Bitcoin – be your own bank (ps, you are in charge of security)
bitcoin security should be entirely down to you, if it is not then there is a chance that who/whatever you are trusting is going to take your bitcoin.
Practically speaking, if you are not in control of your private keys (you aren’t with many online wallets), you don’t have control.
My advice is to have most of your bitcoin securely deposited in a backed up, encrypted, trusted, determanistic, opensource wallet. My favourite is electrum (www.electrum.org)
Step by step guide
Download Electrum from https://electrum.org/#download (httpS not http)
On windows the portable version comes with the following warning from the creator ThomasV.
If you follow this guide exactly, you are fine to use the portable version.
Put the downloaded file on your desktop, double click, hit run
Pick your wallet type. Start off with the defaults (Create a standard wallet)
You need to write the words in the white box down. Do not save them on a computer in any way.
They are your seed, they are the most important thing. With these you can recover everything you need.
It is important you write the seed on paper with a pen. Store multiple copies somewhere safe.
Electrum now checks that you wrote your seed down correctly. The next box will be click able when you have entered the 13 words correctly.
Now enter a password. This is not needed to recover your wallet if you have the seed but it is important to use a strong password as this is what encrypts the file on your computer. If this is weak and you get malware on your computer you will loose your bitcoin. You can make it very very strong by using 13 words like you did with the seed but make sure you make a note of it somewhere.
Leave on default (Auto connect) for now, no real need to ever change this.
Electrum will open your wallet. It will show the status in the bottom left corner, initially it may be not connected. In this case the icon in the bottom right corner will be red to show you that you are not synchronised. Just wait for electrum to connect to a server and get synced. This will take less than a minute usually as this is a light client – you will not be downloading the entire blockchain.
When connected this icon will be green and your balance will display in mBTC (mili bitcoin, 1/1000 of a bitcoin, 0.001, this can be adjusted to BTC if desired in the settings)
Go to the receive tab, here you will have your first receiving address listed. To copy highlight and Ctrl-C or click the copy icon in line with the address on the right. This can be sent to whoever you want to pay you. When copying and pasting addresses always ensure that the address has not been changed by malicious code by looking at the first and last 2 characters. In this case 1H…pu (Addresses are case sensitive). The QR code can be scanned to pay to this address too.
If you go on your addresses tab you can see all the receiving addresses you have generated.
These are generated ‘deterministically’ from your seed. Unlimited addresses can be generated, but only those up to the Gap Limit will normally be generated. You cannot run out of addresses as they are generated as you use them. If you needed more than currently visible you can get more easily.
Once you have used an address (spent from it) it will move into your ‘used’ addresses under the change tab. Do not worry. You don’t need to manage which addresses have what amounts, electrum handles that for you. All you need to do is enter the amount and the address you want to send to and electrum will combine funds in different accounts to make the transaction as simply as possible.
(If you do need to use a specific address in the future it is very easy to do that (right click, send from)
Now you are ready to backup your wallet. You don’t need to do this as you have your seed. You could email a receive address and then throw your computer in a volcano but you would still be able to recover EVERYTHING from your seed. That’s all your addresses, all the spent transactions ect.
If you want to back something up digitally you can copy both the electrum data folder and the electrum.exe (shown below) and save them to a memory stick / in the cloud. This means you can drag this combination of files off your cloud to any computer in the future and access your bitcoins using only your wallet. The danger of this is that if you do this on a compromised computer (malware) you can lose your bitcoin due to keyloggers ect.
Personally I recommend putting them in your google drive folder (or equivalent) and running them from there only on your trusted device. This ensures that they are allways backed up online with no effort.
This all requires that you have a strong password to encrypt the files. If you have a weak or even no password then if someone gets into your cloud account they could get into your account. With a strong password (and two factor authentication on google drive for example) and your seed written on paper and stored in 3 different secret locations. You can be sure your bitcoin is safe.
before putting any large amounts in a wallet of any type put a small test amount in (£0.01) and attempt to recover it from fresh. If this works then you can go ahead and put your bitcoin in this wallet.
For long term storage store your bitcoin in cold storage. This can be done by doing the exact same process as here but removing from inside a clean OS (eg boot from tails/ubuntu running on a memory stick) with no other Hard drive connected and no internet connection. This ensures the data is truly only temporary as no data can be stored if booting from a live environment on a memory stick and you ram is volatile therefore cannot store any data after being powered down. Ideally this would be done from a machine that never again connects to the internet but so long as your memory stick is removed from the pc before reconnecting internet or hhd then you will be fine)