Before You Begin

Lesson 3: Backups and Offline Storage

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Welcome back to Digital Currency Ownership: Before You Begin, an original Coin Academy course designed to give you the tools and techniques you need to have in place before you embark down the path of digital currency ownership. This course is broken into 6 lessons. We’re currently on the third lesson: Backups and Offline Storage. In the course of this lesson, we’re going to look at backing up the hard drive of your computer, backing up your soft wallet, and how to create different offline storage techniques to hold critical digital currency data.

Let’s start by looking at hard drive backups. These are absolutely essential, they are a basic part of any security regimen. They’re what you fall back on in the case of disaster. Use an external drive for this. Good rule of thumb – get one that’s at least twice the size of your internal hard disk drive, this gives you enough room to do a complete backup and also room to grow.

A RAID system is optimal. A RAID is a software system that uses multiple hard disk drives to split the data up across the multiple drives and also many times create redundant backups. There are consumer RAID systems now that are quite affordable but this is an extra expense item. It is an extra maintenance item and for some people, it may not be the right choice. Though again, I repeat, it is optimal.

Cloud storage has become widely available these days and I know a number of people are using it. We consider it, however, to be the more risky alternative. The simple reason is you put your financial data in the hands of third parties. It’s better really for you to maintain control over your data locally.

If you are using Mac or Linux, there are good built-in backup routines that you can use. There is no need to look for third party solution. If you are on Mac, the time machine system coupled with the time capsule external drive is extremely effective, extremely easy to use, and it makes restoring data a breeze which a lot of other systems simply can’t say.

If you are on Windows, you might want to look at the third party systems Carbonite or Backblaze. Both of these are very reliable and easy to use and full – featured backup programs. There are other solutions, if you have something you’re comfortable with, great! Bottom line is, make sure you’re doing this. Moreover, set a schedule and maintain your backups. You need to have current backups. These programs that we’ve mentioned often offer their own scheduling, so use that schedule and set it up so it automatically takes care for you.

Also one tip, use incremental backups, it will get the job done faster. Full backups can be really time-consuming. Of course, your first backup should be a full backup, but thereafter, if you use incremental backup, it will only backup the things that have changed from the last time a backup was done.

Now let’s talk about soft wallets, these need to be backed up as well. The easiest way – buy a good quality thumb drive, backup your wallet to the thumb drive, encrypt the thumb drive, and only use the thumb drive for this purpose. You must store that thumb drive securely. Some digital wallets that we’ve looked at, they have really good backup programs built in to them. Just simply use those programs, that’s the easiest way to go.

Now let’s talk about offline storage. Your most secure storage of your digital currency data is offline. This is commonly known as creating the hard wallet as opposed to a soft wallet. You can choose whatever form of hard wallets suits you best. There are hardware solutions, there are paper wallets, and there is actually a wide variety of other media you can use.

In the next few slides, we’re going to look at the different options that are out there starting with the simplest – the USB. It’s the easiest and cheapest way to create offline storage. Basically, take a USB, encrypt it, you can use the techniques discussed previously, you can use TrueCrypt, dedicate the USB to this purpose, and store it securely.

Another option is what we call ‘static hard wallet’ and you see examples on the screen. There is an example of the CryoBit hard wallet which is made out of aluminium I believe and the bamboo hard wallet which is made out of sustainable bamboo. Basically, this is a way to record key account data, public address, private key, in a permanent form. There are several examples in the market.

There’s one called Bitkee that’s made out of metal, there are wood wallets obviously made out of wood, bamboo wallets, then there’s the CryoBit system which offers either the CryoCoin and the CryoCard. The price for all of these is fairly nominal. If you’re using a single private key or single public address, this is a pretty good way to go. It’s also possible for you to carry it. You can actually encrypt your private key on this so it’s the private key that displays if it’s scanned, it requires a password to be able to decrypt so it does not expose your private key. They’re handy little devices; they’re great way to carry around the data. If you are transacting out in the world, it’s the fast way to produce the data, and of course, you can just lock this in your safe or your safety deposit box and it’s taken care of.

There is also what we call ‘functional hard wallets’. These are essentially appliances. They add more functionality than the static hard wallet. Some of them will maintain your balances. They’ll allow you even to conduct offline transactions in some cases. They provide backup to paper functionality. There are three different examples we know of right now. There’s the Trezor, the Bitsafe, and the Hardbit. Bitsafe is actually still under development, they haven’t released the price for it, but photographs of those three devices are shown on the right hand side. They’re actually quite small, they’re all very small handheld things about credit card size, except for the Trezor which is a bit bigger.

Finally let’s look at paper wallets. Paper wallets are simply a way for you to make your own offline storage. You just print out the private key and you store it. There are Paper Wallet Generators that make this easier for you. There’s the device called Piper, a little over $200 is a bit expensive but it is actually a printer appliance for digital currencies. It does include the Armory Wallet built into it so it does more than simply print. But it does make it easy for you to print out each of those Bitcoins as they come in and store them offline. There are also free software solutions. Bippy is one. This generates encrypted paper wallets which is quite nice. You can also use this in conjunction with the static hard wallet to encrypt that QR code. Bitcoin Paper Wallet is an online service that is free and so is offline Bitcoin Wallet, a free service that allows you to create paper wallets and store securely your digital currency data. Some of the people that I know that are really security conscious about this whole thing, as soon as they purchase a Bitcoin or part of a Bitcoin, they take that private key, they print it out, they move that data offline and they remove all evidence of it from online. The only place it exists is in the offline hard wallet which is stored securely. This is actually the best way for you to protect your digital currency assets though it does require more time on your part.

That’s it for this lesson. Please join us for lesson 4 where we look at Mobile Security.