Crypto Help: { can you trace a bitcoin wallet }

A helpful discussion about wallet security (esp. Electrum)

I was recently contacted via private message by a redditor who read a comment of mine about wallet storage (I assume this comment). I think there was quite a bit of useful information in it for other bitcoin beginners, so I am reposting it here in full (with permission). The redditor in question wanted to remain anonymous though.
I hope this is of use to some of you here!
From: Anonymous Redditor
I saw your post regarding your wallet storage and had a few noob questions if you don't mind.
My plan is similar to yours but I was unsure whether to use armory or electrum (electrum's seed creation scares me a bit).
You mentioned you have a bootable LINUX (ubuntu?) USB stick that you keep your wallet on....do you only boot this onto an always offline computer?
Do you use something like Truecrypt to further protect your wallet.dats?
Thanks for your time!
From: SanderMarechal
My plan is similar to yours but I was unsure whether to use armory or electrum (electrum's seed creation scares me a bit).
For me it is the other way around. Armory (and bitcoin-qt) scare me. Armory is just a wallet. It still needs bitcoin-qt running in the background. For me the problem is two-fold:
1) Size
bitcoin-qt (and armory) need to download the entire blockchain. That 13+ GB that takes hours to download and days to verify. And if you ever lose it, you need to do it again.
2) Random keys
armory and bitcoin-qt generate random private keys. You get 100. If you use a few (you use them when you send coins for example) then new ones are created. So, if you create an armory wallet and make a backup, that backup will have 100 keys. Then, if you make 33(!) transactions, your 100 keys are used up and you will have 100 different random keys. If someone then steals your computer (or your house burns down) then you cannot use your backup anymore. It only has the 100 old keys and none of the new keys. So you have lost all your bitcoins.
Why 33 transactions and not 100? Because of change addresses. If you have 10 BTC and send me 2 BTC then most wallets will create 2 transactions. 2 BTC from your old addres to me, and 8 BTC from your old address to a new (random) address. This process costs 3 private keys. 2 keys for the transactions and 1 key to create a new address.
This means that after every few dozen transactions you need to refresh your backup so it has the newer keys. For me that is impractical. It means that I need to keep my backup close by because I often need it.
Electrum does not have this problem. The seed solves this. Private keys are not random but are created from the seed. If you have the seed then you have, by definition, all the private keys you will ever need. Your backup can never be out-of-date. This is easy for me. I save the seed in a file, encrypt it, put it on an USB stick and give copies to a few family members who have safes in their homes.
If my computer is ever stolen, or my house burns down, I can go to a family member, decrypt the seed file and use the seed to restore my electrum wallet. Even if that USB stick is 10 years old.
You mentioned you have a bootable LINUX (ubuntu?) USB stick that you keep your wallet on....do you only boot this onto an always offline computer?
It depends on how secure you want to be. For maximum security, keep the computer always offline. But if you want to spend the bitcoins from your wallet, you will need to be online.
I use the USB stick for my savings account. It only receives coins and I do not send. So I do not need to boot up my USB stick. I have created a second wallet on blockchain.info that I use for day-to-day transactions. All BTC I receive goes to my blockchain account. Then I transfer a part of that to my savings account and only keep a bit of change that I need in the blockchain account.
Do you use something like Truecrypt to further protect your wallet.dats?
No. Electrum does not have a wallet.dat. It has the seed. I simply copy the seed to a TXT file and encrypt it using GPG and symmetric encryption. Example:
gpg --armor --symmetric --cipher-algo AES256 seed.txt 
Make sure you use a password that is strong and that you cannot forget! If you need to write the password down on paper and your house burns down, then you cannot decrypt the seed anymore!
From: Anonymous Redditor
Forgive the naivety here: Correct me if I'm wrong - The safest way to generate your wallet seed is on an offline computer correct? So, theoretically, generate the seed on an offline-only computer, copy to txt...encrypt. back up on multiple USB's. Then on your online computer, load electrum and import Seed?
