How to secure Bitcoins offline using Hardware Wallets

Why Set up an Offline Savings Wallet?

Modern operating systems are highly complexity, leading to a large attack surface. They also constantly leak information without the user’s knowledge or consent.

No matter how many precautions you take, it is very hard to ensure your wallets is reasonably secure on an Internet connected computer.

Because Bitcoins can be stored directly on your computer and because they are real money, the motivation for sophisticated and targeted attacks against your system is very high. Previously, only large organizations had to worry about advanced attacks.

Overview of existing solutions

The bitcoin ecosystem is still relatively young and unfortunately not many user-friendly and highly secure wallets have been developed yet.

Today these are the two best ways to secure your bitcoins against theft:

Ledger Nano S - The secure hardware wallet

1. Using a hardware wallet such as TREZOR, LedgerKeepkey

A hardware wallet has two functions – it stores your Bitcoins in a hardened device that is designed to be simple and highly resistant to the usual range of attacks (viruses, hackers, keyloggers).

2. Create a cold storage wallet using BitKey.

Cold storage wallets generate and stores private wallet keys on a clean air-gapped computer.

Used correctly, an air-gapped wallet is safe from all online threats, such as viruses and hackers. It is however still exposed to offline threats, such as hardware keyloggers, extortion, or people looking over your shoulder.

To spend funds from cold storage securely, an unsigned transaction is generated on an Internet connected computer. An unsigned transaction is akin to an unsigned check. The unsigned transaction is then transferred to the air-gapped computer to be verified & signed with the wallet keys.

Using a cold storage wallet on an air-gapped computer may seem tedious, but remember that security almost always comes at the cost of convenience.

Source: Bitcoin Wiki

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