it'll get there.

CAVEATS

Be very careful if you choose to use either a vanity or brain wallet. These are both susceptible to a number of attack, both social and technical. You should make yourself fully aware of these before using either.

Also remember that although this software is developed by experienced professionals, it is provided without any kind of guarantee. This means if you use this service and lose your crypto-coins, it cannot be made in any way liable to the person(s) responsible for releasing the software.

I hope that's helped to answer some of your questions. If you want to know anything else, ask away either in the comments here, on Reddit or on BitcoinTalk.

n00b