In this guide, we will walk you through How to set up a Bitcoin cold storage wallet. We’ll be discussing the completely free and highly secure ‘paper wallet’ method. In July 2017, one of the largest Bitcoin (BTC) exchanges, Bithumb, was targeted by hackers who stole millions of Won. The infamous BTC Exchange MtGox was also hacked in 2014. Thieves made away with nearly $500 million (around £370 million) worth of Bitcoin, forcing the exchange to shut down.
Getting Started With Bitcoin Cold Storage Wallet
Before diving into the process, you may be wondering, “What is cold storage?” In simple terms, cold storage refers to keeping your bitcoin completely offline. Although ‘hot’ (online) wallets are perfectly safe – in addition to being highly convenient for everyday usage, including for trading – cold storage wallets, because they never touch the Internet, provide an even safer method for simple, long-term storage. They also make a unique way to give bitcoin as a gift.
Generating a private/public keypair
The first step to getting your bitcoin into cold storage is creating an offline Bitcoin address. This address will have a “public/private key pair” that is created without ever touching the Internet. A public/private key pair can be thought of as an email address and its corresponding password. To ensure the maximum level of security, it’s important that this key pair never be exposed to the Internet.
Setting up your cold storage paper wallet is fairly simple and requires very little technical knowledge. The one “hard” part is that, to ensure your paper wallet’s private and public keys have never touched the Internet, you’ll need to save the webpage that generates the keys, disconnect your device from the Internet, open the saved webpage on your desktop, then generate the keys.
For Bitcoin (BTC), we recommend this wallet-generating tool.
For Bitcoin Cash (BCH), we recommend this wallet-generating tool.
ALSO READ: What Are Central Bank Digital Currencies (CBDCs)?
Printing the page
The step is to make an offline copy. Later you’ll use the public key (also known as the address) to load your wallet with bitcoin, and the private key (also known as the password) to sign transactions if you want to spend the wallet’s contents.
To make an offline copy, you simply print out the public/private key pair. Actually, you could just write the key pair on a piece of paper. However, as long as you’re sure your printer and computer are disconnected from the Internet, it’s perfectly safe to hit the print button (thereby avoiding the potential for human error when writing out dozens of randomly generated numbers and letters).
Congratulations, the hard part is over! You have now created an offline Bitcoin address and made a hard copy of it locally for safekeeping. You can now safely reconnect to the Internet.
On the printed page should be the public Bitcoin address in both alphanumeric form and QR code form with the corresponding private key, also in alphanumeric and QR code form. If you plan on keeping a lot of value in this wallet, we strongly recommend that you store the paper wallet somewhere secure, such as a fireproof safe. If there isn’t much on it, you can think of the paper wallet like, for example, a $20 bill (this is what makes it a fun way to give out some Bitcoin).
How does this work?
Adding funds to your cold storage wallet
Since your new paper wallet has a public address just like any other Bitcoin wallet, loading it with Bitcoin is a simple matter of sending Bitcoin to the address which is shown in both alphanumeric form and QR code form on the printed wallet.
Redeeming bitcoin from cold storage
When you are ready to spend from your cold storage wallet, you will need to import the wallet’s private key to a Bitcoin wallet that connects to the Internet (a “hot” wallet). Any wallet that supports importing private keys will work.
Once you have successfully imported your paper wallet to your “hot” wallet, any funds previously sent to the paper wallet are now ready to spend.
Note: Never reuse cold storage wallets. Once you have redeemed them online, follow the process outlined above to create a new one when necessary.
Reader note: creating cold storage manually is not for everyone, there are many hardware wallets available with decent community approval in the market today. You have to decide for yourself which method is right for you and your situation.
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