How To Set Up Your Bitcoin Cold Storage For Free
What is a Bitcoin Wallet?
A Bitcoin wallet is software that runs on a computer, smartphone, or smart hardware device and provides a secure way to store, send, and receive Bitcoin. There are three major types of Bitcoin wallets: hardware, software, and paper wallets.
Hardware wallets are physical devices that store private keys away from the internet, software wallets are digital wallets that allow you to store private keys on a computer or mobile device (see our wallets page) and paper wallets are wallets that involve writing or imprinting private keys onto something offline, like a piece of paper or even metal, making them secure from hacking attempts.
Bitcoin cold storage is the practice of storing Bitcoin holdings in a secure offline wallet. This method of storage is commonly used by long-term holders who want to protect their Bitcoin savings. The best cold storage devices are hardware wallets, but they can be pretty pricey for Africans to get their hands on. The most affordable way to store your Bitcoin offline is by using software wallets like sparrow wallets or generating paper wallets offline.
What are Private Keys?
Your private key is a series of random letters and numbers that gives you control over the Bitcoin in your Bitcoin address, like the one generated from BitAddress. It is used to show ownership of the Bitcoin in your Bitcoin address and used to create the signatures that permit you to send out your Bitcoin.
Modern self-custodial wallets use seed phrases that simplify the process of generating and accessing bitcoin wallets by implementing the BIP39 protocol, which allows users to use a set of natural language words to access their Bitcoin wallet instead of a complicated private key. For additional wallet security, the BIP 39 protocol has an optional, advanced feature that allows you to create a passphrase that is used together with your seed phrase to access the Bitcoin in your wallet.
And so if you create a self-custodial wallet using a wallet like Sparrow Wallet and write down your Bitcoin address and private keys or seed phrase and paraphrase on a piece of paper, this automatically becomes a paper wallet, the same way a paper wallet generated online and copied out is also a paper wallet. Because a paper wallet is simply your Bitcoin address and private key or seed phrase written on a piece of paper, and as long as you have that piece of paper, you can always access the Bitcoin in that wallet.
Paper wallets are a form of cold storage where Bitcoin private keys are printed or copied on paper, which oftentimes also includes the wallet address. Paper wallets enable you to store your Bitcoin safely offline. This makes paper wallets significantly more secure compared to hot wallets, which are accessible online and vulnerable to hacking and theft. Creating a paper wallet is a simple and inexpensive way to store your Bitcoin offline and keep them safe.
There are many paper wallet generators available online, but not all of them are trustworthy. It’s important to choose a reputable one that has been around for a while and has a good reputation in the Bitcoin community. Some popular paper wallet generators include:
BitAddress is a popular and reputable paper wallet generator that allows you to generate a paper wallet offline. You can simply visit their website on your desktop or phone and create your wallet in a few simple steps. You can also add a passphrase to encrypt the paper wallet for additional protection by ticking the BIP38 encryption box
How to create your Paper Wallet:
N.B: For ultra secure Bitcoin paper wallets, you need to download the paper wallet generator software onto a clean and secure computer. Make sure to check the website’s security certificate to ensure that it’s legitimate.
For Bitcoin cold storage using software, we advise you to check out our wallet page for self-custodial wallet options.
How to Generate a Mnemonic Seed Phrase
Bitcoin paper wallet generators will most likely give you a long string of letters and numbers as a private key, and this is usually difficult to memorise. What if we told you there was a cool way to generate a seed phrase from that private key?
To convert a Bitcoin private key into a 12 or 24-word mnemonic phrase, you can use a tool called a mnemonic converter or a seed phrase generator.
Here’s how you can use the BIP39 tool to convert your Bitcoin private key into a 12 or 24-word phrase:
There you have it! You can then use this mnemonic phrase to restore your Bitcoin wallet in case you lose your private key.
It’s important to note that once you have generated your mnemonic phrase, you should keep it secure and private, as anyone who has access to it can potentially access your Bitcoin wallet.
How to Keep Secret and Safely Store Your Keys
Remember that your keys can be a long string of numbers and alphabets or the more modern BIP 39 protocol-generated seed phrase and paraphrase; they are the most important aspect of a paper wallet. So it is important to take steps to keep it safe and secure because if you lose your keys, you lose access to your Bitcoin and if someone gets their hands on your keys, they can easily steal your funds.
Luckily, there are some easy steps you can take to make sure your keys are as safe as possible. Here are some tips for creating and storing your paper wallet: