Topic: [Guide] How to Create a Watch-only Wallet (for Electrum) (Read 336 times)

Unfortunately there are people who exploit the ignorance of others to make a profit on that, and cryptocurrency is currently an ideal area for such types of frauds. When a person does not distinguish private key from coin address then it's very easy perform such a fraud. This area is still more or less in a kind of gray zone, people are left on their own and many simply are not familiar with the basics.

Electrum has supported ALL of these methods for a long while, it was just that the options were a bit muddled and not "grouped" very logically...

For instance, v2.9.3 had:
"File -> New\Restore -> Watch Bitcoin Addresses" <-- Allows you to enter Addresses ONLY
and
"File -> New\Restore -> Standard Wallet -> Use public or private keys" <-- Allows you to enter master keys (ie. xpub or xprv) AND also accepts WIF private keys


The functionality was rearranged a few versions back which caused some confusion at the time... For instance, v3.0 -> v3.0.6 had:
"File -> New\Restore -> Import Bitcoin Addresses or Private keys" <-- Allows you to enter Addresses or WIF private keys
and
"File -> New\Restore -> Standard Wallet -> Use public or private keys" <-- Allows you to enter master keys ONLY (ie. xpub/ypub/zpub, or xprv/yprv/zprv)

People were trying to import WIF private keys using the "New\Restore -> Standard Wallet -> Use public or private keys" option... but it had been changed to only accept "master" keys and caused a bit of confusion. Especially with people following older guides on how to import private keys into Electrum.


The situation was then "clarified" somewhat in v3.1.0, with the options being relabeled as:
"File -> New\Restore -> Import Bitcoin Addresses or Private keys" <-- Allows you to enter Addresses or WIF private keys
and
"File -> New\Restore -> Standard Wallet -> Use master keys" <-- Allows you to enter master keys ONLY (ie. xpub/ypub/zpub, or xprv/yprv/zprv)

It looks like a new feature, I used to use the import public or private keys function previously.

I assume the import addresses or private keys still allows you to import a xpub/xprv key in to them still along with this new method.

Thanks for the link. I see that your tutorial has touched upon many facets of Electrum. As far as creating watch-only wallet is concerned, it contains more or less the same information as in this post, only in a very condensed form. For experienced users, that's more than enough, but beginners would certainly appreciate a more detailed explanation.


I'll have to look into it. The images in this guide are edited in the good old Photoshop.

Some time ago, I created a tutorial on using Electrum which includes less detailed explanation of creating a watch-only wallet.

Consider using LightShot. It will be easier for you to underline text.

Thanks for that. I figured it could be useful to make a guide with images because it is not always clear what key to export, and then, where and how to import it. 


Wow. It has never occurred to me that watch-only wallets can be used that way, to scam people. It's scary how creative these scumbags can be. So, the victim is happy believing they have obtained some BTC, until the moment comes they decide to spend their funds. Since they don't possess the private keys, they cannot spend the coins. And the thief may decide to keep these unspent transaction outputs intact indefinitely, fueling the illusion of the victim. People really need to educate themselves to be able to avoid frauds of this kind.

You made a simple but good guide for only watch wallet, it will probably help someone when they want to make this kind of wallet. We can often see that users are confused with watch-only wallets, importing private key and only address/public master key is something completely different. Some people get
deceived and buy BTC, in their ignorance thief just give them BTC address and instruction to import that address in only-watch wallet.

No doubt we need more education, many would like to use cryptocurrency, but it is hard for them to start. How to use wallets is one of the most important thing between everything else that needs to be understood and learned.

Thanks for the suggestion. I've never tried that before, but I think if you just paste your bitcoin address, the watch-only wallet will be just for that single address. With the described method above [using the master public key (MPK)], you can get a watch-only wallet for all the addresses in the Electrum HD wallet because they are all derived from this one MPK.

I think you can also make a watch-only wallet by using the bitcoin address but you must choose "Import bitcoin addresses or private keys" then paste your bitcoin address and you can now have a watch-only wallet.

Anyway, it's still helpful and didn't know this method of importing watch-only wallet by using public master key.

Watch-only wallet is a great way to safely "watch" the status of your wallet and the history of your transactions from your "ordinary" computer connected to the internet. At the same time, your private keys remain hidden in an off-line, air gapped computer (cold storage).

This post is a guide how to create a watch-only wallet for the current version of Electrum (3.1.3).

We will assume that you already have an air gapped computer with your Electrum wallet on it. If you don't, check out this post about what it means to create an air gap and then install a new Electrum installation on it, making sure you have the genuine Electrum software.

1. Go to the air gapped computer. The only thing you have to do there is exporting your master public key. Knowing the master public key is enough to reproduce all Bitcoin addresses associated with your wallet.  Click on Wallet --> Information like this:



and then copy the provided Master Public Key that starts with xpub...:



Copy it onto a USB flash to be transferred to your online computer.

2. Go to the online computer. You should have another Electrum installation there. Click on File --> New/Restore:



3. Give a name to your new watch-only wallet.



4. Choose Standard Wallet:



5. Choose Use a master key:



6. Paste the previously exported master public key:



7. You may choose a password to encrypt this wallet:



8. And now there's a message telling you that this wallet you've created is watch only:



As it says, you won't be able to spend bitcoins with it, but you will be able to monitor your funds and transactions.

For example, if you expect a payment, you will see it there, and you won't have to start up the air gapped computer for that.

Moreover, you will be able to prepare transactions and save them on a file to be signed by your air gapped wallet. Then the signed transactions can be brought back to your watch only wallet to be broadcast to the Bitcoin network. This is very useful, because you never put your air gapped computer in danger by connecting it to the internet. But we won't go into that in this guide.

Note: Your master public key should always be kept hidden. If an attacker steals it, they will know all your public keys associated with all your addresses. While they won't be able to steal your bitcoins, your privacy will be compromised.

Useful Link:

http://docs.electrum.org/en/latest/coldstorage.html