bootstrap template

        


                                                         "The best bitcoin is the one you store yourself"

METHOD 2: Electrum wallet software on your personal computer with password protection

Security Level = VERY LOW TO LOW


Amount of work to setup = Little to Moderate
 
Advantages = Electrum wallet software is open source. It is one of the wallet programs listed on bitcoin.org. It is available for everyone to download and analyse. It has been around for a long time and uses secure address generating processes. It was one of the first personal wallet programs and has been in continuous improvement since it became available. Their key generation procedure is one of the most trustworthy there is for creating your own private and public keys. It is also relatively simple to use and has many neat features.
 
Having electrum software on your computer is like having an offline and/or online wallet you can transact with. It is easy to send Bitcoins to others regularly and these transactions are harder to track because the software can generate heaps of new addresses to send and store bitcoins from. It has many additional functions which are constantly being added and is completely free to use. When it is used correctly, to store moderate amounts of bitcoins which you regularly transact with, it is a good option. 
 
Disadvantages = The security and longevity of your bitcoins is not as strong as other methods of storage listed next. Apart from the fact that you can quite possibly lose your bitcoins stored on the electrum wallet in a computer crash or other accident like a house fire, electrum wallet software is likely to be regularly used and therefore offers more opportunities for a thief to try to steal your bitcoins. They can do this via computer viruses, key loggers, trojan horses, malware, rootkits, phishing attacks and other means. The software is also usually housed on your main computer so a thief has a clearer target to direct their attacks. We believe all online computers are prone to having key loggers on it, and therefore think it is a better idea to transact with Method 1, the localbitcoins.com wallet until you become familiar with using the electrum program in an offline / online manner where transactions are signed offline and then broadcasted online.
 
The random 12-24 word sequence (called a seed) that is used to initially create your wallet addresses is possibly the weakest aspect of the electrum wallet, next to the password you choose to have the software encrypt your bitcoin public and private keys. The word sequence is particularly vulnerable to keylogger programs that may be on your computer, and is also difficult to memorize, and hard to hide away safely. These are all factors which make it susceptible to loss. The security of your electrum wallet is only as strong as its weakest link. Therefore, you should only use Method 2 (as a standalone) to become familiar with how bitcoin works and to send and receive small amounts of bitcoins to yourself or other people. For much stronger security; as soon as you know how setup and use the wallet and addresses in Method 2, it is recommended you create and store new bitcoin addresses, private keys, word sequences and wallets using Method 3 or Method 4 and transact with your bitcoins using Method 3 or Method 4.

GUIDELINES


  • It is critically important to ensure that your computer is keylogger free when setting up this storage method (electrum wallet). See our ‘Keyloggers and malware’ article in our Security section for more information. It is less important to be malware and keylogger free once you have already setup your wallets and created the Bitcoin addresses (via the seed), since the built in encryption and secondary security measures will prevent hackers from stealing your information without physical access to your computer.
 
  • It is strongly recommended however that all serious users planning to store actual bitcoins here, take the time and effort to create their Bitcoin addresses using Method 3 (Steps 1 – 9.7) before returning to Method 2 to install the electrum software on their primary computer operating system. Method 3 is absolutely 100% keylogger/malware proof when done correctly.
 
  • The following steps are specifically for a Windows 7 operating system but you should be able to get it to work on most Windows operating systems and some other operating systems.

HOW TO DO IT


Step 1: Download and install Electrum desktop software
 
        Step 1.1: Download Electrum (Windows Installer version for Windows operating system) from https://electrum.org/#home onto your computer. Download the latest version of electrum and if it doesn’t work, upgrade or install the necessary computer software on your computer so that it does work. Only download from the official website shown here. 
 
        Step 1.2: Double click on the downloaded file and install it on your computer. Use the default folder it suggests [usually Local Disk (C:)>Program Files>Electrum]. Windows 7: Install > Close.
 
        Step 1.3: Go to the folder where the Electrum software has been installed [usually Local Disk (C:)>Program Files>Electrum] and create a shortcut for it on your desktop (if one doesn’t already exist). Windows 7: Right click ‘electrum’ application > Create shortcut > Yes.


