Monday, June 27, 2011

Worth more than the computer they are stored on...

Reporters sometimes ask me how many bitcoins I own; I think they assume that I'm a bitcoin millionaire.

I wish!

I don't feel comfortable telling the world exactly how many bitcoins I own (I don't feel comfortable saying how many dollars I have in the bank either), so I tell them I own thousands of bitcoins-- not tens or hundreds of thousands. At about $17 each, that means my bitcoins are worth a lot more than my computer, and I worry about them being lost or stolen.

Here's how I keep them safe:

First, I have an advantage because I'm a geek who keeps track of the latest security threats and know the ways malware can worm its way onto my system. I keep my operating system and web browsing software up-to-date, never open email attachments I'm not expecting to get, am very careful about what programs I allow to run on my computer.

Even so, I'm human so I expect that sooner or later I'll click the wrong link or view a YouTube video containing a zero-day Flash exploit and my desktop computer will be compromised.

So I keep most of my bitcoins on an old Mac laptop that I don't use for anything else. It is turned off most of the time; I only turn it on when I need to move some bitcoin from 'cold storage' because I will want to use them soon. I turn it on, let bitcoin run for a while to catch up with the block chain, and then send as many coins as I think I'll spend in the next week or so. I'll wait for the transaction to get a confirmation or three, then shut it back down.

I use a long, strong pass-phrase to login, and my home directory is encrypted using the OSX's built-in FileVault protection, so even if somebody manages to find out where I store that machine and steals it they won't be able to decrypt the wallet without the pass-phrase.

To make sure I don't lose the bitcoins if I lose the laptop, I also encrypt and back-up the wallet "to the cloud" -- I use gpg to encrypt and Amazon's S3 for storage, but there are plenty of great file encryption and online backup services.

All of this is much more complicated than it needs to be and is still vulnerable to "rubber-hose cryptanalysis"; bitcoin is still at the do-it-yourself bleeding-edge-technology stage. I expect there to be ultra-secure, low-cost, easy-to-use, "you don't have to trust us" services or devices for storing bitcoins within the next year or so, and when there are I'll switch, and I'll write a blog post encouraging you to switch.


Elliot said...

how could there possibly exist "you don't have to trust us" services or devices for storing bitcoins?

Gavin Andresen said...

See for gory details on schemes to require that two devices cooperate to send bitcoins, such that neither can send bitcoins without the other.

Zooko Wilcox-O'Hearn said...

Thanks for this practical advice, Gavin.

The open source secure storage project "Tahoe-LAFS" is interested in developing features which make it more useful for securely storing valuable things like Bitcoin wallets. Here is a mention of this topic in a recent edition of the Tahoe-LAFS Weekly News:

Your feedback would be appreciated.

Beryl Ostting said...

I just wanted to say that sadly, the public knowledge about BitCoin has far, far outrun the need for better protection.
It would have been much better for your project if it had continued in relative quiet for another year or two.
As it is, I think a lot of users without your level of sophistication are going to lost money one way and another.

psypher246 said...

Hello. Check out this site: Seems to be quite a cheap secure way to store your coins

Bill Claxton said...

I agree with your approach. I'm using TrueVault to create a secure container for my BTC wallet and other confidential data. Then I created a folder on Dropbox called 'safedeposit' that syncs my secure container for safe-keeping in the cloud.

Anonymous said...

Yes it is absolutely correct way to do it i.e. a dedicated device which is online only when you need to send money out.