Topic: Offline Machine for Cold Storage - Update Question (Read 277 times)

Sorry if I drifted off the topic, but the further questions and comments occurred to me as I as thinking about Cold Storage.

I'll be more diligent in future.

Thanks

It is just a register, like a phone book. But instead of names you have addresses and instead of phone numbers you have balances. if you throw your phone book in the trash nothing changes. The same people will still have the same phone numbers and in this case the bitcoin will remain on the same addresses as previously because they are not in your computer, they are on the blockchain. Therefore, you can have 1 wallet installed on one device or have it installed on 20 devices. All you have is 1 or 20 ways to explore this register.

@op: are you sure you understand the concepts this time, cause it looks like i already explained most of the things you're asking to you 3 days ago (well, the initial question was new, thus deseverved a new thread, but most of the additional questions you've asked were answered/explained before):

https://bitcointalksearch.org/topic/m.53955380

in my first reply in above topic, i even pointed to a more in-depth, beginner-level (simplified) post i made earlyer that should have explained some of the more basic concepts you still seem to struggle with:

https://bitcointalksearch.org/topic/m.53953744

It's not a problem if you don't get something, but it might be nice if you'd continue to ask questions in one topic untill you're completely sure you understand everything.
Setting up any kind of wallet can be dangerous if you don't completely understand what you're doing, especially setups like air gapped wallets or paper wallets.

As for the new quesion you asked (about updating your OS): i'd recommand NOT touching the internet with your airgapped device... Write the seed down, and when your OS becomes REALLY outdated, you can install a new version from an offline medium and restore your wallet using the seed (i'd use dd to clone the current OS to an offline medium before scratching it tough)

An extra tip i didn't give you before: check out the TESTnet... Do an airgapped setup using electrum on the testnet, fund it with testnet coins, spend the testnet coins, reinstall your os, restore electrum on the testnet using the previous seed phrase, play, learn, make mistakes (learn from your mistakes), repeat... Untill you're certain that you can fund, spend, transfer, scratch, restore,... without losing testnet coins. Only then move to the main net..

Indeed, yes, I was confused.

The term "wallet" implied storage of some sort, like a wallet or purse that actually hold £, $, Euro notes etc.

It's beginning to dawn on me that, on one level, the wallet is really just a set of pointers to entries on the blockchain.

Yes, indeed, I was confused, hence the question.

Thanks for the link.

It seems that you don't understand or confuse in the above posts.

To make it clear how to make a transaction offline much better to check this guide on youtube so that you know how offline transaction works and how to sign a transaction from offline wallet.

- Electrum offline transactions tutorial - Youtube

To expand on BitCryptex's answer:

He is right in stating you should generate a receiving address from your watch only wallet. But technically speaking, you can generate a receiving address from either your watch only or your airgapped wallet, as they contain the exact same set of addresses. The only difference is that the airgapped wallet also contains the private keys to those addresses, and so can sign transactions, whereas your watch only wallet can only watch those address, as the name suggests.

There is also a common misunderstanding that your wallet is storing your bitcoin, which is why people get confused about having two wallets for the same address. This is not the case. The blockchain is simply a record of which addresses are allowed to spend which bitcoins. The bitcoins never actually leave the blockchain, and are never stored in your wallet. All your wallet stores is a list of addresses which you control, and the blockchain stores a list of all the coins those addresses are allowed to spend.

You will be able to that in the watch-only wallet without any risk. You will be able to generate payment requests and see new addresses in the Receive tab.

Thank you for that very clear explanation of how to send or spend with an offline wallet.

But how should the receive work?

So, when I buy some bitcoins, how and from which wallet do I generate the Receive transaction?

