What is a Bitcoin Wallet?
Your Bitcoin wallet is what allows you to transact with the world. It gives you ownership of Bitcoin addresses that you can use to receive coins from other users, and it lets you send those coins to others. Basically, it works just like email, you can receive Bitcoins when you are offline (all wallets are compatible with each other) and send them when you are on-line.
Like in real life, your wallet must be secured. Always remember that it is your responsibility to adopt good practices in order to protect your money. Here are some options you should consider.
Backup your wallet - Bitcoin services and softwares allow you to backup your wallet, which can be printed on paper or saved to a USB drive. Stored in a safe place, a backup can protect you against computer failure and many human mistakes.
Encrypt your wallet - Encrypting your wallet allows you to set a password for anyone trying to withdraw any funds. This helps protect against thieves and hackers, though it cannot protect against keylogging hardware or software. However, you should make sure you never forget the password or your funds will be permanently lost. Unlike your bank, there are no password recovery options with Bitcoin!
Two Types of Software/Electronic Wallets.
- On-line wallet
- Off-line wallet
Online Wallets (Web-Based)
Here are my 2 favorite online Bitcoin Wallets:
Be careful with online wallets - Using an online wallet is pretty much like using an online bank. You are trusting someone else to protect your money while you have to remember and protect your password. You should always choose such services carefully. As of today, no online wallet provides enough insurance and security to be used to store value like a bank.
Offline Wallets (Client-Software)
Here are my 2 favorite offline Bitcoin Wallets:
- Armory – Very secure | feature rich | for advanced users - https://bitcoinarmory.com/
- Electrum – Extremely fast/efficient | uses very little resources - http://electrum.org/
Use an offline backup for savings - An offline backup of a wallet provides the highest level of security for savings. It involves storing a wallet only on paper and on usb keys in different secured locations that are not connected to the network. This is a good protection against computer failures, computer vulnerabilities, theft and human mistakes. As of today, this approach still requires some technical knowledge to be done correctly. We provide that technical knowledge in our Video Tutorials and Electrum comes pre-loaded on the USB Flash Drive we sell.
Two Types of Paper Wallets
Above we compared two types of electronic wallets, however another kind of offline wallet is the paper wallet. Below I will show you the best and most secure way to create a paper wallet using the "Doctor Evil" Wallet App. Two types of paper wallet will be explained, first the "Dr Evil" wallet you can print, and second the Brain Wallet you can remember.
Hard-Copy (QR Code printout)
The standard paper wallet is a hard-copy print out which includes a QR code.
Pass-Phrase (a "Brain Wallet")
The Brain Wallet is 100% secure because it is kept in your mind, no hard-copy is needed.
The most popular paper wallet (either hard-copy or pass-phrase) can be created here: https://www.bitaddress.org. However, in our example we use the "Doctor Evil" Wallet because it is more fun. Actually, the later is just a clone of the first.1 That means the all the steps we explain for making a 100% secure "Dr Evil" wallet would be the same because the source code is the identical.
- You can learn more about the "Dr. Evil" Wallet here: http://evilwallet.wordpress.com/
- Direct link to source code for this project: https://github.com/obesityspray/Dr.-Evil-Paper-Wallet
Click images to open, then use the "back" key to return
STEP ONE: Follow the GitHub link and download the source code.
STEP TWO: Unzip the file you just downloaded (see video: How to Unzip a File or Folder in Windows 7)
STEP THREE: Open the unzipped folder.
Next, open the "DrEvil" file. This an HTML file and it will open your default browser. I have read that Google Chrome works best, but any java browser should work just fine.
STEP FOUR: If you want to print a "Dr. Evil" paper wallet, click on the second tab. Notice this Public/Private key is being generated off-line. This is done using the programming code you downloaded, and it is 100% secure. Once you print this paper wallet and load bitcoins onto this address, you can reset assured no hackers will ever steal your coins. Just be sure you don't lose this paper because you need it to reclaim your coins (explained in the last step).
STEP FIVE (optional): Make a "Brain Wallet."
If you don't want to risk losing the paper wallet, you can make it a "Brain Wallet" (that way you don't need to print out the paper wallet). With a Brain Wallet all you need to do is remember your pass-phase (see below). When the time comes to redeem your coins, you can print out your paper wallet then.
STEP SIX: That's it, you done. But wait, there is one more prudent step you should take.
Save the "Dr Evil" application to a Flash Drive. That way, when you are ready to restore a Brain Wallet, you can use the same app to restore the Public/Private keys. If you lose the flash drive, no worries. You can also restore your Brain Wallet here: http://www.bitaddress.org (all you need to remember is the pass phrase).
STEP SEVEN: Redeeming your coins.
After you restore a Brain Wallet, print it out.
You can go to coinbase.com or blockchain.info to redeem the bitcoins on your paper wallet. You will find more info one those respective sites on how to perform this function. The easy way is to just let you smartphone or webcam read the QR Code (or you could do it the hard way and type in the Private Key by hand).