Step 2: Run installed Electrum software
 
These instructions are specific to electrum-2.7.18 since this was the version that was current when this guide was first prepared, however newer versions are likely similar with only some minor differences. If you like you can practice first with installing version electrum-2.7.18 to see how it works before using the latest version. Do note that you will not be able to use electrum-2.7.18 online since it is an old version that is currently not supported by the current electrum servers. The directory for old versions of the software is https://download.electrum.org/ .
 
        Step 2.1: Double click the ‘Electrum’ shortcut on your desktop to open it.
 
        Step 2.2: The first screen will ask ‘How do you want to connect to a server?’
Leave it at the default setting ‘Auto connect’ and then press ‘Next’.
 
 
Step 3: Create your Bitcoin wallet files, seeds and addresses
 
         Step 3:1: With the Electrum – Install Wizard screen showing, select ‘Standard Wallet’, then press ‘Next’. 
 
         Step 3.2: Select ‘Create a new seed’ then press ‘Next’.
 
         Step 3.3: The next screen should show 12 randomly generated words. Open a ‘New Text Document’ on your desktop (Windows 7: right click anywhere on ‘Desktop’ > select ‘New’ > select ‘Text Document’) and then and record these words in it. Now mix up the order of these words and remove some words. These first words will now be your ‘seed extension words’.
 
        Step 3.4: Press ‘Back’, then ‘Next’ again on the Electrum screen. This should create a whole new series of 12 words. Record these 12 words in the same Text Document in step 3.3. These second 12 words will be your ‘seed words’. 
 
         Step 3.5: Press ‘Options’, tick the ‘Extend this seed with custom words’, then press ‘OK’. Then press ‘Next’.
 
         Step 3.6: Copy and paste your ‘seed extension words’ from step 3.3 onto the Electrum screen. Then press ‘Next’.
 
         Step 3.7: On the next screen copy and paste your ‘seed words’ onto the screen then press ‘Next’.
 
         Step 3.8: Now copy and paste your ‘seed extension words’ onto the screen and press ‘Next’.
 
         Step 3.9: Enter a 10- 14 character password then press ‘Next’.
 
Congratulations, your seed, wallet file and addresses have been created.
 
        Step 3.10: Now select ‘File’; then select ‘Open’; then right click on the file named ‘default_wallet’; select ‘Rename’; then rename the file into something you can easily keep track of such as ‘3 Feb 2017 Windows 7- Wallet A’. After renaming, press ‘Cancel’ to go back to the main screen.
 

If you have already created a wallet file or wallet files (with the seeds, addresses and passwords) previously using Method 3: steps 1 – 9, then you can now insert Usb No. 2 or Usb X and open the folder titled ‘electrum_data’, and then ‘wallets’, and then copy and paste these into your newly created Electrum folder on your main operating system (Windows 7 in our case). The default folder where these wallets are stored is usually C:\Users\Name_of_your_computer\AppData\Roaming\Electrum\wallets. If you can’t find it, then on the main screen of the Electrum program after you have created the default wallet go to ‘File’, then ‘Open’ then take note of the folder where the wallet files are stored.
 
Once you have copied and pasted these files you can immediately start using them. Delete the default wallet file you just created in Method 2 as this is no longer needed and remember to completely format Usb No. 2 and Usb X (including ‘Eraser’ full disk format).
 
If however you have not previously created a wallet or wallet files using Method 3, then continue onto Step 4
 

Step 4: Record your seed and seed extension words onto paper
 
        Step 4.1: Print out the words in your New Text Document onto paper. If you don’t have a printer then carefully write down your seed words and seed extension words onto a piece of paper. Be very careful when doing this to make sure you have written them down correctly. 
 
        Step 4.2: Close the unsaved New Text Document. Do not save it anywhere on your computer. If you have saved this document previously then delete it.
 
        Step 4.3: Hide the piece of paper you have printed or written onto, somewhere safe which only you have access to. Remember anyone who knows your seed can recreate your entire wallet and use any Bitcoins stored in it (even without knowing your password).


ADDITIONAL INFORMATION


  • Step 4 above should only be a temporary measure if used at all. Once again, it is strongly recommended that all serious users planning to store actual bitcoins, take the time and effort to create their Bitcoin addresses using Method 3 (Steps 1 - 9.14) before adding the wallet files onto their primary computer operating system. Method 3 is absolutely 100% keylogger/malware proof when done correctly and will securely store your seed, seed extension words, and bitcoin public and private keys.