Thanks so much for the thorough explanation! I'm a potato when it comes to reddit's bitcoin tip bot. Send me an address - would like to send some internet magic money your way.
From: SanderMarechal
The safest way to generate your wallet seed is on an offline computer correct? So, theoretically, generate the seed on an offline-only computer, copy to txt...encrypt. back up on multiple USB's. Then on your online computer, load electrum and import Seed?
Not quite. The risk with an online computer is malware and people breaking in. If you generate the seed on an offline computer and then move it to an online computer, you don't really take that risk away. You still have your wallet on an online computer which you use for day-to-day work and which is exposed to hackers and malware.
I suggest you make two wallets. One wallet is your "savings" wallet. You can use the USB stick Linux for this. Generate the wallet offline, backup and encrypt the seed onto multiple USB sticks and note down the bitcoin address somewhere so you can transfer funds to it. The only time you should use the USB stick to go online is when you want to transfer funds out of your savings wallet.
The, on your normal computer (or your smartphone if you prefer), create a second wallet using a different password. This is the wallet you keep only a little money in for your day-to-day transactions. Note down the seen, encrypt (with a different password than you used to encrypt the seed from your savings wallet) and add it to the USB keys. You can use Electrun for this second wallet as well, but you can also use something different. I use a blockchain.info wallet for my day-to-day expenses.
Whenever you have a larger amount of bitcoins in your day-to-day wallet, transfer some to the wallet on the USB stick. You don't need to boot up the USB stick for this. You only need the address you wrote down.
When you want to spend a large amount of money, boot up from the USB stick and transfer coins from your savings wallet to your day-to-day wallet. Reboot into your normal computer and use the day-to-day wallet to pay for what you wanted to buy.
The core of the issue is simple: Don't store a lot of money in a wallet on a computer that you use a lot. Computers that are used a lot get attacked a lot. Simple :-)
Thanks so much for the thorough explanation! I'm a potato when it comes to reddit's bitcoin tip bot. Send me an address - would like to send some internet magic money your way.
That is very kind! My address is: 1PAXiscvKoGRJ5XxMZvri3CMNeKYYb8wMQ
From: Anonymous Redditor
You are awesome:) Thank you again for the insight! Sent some your way.
From: SanderMarechal*
Your welcome. And thanks for the coin!
From: Anonymous Redditor
Last question(s) (I promise)...
Would a netbook like this be appropriate to 1)dban 2) boot up via USB ubuntu and 3) create the electrum seed?
This would of course never go online, be backed up and encrypted, etc.
http://www.newegg.com/Product/Product.aspx?Item=N82E16834131403
Thanks again.
From: SanderMarechal
I don't know. You would be better off asking this on www.ubuntuforums.org for example. I don't know if that computer's hardware is compatible with Ubuntu. Speed-wise the bottleneck will be the USB stick and not the CPU or memory. USB sticks are much slower than hard drives.
Note that you don't have to buy a computer for this. You can use the computer you already have and still run Ubuntu off an USB stick for your Electrum wallet.
What I said in my previous post about not using your day-to-day computer for your wallet, with that I mean the operating system and software. Not the hardware. Unless you're afraid someone put a hardware keylogger inside your computer :-)
From: Anonymous Redditor
Fascinating!
My tin foil hat is in full effect:) Thanks again for your time and patience.
From: SanderMarechal
Your welcome. Have fun with bitcoin!
Oh, I have a question for you now. Would you mind if I repost our entire private conversation here to /BitcoinBeginners? I think other redditors there would also be interested. And if I can repost it, do you want your username in there or should I replace it with "Anonymous Redditor" or something?
From: Anonymous Redditor
You can certainly repost it! And yes, if you wouldn't mind removing the username I would very much appreciate it.
Thanks for asking btw!
Anyway, I hope this is useful for some people out here.
submitted by SanderMarechal to BitcoinBeginners [link] [comments]

