safely storing your coins: beginners guide

For the past few days I have been trying to figure out the best way to safely store my coins while I am waiting for my hardware wallet to arrive.

 

The best option I came up with:

1. offline wallet on a persistent linux live-system on a USB stick.
2. watching-only version of your wallet on a system of your choice.
3. optional: creating unsigned transactions in the watching-only wallet and then signing these transactions in the offline wallet.

 

I am not an expert by any means. Do your own research before doing anything and follow these instructions at your own risk.

 

Before you start scan your system. I recommend Malwarebytes.

 

Part I: Creating a persistent linux live-system on a USB stick

 

Choosing the right Linux distribution
It took me an entire day of testing out several Linux distributions (tails, ubunutu, xubuntu, debian) to find one that actually worked the way I needed it to: lo and behold Linux Mint!

 

let's get started:
a) download 'Linux Mint 18.1 Serena'. I went for the 'Cinnamon' edition.
b) download 'Universal USB Installer' https://www.pendrivelinux.com/universal-usb-installer-easy-as-1-2-3/
c) run 'Universal USB Installer' > In 'Step 1' select 'Linux Mint' > In 'Step 2' select the Mint .iso you downloaded > In 'Step 3' select your USB flash drive (>12GB) and choose to format it > In 'Step 4' move the slider all the way to 4089 MB > click on 'Create'> wait for it to finish. You now have everything needed to run your Linux live-system.
d) restart your computer and select to boot from USB device. If you don't know how to do this please search for instructions for your system.

 

Choosing your wallet
I went for electrum-ltc (https://electrum-ltc.org/) because it's secure, can be easily recovered and dosn't require the entire blockchain to be downloaded. For this part you will need a internet connection.

 

a) open up the 'Terminal' in Mint by clicking on the icon in the taskbar or searching for it in the menu.
b) run the following commands one by one and confirming with 'y' whenever requested:

1. sudo apt-get update
2. sudo apt-get install python-qt4 python-pip python-dev
3. sudo apt-get install python-slowaes
4. sudo apt-get install python-setuptools
5. pip install -U setuptools
6. sudo pip2 install https://electrum-ltc.org/download/Electrum-LTC-2.6.4.2.tar.gz
   c) Important! disconnect your internet now and make sure to never turn it on again on this live-system. Your wallet will now be created in an offline environment.
   d) start electrum through the terminal with the command: electrum-ltc
   note: electrum does not show up in the applications menu so you need to run this command any time you want to use your wallet.
   e) chose 'Create a new wallet' and 'Standard wallet' and follow the wizard.
   Important! write down your 'wallet generation seed' on paper by hand and keep it safe. It is the key to your coins and allows you to recover your wallet.

 

optional: testing your seed
I was a bit paranoid so I wanted to test if I was able to restore my wallet completely from scratch by using the seed I wrote down. If you want to do the same:

 

a) go to your 'Home' folder
b) in the location bar delete whatever is there and type ~/.electrum-ltc
c) hit enter > open the folder 'wallets'
d) delete the wallet file you see in this folder
e) now you can start electrum through the terminal and select 'Restore a wallet or import keys' to test your seed. If all goes well your wallet is restored.

 

Part II: Creating a watching-only version of your new wallet
A watching-only wallet will allow you to see what's going on in your wallet without ever exposing your private keys. Yay!

 

a) we will need the 'Master Public Key' from your offline wallet you just created. Grab it by going to Wallet > Master Public Keys
b) you can save it to a second freshly formatted USB stick.
Imporant! don't ever use the one which runs your live-system. It has your wallet file on it!
c) restart your system, unplug the live-system USB stick and boot into your normal operating system.
d) install electrum-ltc by going to https://electrum-ltc.org/
note: installation procedure depends on your operating system. For windows users just download and run the 'windows-installer'.
e) run electrum and in the wizard select 'Restore a wallet or import keys'.
f) enter the master public key you copied to your second USB stick.
g) you now have a watching-only wallet!

 

Part III (optional): creating unsigned transactions
This allows you to send coins from your wallet without ever connecting your offline wallet to the internet.

 

a) follow instructions in http://docs.electrum.org/en/latest/coldstorage.html#create-an-unsigned-transaction

 

over and out!
I hope this helps some of you.