How to Secure your Bitcoin Wallet via Cold Storage
Posted on May 16, 2014.
A major concern within the Bitcoin community is how to successfully keep your bitcoins secure and safe. Like in real life your wallet needs to be secured and there are a few solutions to ensure your bitcoins are safe. Such methods include encryption, multi-signature wallets or anti-malware software. Each one of these methods provides a high level of security when used correctly but the most secure method is known as ‘cold storage’.
Online Storage: Why the Risk?
Bitcoin allows for you to be in complete control of your money and finances in the Computer Era. The digital currency makes it possible for the transfer of money to occur anyway around the globe and any given time, easily and quickly. However, with such great features come great security concerns.
Who can forget the notorious Mt. Gox scandal which publicly unwound earlier this year? The Bitcoin exchange filed for bankruptcy after losing $600m worth of bitcoins. Such stories highlight the importance of securing your wallet from loss, theft and seizure.
What is Cold Storage Bitcoin?
The Bitcoin terminology ‘cold storage’ simply means to keep your wallet’s private keys on an offline computer. As there is no hot electricity associated with your wallet and it is not connected to the computer or internet, your wallet is offline. There is no more secure way to store your bitcoins from computer vulnerabilities. You will need a Flash/Thumb drive or an external hard drive you can plug into your computer to keep your bitcoins offline until you need them.
How to Implement Cold Storage
- Firstly you will need to create a Bitcoin Core wallet address on your pc.
- Transfer the bitcoins you wish to store to this address.
- Encrypt this address using the Bitcoin Core wallet settings. Remember to write down your encrypted password for future reference.
- Go to where your Bitcoin Core wallet is located and open the Bitcoin Core folder. Copy the wallet.dat files over a new Flash drive.
- Close the wallet where your bitcoins are stored then re-open the application. Although the application can still be opened your bitcoins will not be shown if your wallet is closed.
- Before we delete the bitcoins of your PC check to see if they have been safely transferred to your Flash/ Thumb drive. Simply plug your hard-drive into your computer and open your wallet from your Bitcoin wallet app. If your bitcoins appear and your wallet is show then you have transferred your bitcoins successfully.
- Now you have your wallet saved on your Flash drive safely with your bitcoins, wipe all bitcoin wallets from your computer. Search for the wallet.dat files you have made a copy off and delete. Don’t forget to remove them from the trash/ recycle bin too.
- If you have no practice in cold storing bitcoins, it is advised you do a small test restore with a small amount of bitcoins first.
- Put your Flash drive (with the wallet.dat files) along with your encrypted password in a safe place. Sure Bitcoin recommend a hidden security box or at a safety deposit box with a trusted local bank if you are storing a lot of bitcoins offline.
Your bitcoins are now secured and safe in cold storage! But how do you get them out of cold storage when you need to use them? You may be pleased to know, quite simply. All you have to do is retrieve your flash drive along with your encrypted password and plug into a private computer. Replace all wallet.dat files in a Bitcoin Core wallet with the ones stored on your flash drive, and then wait for the Bitcoin Core wallet to synch with the bitcoin network. Done, just like that.
If you get stuck at any point drop us an email with your questions! After all, we’re here to help you with your bitcoins.