August 21, 2022

Episode 35: Bitcoin Self Custody and Cold Storage (eg, Paper Wallets, Air Gapped Devices, Seed Calculators, and Hardware Wallets)

49 minutes

Discount link: https://www.hardblock.com.au/join/ozbitcoinpod

Hosts:

https://twitter.com/mission_bitcoin

https://twitter.com/jeremy_m16

Sponsored by HardBlock: https://www.hardblock.com.au

Notes

Why self custody?

- bank runs, bank bail ins, exchange insolvencies, censorship; and overall: third party ("counterparty") risk

- bitcoin ethos: not your keys, not your coins and don't trust, verify!

How to self custody?

- ideally with an air-gapped device (but what is an air-gapped device, what are the benefits, and does a hardware wallet count as an air-gapped device?)

Instructions

- Beginners: Use an air-gapped hardware wallet like ColdCard or Passport and follow their standard instructions; if you're looking for ways to improve from there, then: 1) interact with your hardware wallet using a watch-only FOSS software wallet (eg, Sparrow or Electrum), 2) connect your wallet software to your own node (eg, Bitcoin Core), and 3) spend using the standard PSBT (partially-signed bitcoin transaction) features within your chosen software and hardware wallet.

- Intermediate and Advanced (and courageous Beginners):

1) Use an air-gapped hardware wallet, access it via a watch-only FOSS software wallet (eg, Sparrow or Electrum), connect your wallet software to your own node and index server (eg, Bitcoin Core + ElectrumRS or Fulcrum Server), and then spend using standard PSBT features within your chosen software and hardware wallet.

2) Generate an offline cold wallet using an air-gapped device (eg, using Ian Coleman's BIP39 calculator, Bitcoin QnA's Seed calculator, or generate an offline wallet in Sparrow or Electrum wallet); save the seed words, passphrase, derivation path, extended public key and/or any number of receiving addresses; then you can query individual receiving addresses over VPN and/or Tor on public blockchains (or ideally on your own node if it has a block explorer feature), or alternatively you can load the cold wallet's extended public key into an online but watch-only wallet (eg, Sparrow or Electrum) that's connected to your own node; and when you're ready to spend, you can do so after sweeping individual receiving addresses (using the associated private key) into a new online hot wallet dedicated to spending.

Resources

https://iancoleman.io/bip39/

https://bitcoiner.guide/seed/

https://armantheparman.com/agc/

...more

View all episodes

By HardBlock