Tutorial – How To Store Your Bitcoins Securely Using Cold Storage
By Tamer Sameeh
Cold storage is the process of storing your bitcoins offline. This represents the most secure way to store your bitcoins, especially when large number of coins are considered. There are multiple methods for cold storage:
- Paper wallets
- USB drives or other forms of offline storage mediums
- Offline hardware wallets e.g. Trezor
- Bearer items e.g. physical bitcoins, engraving the private keys and bitcoin address on jewelry
- Brain wallets (not recommended)
Throughout this tutorial, I will show you via means of a simple-to-follow steps, how to use cold storage for storing your bitcoins securely. We will start by downloading and installing the bitcoin core qt desktop wallet for Windows; transferring your coins to your desktop’s wallet addresses and finally, importing your .dat wallet file, or private keys, and using them for cold storage using paper wallets, usb drives, hardware wallets or physical coins.
Note: Although cold storage is inarguably the safest way to store your bitcoins offline, it depends on safely storing files or private keys, which if lost, you will lose access to your stored coins. Also, using bitcoin core qt desktop wallet can be rather complex for non-professional users, so follow the instructions carefully and use more than one place to store your .dat wallet files and private keys.
Downloading and Installing the Bitcoin Core qt Client for Windows:
1. Download the Bitcoin Core package from the official bitcoin site:
2. After the download is complete, click “install” and on the setup window, click “Next” so start installing the software.
3. You will now be prompted to choose a destination folder, to install the client and download the whole blockchain which is more than 120 GB in size. Then, click finish to continue on installing the bitcoin core client.
4. After the client is successfully installed, leave the “Run bitcoin core” checkbox ticked and click “finish” to start your bitcoin client.
The client will be installed
5. Now, the bitcoin core window will open and connections with the network will be initiated. You may be prompted to allow access of the bitcoin core client to the internet. The client will start downloading blocks (as shown on the below screenshot). It will take a few days to download the full blockchain, depending on the speed of your internet connection.
Encrypting your wallet:
As you have installed bitcoin core, it is highly recommended now to encrypt your wallet before attempting to receive any coins. If you adjourn encryption, earlier bitcoin addresses may be prone for theft, in case of compromise of your system. This can be done by:
1. From the top menu bar, click on the “Settings” button and select the “Encrypt wallet” option. You will be prompted to enter a passphrase of ten or more random characters, or alternatively you can use eight or more words, as shown on the below screenshot.
2. Note that you have to memorize the passphrase you used, because if you forget it you won’t be able to spend the coins you have on your wallet.
Receiving your Bitcoins to your desktop qt wallet:
Before attempting to receive your first coins to the wallet, I recommend waiting for downloading the full blockchain to avoid any problems.
1. Click on the “Receive” button on the top menu and then click on the “Request payment” button on the “Receive” window. A window will appear showing your bitcoin address and its corresponding QR code, as shown on the below screenshot.
2. You can now use this bitcoin address to receive the amount of bitcoin you want to store offline via cold storage. However, I recommend testing first with a small amount of coins before sending the full amount you will store offline.
There are two ways now that you can use to store your bitcoins offline; you can either use the .dat wallet file, or you can export your “private bitcoin keys.”
Storing your Coins Offline Via the .Dat wallet file:
1. Disconnect your computer from the internet. Make sure that your machine is offline before proceeding to the next steps.
2. Run the bitcoin core client while you are offline. The client should show 0 blocks and 0 connections.
3. Change the wallet passphrase, via clicking on “Settings” -> “Change passphrase”. You will be prompted to enter your old passphrase, the new passphrase and then repeat you new passphrase as shown on the below screenshot.
4. Now, copy your wallet’s wallet .dat file to a USB drive. You can find your wallet .dat file in the folder you chose to download the client’s files and the blockchain.
5. Save your bitcoin address to a .text file and then save it also to the USB drive you used to store the .dat wallet file. You can retrieve your bitcoin address via clicking “File” -> “Receiving addresses”.
6. Turn off your computer. Before turning it on again, remove all electricity sources for around one minute. Also, remove the battery if you are using a laptop.
7. Backup your encrypted wallet .dat file using several storage places:
a. Send it to your email as a message attachment.
b. Create cloud storage accounts on Google and Dropbox and save it there.
c. Save it on 2-3 USB disk drives and store them in safe places.
8. Send a small amount of bitcoin to the address you stored on the USB drive. Use the blockchain explorer to make sure that the coins were actually sent, or add the address to Blockchain.info’s watch bitcoin address service.
Exporting your Private Keys:
Alternatively to using the .dat wallet file to store your bitcoins offline, you can import your wallet’s private keys and store them offline.
1. After starting your bitcoin core client, open the console via clicking on “Help” -> “Debug Window”.
2. Now, on the debug window, you will export the private key of the address you used to store your address. First, you will have to enter your wallet’s passphrase via the command:
walletpassphrase “EnterYourPassphraseHere” 60
The number following your passphrase determines the period of authorized access in seconds, so 600 means that access will be authorized for 10 minutes.
Then export your private key via the dumpprivkey command:
According to the speed of your machine, your private key will appear after 20-60 seconds, as shown on the below screenshot:
3. Now, copy the private key that appears and save it also using multiple ways:
a. write it down on a paper wallet that includes the private key and its bitcoin address.
b. save the private key and bitcoin address to a text file on a USB disk and store it in a safe place.
c. Create an account on Google Drive and Dropbox and save the private key and the bitcoin address to a text file saved on your storage space on both cloud drives.
Retrieval of Bitcoins from Cold Storage:
When you want to spend your coins after putting them in cold storage, you will either use the .dat wallet file you used, or import your private keys to the wallet you will use to spend your coins.
Using the .dat wallet file to retrieve bitcoins from cold storage:
1. Install the bitcoin core client on the machine you will use to retrieve the bitcoins from cold storage.
2. Disconnect from the internet, and then re-launch the bitcoin core client.
3. Now, replace the .dat wallet file, in the installation directory, with the .dat wallet file you used to store the bitcoins.
4. Reconnect to the internet and wait for the blockchain to synchronize and download the latest blocks.
5. You will find you bitcoin in your wallet’s balance and you can send them to any address.
Importing your private keys to retrieve your bitcoins from cold storage:
1. Install bitcoin core client and then exit it.
2. Disconnect your machine from the internet and then restart the client.
3. On the main window of the client, select “Help” -> “Debug Window”.
4. Decrypt your wallet by entering your used passphrase via entering the following command in the input box:
walletpassphrase “EnterYourPassphraseHere” 60
5. Now, import the private key you used to store your coins to the wallet via the following command:
6. The bitcoins will be added to the balance of your wallet and you can spend them via pressing “Send” on the top menu bar.
This was a concise tutorial to help you use cold storage to securely store your bitcoins. If you have any questions, I will be happy to answer them. Just add them in the comments’ section below and I will answer them as soon as possible.