Cold Storage: The Best Way to Protect Your Bitcoin During a Hard Fork
Before there is a Bitcoin hard fork, you can take extra precautions to store your coins in a cold storage wallet.
Products such as KeepKey, Trezor Wallet, and Ledger Wallet can provide you with offline hardware solutions. If these devices are not accessible, or you have some last minute paranoia, you can always create a paper wallet for secure offline storage.
Storing any information on a computer can be risky. This risk is significantly increased when that computer is connected to the internet. Bitcoin storage is no different. If you have generated your bitcoin private keys online there are certain risks that you have knowingly or unknowingly accepted.
First Off: What Is Cold Storage?
Using a non-internet-connected device and/or program to generate your bitcoin wallet is the practice of cold storage. Additionally, with cold storage, you own full control of the private keys, and you have reduced the risk of potentially creating compromised private keys.
In contrast, a hot wallet would generate your private keys — that you may or may not control — while being connected to the internet. This is also referred to as custodial and non-custodial wallets.
Which Device Is Best for My Bitcoin Cold Storage?
There have been many devices created to help users with offline bitcoin storage. Each device offers something a little different, such as: A DIY raspberry pi wallet, Opendime (a one-time-use USB stick), and more commercial products, such as Keep Key. You can see a more exhaustive list on the hardware wallet wiki page.
KeepKey is a product that stores bitcoin private keys on an offline USB device. The device, once plugged into your computer, signs Bitcoin transactions when you request to do so. The keys are generated with a RNG that is installed on the device itself.
During the setup of KeepKey devices, you assign a four-digit PIN for added security if your device is stolen. Additionally, you receive a 12 phrase recovery seed during initial setup. This makes it possible to retrieve the private keys in the event your Keep Key is lost or stolen.
Trezor is an industry leader in hardware wallet devices. This USB device offers many similar features, such as: offline key generation, PIN device protection, and easy to use transaction signatures. Trezor also has the added feature of supporting storage for different altcoins.
Ledger wallet offers a slightly different look and feel in their design with the added feature of two-factor-authentication for enhanced security. Ledger’s cold storage device also offers alt-coin storage at a competitive price.
Feel Like You Are Running Out of Time? Paper Wallets Can Save the Day
The real downfall of the devices mentioned is that you have to physically possess the device to utilize the cold storage — which means you’ll be waiting on it to come in the mail after ordering. With the potential of a Bitcoin fork only five days away, the pressure is on to secure your bitcoins offline.
If you cannot get one of the aforementioned devices in time, a paper wallet can be a bitcoin savior. Paper wallets are pieces of paper that have the public and private key printed on them. Paper wallets are free and available to anyone that has an internet connection and a printer. You can access the paper wallet generator at Bitaddress.org
How to create a paper wallet using best practices:
- Visit https://github.com/pointbiz/bitaddress.org – this is the official home of the source code for Bitaddress.org
- Download the ZIP file
- Install this program on a PC which is offline
- Use a ‘basic’ printer
- Keep your paper safe from physical destruction
Bitcoin and all associated hardware and software are still in their infancy. A Bitcoin fork can be seen as a growing pain for this young technology. With even more issues likely to rise in the future, take this opportunity to become a better Bitcoin user by utilizing cold storage. By taking action now, you will be prepared for the next fork or hurdle that gets in the way of Bitcoin.
What are you doing to protect your coins in the event of a hard fork? Let us know in the comments below.
Images via Wikipedia, Ledger