A Bitcoin Miracle (Story)

Ian had started mining bitcoins with all his friends in high school, as a hobby. He had researched the concept and realized it would be a fun thing to get involved in. His interest in it had been perked by his econ professor, when they discussed the pro's and con's of different types of currencies / payment methods in history. With his after school job stocking shelves he had saved up a bit of money and all he had to do was convince his parents the extra electricity him and his friends would be using of theirs, with the computers running in the basement. To save on costs, he wanted to keep the computers as cool as possible, using as much "passive" cooling as he could get away with. At dinner he spoke to his father, Ted, who like most parents, not only didn't understand what he was talking about, but claimed it was illegal on some level. "You can't just make money from thin air! The answer is no". Begrudgingly Ian went to his room and logged on to his and his friends favorite IRC server to let them know of the answer. Luckily Ian's bestfriend, Sara, had gotten the go ahead from her parents, who were thrilled she was interested in computers. They knew that any employment opportunities in the future their daughter would chase, would involve a strong grasp of current computing technologies. Unlike Ian's dad, Sara's parents had asked her how Bitcoin mining worked, and after she had explained it, her parents realized their daughter and friends weren't going to be actually printing money from thin air, but employing hardware and software to work for it. And electricity. They all agreed to meet tomorrow to plan it.
They met at lunch, outside, and sketched out the amount of money they'd need to spend in the start, as well as a monthly amount of cash they'd give to Sara to offset the cost of the electricity. They all were pretty amped about it, other then Ian. Ian returned home and decided that he'd do some mining on his own, regardless of what his father had said. He'd just sacrifice his own rooms electric power, so his father wouldn't ever notice it. This meant no more Xbox, no more air conditioning, and no more mini fridge. He built a small space in his closet, that had a hole for an air duct into the attic. With proper airflow achieved he began the process of transferring all his files from his desktop to his netbook. He had enough money for more graphics cards, but not an entire separate machine. He maxed out his computer with 4 HD 5830's after some research on cost/MHash, installed Ubuntu on the computer, started up cgminer on it, and configured the machine to mine with a few pools. He had them send bitcoins to a wallet he had made, in a truecrypt volume. Feeling pretty excited about it, he turned off his AC, and tried to fall asleep in the summer night.
Weeks and months and then a few years passed by, with some of Ian's time being spent at Sara's basement with the rest of the group, building their mining rigs, powering them on, configuring their mining pool, and making sure everything was running properly. One of Ian's friends dad was an engineer, and they had been able to borrow an infrared thermometer gun to double check the temperatures of the cards. Things were going real well. And when things are going well, something bad is bound to happen.
Ian began feeling more and more tired each morning. At first he thought it was because he was sleeping without the AC on, so he tried sleeping on the couch in the living room. Things only continued to get worst. Ian's mother took him to a doctor that accepted their health insurance, and after waiting a few weeks for blood tests, it turned out Ian had to have an MRI to verify a few things. The doctors soon saw the cause of his problems, which was a brain tumor that was causing elevated pressure in his head. Ian and his family went home to discuss what they would do, and how they'd pay for it.
While Ian's parents figured out a way to pay for surgery, they heard a crash come from the staircase. Ian had feinted on his way up to his room. As they carried him to the car all they heard him mutter was "bitcoins". Figuring it was due to him feinting they rushed him to the emergency room at the local hospital, where Ian was put in to a chemically induced coma, to prevent any brain damage.
Ian's friends came to visit him, but they visited less and less each week. One day, with only Ian's parents and Sara in the hospital room, the father mentioned to Sara the last thing Ian had said to him was something about bitcoin's, and he then told her about the fight he had had with Ian the year before. She smiled and told him about how they had ended up doing it at her basement, explaining what it was, and how most of their coins they had spent on pizza. She told him that the price of a bitcoin was rising, in U.S. dollars. The father smiled, realizing that his son may have been right all along, about the importance of a decentralized currency, and after Sara's explanation, it truly wasn't printing money from thin air. There was nothing illegal about it. A $20 dollar bill wasn't illegal because it could be used to buy drugs, so why should a bitcoin be illegal?
Later that night, Ian's father was going over the family bills that seemed to keep stacking up, trying to figure out how to pay for Ian's surgery, when he saw the electric bill was much higher then usual. He had recently turned the AC on in Ian's room, and plugged his mini-fridge in after stocking it with his favorite soda's, in anticipation of the day his son would come home. He went up to Ian's room and heard a whirring noise coming from Ian's closet. Behind a stack of comic books and shoe boxes he found Ian's desktop. "What was it doing back here?" He decided to give Sara a call, though it was late, she lived across the street so it wouldn't be a problem. He showed her what he had found, and after some clicking and typing, she hugged him and screamed for joy. Confused he asked her what was she so happy about. She showed him Ian's Bitcoin wallet, which was still mounted, and explained that Ian had been mining privately Bitcoins for awhile now. His Bitcoin wallet showed 1803.78004 BTC. Before Ian's father could ask why this was good news, Sara showed him the current rate of a bitcoin on mtgox, and after some calculations, Ian's father realized enough money existed to pay for Ian's surgery!
Sara spent the rest of the night setting up accounts on various BTC exchanges, transferring funds, and then trading bitcoins for U.S. dollars. The next day was spent going from bank to bank, to pick up wire transfers, and then it was time for Ian's surgery.
When Ian recovered from the surgery, Sara explained to him what had happened, while Ian's father and mother held his hands. Ian's dad apologized and told him he'd support his bitcoin hobby. Sara interjected and caught Ian up on how GPU mining was soon being replaced with ASIC mining. Ian looked up at his father and casually mentioned "Well... my birthday is coming up..."
|Just something that came to me on my bus ride this morning
submitted by qwertytard to Bitcoin [link] [comments]

multibit wallet and truecrypt

Hello all just a simple question. I have my bitcoins stored in a wallet file using multibit and have put the wallet file in a truecrypt volume which is then saved on a usb stick as well as a couple cloud drives.
My question is - whenever I use multibit to send or receive coins from said wallet, do i need to replace all the other copies of my wallet that I have after having made the transactions? I think I did a small test of this before and it seemed to be the case but I worry a bit as my wallet file changes file size after making transactions and I'm not 100% sure my copies of my old wallet are still valid.
Another quick question is does anyone know why I get two wallet files whenever I start up multibit? I get the default multibit.wallet but I also have another file like multibit-20130401183007.wallet.
I see that the initial numbers are the current date but the rest of the numbers are fairly random and I don't know what this second wallet file is for - can I safely delete these extra wallet files? I can't even open them in multibit but they must somehow be related to my regular multibit.wallet file.
Thanks /bitcoin
TL;DR
Do i have to replace my old backups of my multibit.wallet files after making transactions or not? Also why do I get random multibit-1272349123123.wallet files?
submitted by BrokenThumb to Bitcoin [link] [comments]

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