Home Blockchain The Importance of Cold Storing Cryptocurrencies & Generating Offline Transactions

The Importance of Cold Storing Cryptocurrencies & Generating Offline Transactions

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Knowing how to properly secure cryptocurrencies is imperative to you not becoming a statistic. Generating private keys offline and storing them as encrypted text files on a USB drive is the absolute safest place your cryptocurrencies can be. Finding a balance between security and accessibility is also imperative. Securing yourself out of your cryptocurrency funds will be just as much a disaster as getting them stolen from you. This article is quite technical and has many steps, however, is the absolute most secure way to store cryptocurrencies. Welcome to total financial freedom and responsibility.

Hot wallets are dangerous

No matter how “unhackable” anyone says anything is, it is hackable. It is simply a matter of time. And what is the most vulnerable way to get hacked? The internet. Therefore staying as far away from the internet as possible is absolutely essential when storing cryptocurrencies. Storing cryptocurrencies on a hot desktop wallet or on an exchange is extremely risky and should NEVER be done.

Something many cryptocurrency investors do not know is that private keys and transactions can be generated completely offline. This puts you in direct control of your funds and makes it impossible for hackers, governments, and prying eyes to access your sensitive private key information.

In the following sections, I will detail out the cold storage methods I have used for 2 years with great success. I have yet to lose a penny of my crypto with these methods. Keep in mind that every coin’s wallet is different and that you should still do your own research. This article is solely intended for raising awareness of the importance of cold storage and should in no way be taken as financial advice on what to do with your cryptocurrency/money.

All these coins, how do I properly store them all? 

If you are like me, you have quite a diverse portfolio of digital assets. I hold 8 different cryptocurrencies, all requiring different wallets and different cold storage techniques. Finding compatible wallets that can both generate private keys/seed phrases and create offline transactions are what I look for. This requires a lot of research, trial, and error, but is well worth the effort.

Being properly equipped for cold storage is essential to the security of your digital assets. I use an old laptop with the wifi card taken out of it. It is not absolutely necessary to take the wifi card out, but it gives me that extra peace of mind that there is no possible way for anyone to access my private keys, except me. Getting as far away from the internet as possible is essential to properly cold storing cryptocurrencies. You may use any computer with a wallet-compatible operating system for this, as long as it is not (preferably never) connected to the internet. You may also use a smartphone for some wallets.

In addition, I use 5 USB drives. 4 of those will never touch the internet and are for storing private keys/seed phrases. They are all backups with the same information on them. The 5th one is used to transfer files from my online device to my offline device. This will be referred to as an “online USB drive”.

As mentioned before, every wallet is slightly different, however, the same general steps can be applied to each. See below:

  1. Download wallet from an online computer to online USB drive
  2. Transfer wallet file to offline device with online USB drive
  3. Install wallet application
  4. Launch wallet application from offline device and create a public key and private key/seed phrase
  5. Save private key/seed phrase as text files to multiple USB drives that will never be connected to an online computer (different ones than you used to transfer wallet file to your online computer)
  6. Encrypt private key/seed phrase text files with a password. A great, free encryption program that I have used for years can be found here.
  7. Write down/store password used to encrypt private key text files somewhere safe. NEVER LOSE/FORGET THIS PASSWORD. IT IS MORE IMPORTANT THAN YOUR PRIVATE KEYS
  8. Write down/print all private keys and seed phrases on paper as well. Store in a safe yet accessible place
  9. Put one or two USB drives in a locked safe as last resort backups. Put one or two in your desk drawer for quick access

store

Funding your newly created addresses

Ok so, so you have generated and secured your private keys offline. But how do you actually fund these addresses? In the next section, I will detail just how to do so:

  1. Launch your wallet application from your offline computer.
  2. Find your public key that corresponds to your recently generated and secured private key
  3. Copy and paste your PUBLIC KEY and save as a text file to your online USB drive
  4. Connect your online USB drive to your online device
  5. Open the text file containing your public key information
  6. Send your cryptocurrency to that public key and your wallet will be funded

Voila. You have funded your wallet and cold stored your cryptocurrencies in both digital and physical form and can have peace of mind they will never be stolen or lost. I have had great success with these methods and have yet to lose a cent of cryptocurrency. As long as you DO NOT lose your encryption password, you will have great success as well. As mentioned before, finding a balance between security and accessibility is extremely important. I feel as though generating private keys/seed phrases offline, encrypting the text files with a password and storing these files on multiple USB drives stored in different physical locations, is plenty of security whilst achieving accessibility.

I have cold stored my cryptocurrencies, how do I access them/send them?

So you’ve successfully created an impenetrable digital fortress to protect your cryptocurrency, but how do you get through this fortress? So is the power of cryptocurrency. All of the work you just put in permits YOU and only YOU to access/send your cryptocurrency. Below I have detailed out the steps for you to access/send your cold stored digital assets without any of your private key information ever touching the internet:

  1. Launch your wallet’s software from your online device
  2. Generate an offline transaction from your online device. This may require a bit of research on how to do so since every coin’s wallet is different
  3. Connect a USB drive with your encrypted private key information to your offline device
  4. Launch your encryption software from your offline device and decrypt your private keys with your password
  5. Launch your coin’s wallet program from your offline device
  6. Generate an offline transaction and digitally sign the transaction with your private key
  7. Copy and paste your digital signature as a text file to online USB drive
  8. Connect online USB drive to your online computer
  9. Open the text file, copy and paste the text into your wallet software from your online device
  10. Click send

Voila. You have officially sent your cryptocurrency without any sensitive private key information ever touching the vulnerable internet. Yes, it is a labor intensive process but in a virtual and physical world rife with hackers, corrupt bankers and prying eyes, it is absolutely necessary. These methods give you the greatest degree of security and financial freedom possible when accessing and sending digital currencies.

I hope this article has guided you in a more secure direction when dealing with storing, accessing and sending cryptocurrencies. Maybe you won’t follow it, but if it has at least sparked your interest in the importance of cold storage and offline transactions, I’m happy. Taking direct responsibility and control of your finances requires quite a bit of technical knowledge, however, is well worth the effort and time. No one, except you, can access your assets and that is extremely powerful.

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Perri Corsello
I am a college graduate with degrees in both neuroscience and psychology. Early in my life, I had a powerful spiritual experience and ever since was infatuated with discovering how those sensations, feelings, and thoughts occurred, beginning my journey into the world of neuroscience. I now work at a lab that studies neurological disorders. I only recently became interested in blockchain technology and cryptocurrencies. Bitcoin and the entire ethos behind it fascinates me. Therefore, I decided to utilize my writing and research skills gained in college and apply them to writing articles pertaining to these topics. I also still enjoy writing about neuroscience. Some of my hobbies include dirt biking, skiing and producing electronic music.

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