This is the whole point of an offline wallet, in that it remains permanently offline. You sign the transaction offline, and then transfer it to a computer with internet access to broadcast it. In practice it would look like this:

1 - Set up a "watch only" wallet on an internet connected device using your public key, but not your private key. This wallet can see your addresses and balance, but can't spend anything and can't be hacked since your private keys are not part of it.
2 - Set up an airgapped wallet on a device with no internet connection using your private keys. This wallet won't be able to see up-to-date balances, since it has no internet connection, but will be able to sign transactions using the private keys.
3 - Open your watch only wallet on your online device, create a transaction you would like to make, and rather than hitting "Send", click on "Preview" and then "Export".
4 - Save the unsigned transaction you just created, transfer the file to a USB stick, and then transfer the USB stick to your airgapped device.
5 - Open your airgapped wallet, click on "Tools", "Load Transaction", "From file", and open the unsigned transaction from the USB stick.
6 - Sign the transaction on your offline, airgapped wallet.
7 - Repeat the steps above to export your signed transaction, save it to the USB stick, transfer the USB stick back to your online device, and load the signed transaction on your online wallet.
8 - Broadcast the signed transaction.

There's more info on this process in the Electrum documentation here: https://electrum.readthedocs.io/en/latest/coldstorage.html

Understood everything said above except for the bolded part. How can you send without being online? When my Electrum is offline and I try to make a transaction, it doesn't get broadcasted until it's online.

if i were you i would never let my cold storage connect to the internet even in its initial step (installation). instead i would do everything offline:
- download a Linux OS such as Ubuntu
- verify its signature
- burn it on a DVD (or if your laptop doesn't have DVD put it on a USB disk and boot it that way)
- also download Electrum and verify its signature
- boot the DVD and install it on your laptop
- add log in password, disable network, encrypt folders you need,...
- install Electrum, add a strong password, write down the seed on a piece of paper and store it in a secure place
- send a small amount to that wallet to test this setup.
- spend that small amount to test if you can spend using an offline setup
- finish!

I think they can still get your bitcoin out from your encrypted wallet with a password even without the seed or password.

If you don't know about the tool called BTCrecovery they can brute-force the wallet file to take the password.


You have a point here.

Anyway, about your question, I think you don't need to update the OS if the Electrum installer works without any issue after installation. Just leave it as it is. But I think for Windows 10 OS some people experience some issues when running Electrum.  So I suggest if you are going to make an offline cold storage use ubuntu OS instead.

OP is creating an offline, air-gapped, cold wallet. He will presumably have a watch only wallet on an internet connected device, and use this air-gapped wallet to sign transactions. Although OP should absolutely keep his seed phrase backed up on paper as well, he can't sign transactions from a seed phrase.

OP to answer your question: If you are using a laptop for cold storage, then I would recommend only using it for cold storage. I would never connect it to the internet, and I would even go as far as removing the WiFi card from it so you can't accidentally connect. I would ignore any driver updates - they are irrelevant since you won't be using the laptop for anything other than your cold wallet.

As you say, if you encrypt your Electrum wallet with a strong encryption key, then even if someone steals the laptop they can't access your coins (unless they can guess or brute force your key).

I guess, as a newbie with electrum, hence the questions.

But, if all you have is a paper wallet, how do you sign transactions on the online machine?

And, (again I'm only going by what I read), if the seed and the password are kept secret, anyone stealing the offline machine still can't steal the bitcoins.

I have a question about your question, OP: if you're looking to store coins offline using Electrum, why not just write down the seed phrase and keep it in a safe place?  Why do you need any sort of computer for that?  As long as you've got the private keys to your coins, it doesn't matter how those keys are stored and it seems even less secure to use any electronic device to store them--because there's always a chance you won't be able to recover them.  Plus you'll have to keep the machine safe just like you'd have to keep the seed phrase safe, only it would be much easier to hide a piece of paper or even one of those steel wallets.

Just curious, not criticizing, and perhaps I'm misunderstanding something as well.

It seems the recommendation for a cold storage electrum wallet is a newly installed operating system on machine that has never been on line.

I'm re-using a spare laptop.

I've formatted the disk on another computer and setup Windows 10, downloaded from Microsoft.

Following the Windows setup, I now have a question.

There are almost certainly Windows updates which are not in the installation I downloaded. Also, things like laptop display drivers could benefit from being updated. That said, the laptop, stand-alone, appears to work OK.

The question is, should I just use the machine as is, or should I go online for the updates, before installing electrum?