Category Archives: Bitcoin
Bitcoin Miners Signal Revolt in Push to Fix Sluggish Blockchain – Bloomberg
You may not know it by looking at bitcoins recent price surge, but the infrastructure underpinning the worlds most popular virtual currency is teetering.
While speculators continue to push the value of the digital money to record highs against the U.S. dollar, the system that verifies bitcoin transactions -- known as the blockchain -- is more backlogged than at any point in the currencys eight-year history. The number of transactions awaiting verification is up more than fivefold from a year ago, and the jam is forcing users to pay increasingly high fees to speed up confirmations, which in some cases is making bitcoin more expensive to use than Visa Inc. or PayPal Holdings Inc.
Now, after more than two years of bitter infighting among the global bitcoin community about how to fix the problem, some of its most influential members are giving up on reaching consensus. Instead, theyve begun backing a controversial solution known as Bitcoin Unlimited. If the gamble pays off, it could ease congestion and may help bring the community back together. If it fails, the digital currency could face a hard fork into separate variants, effectively splitting bitcoin into two currencies.
We will switch our entire pool to Bitcoin Unlimited, Wu Jihan, founder of the worlds largest mining organization Antpool, said in an interview on Mar. 10.His group accounts for 15 percent of blockchain activity and is hugely influential in the community. We cant tell how the hard fork will play out. We will only know by the time we get there.
Wu is backed by Roger Ver, an early evangelist who amassed a fortune and got to be known as Bitcoin Jesus. He opened his own mining collective to the publiclast week. Relying on his high profile in the community and an aggressive pricing scheme, Ver said hes already attracted about 3 percent of global miners and convinced them to back Unlimited.
Photographer: Chris Ratcliffe/Bloomberg
We need to get to 60 or 70 percent of miners on board to activate Bitcoin Unlimited, Ver said in an interview at his office in Tokyo on Mar. 9. Combined with others, Id say were already close to halfway to our goal at this point.
Bitcoin Unlimited is essentially a software upgrade to the blockchain. Years ago, bitcoins early developers imposed a cap on the amount of data it could process. While that slowed down the network, it was seen as a necessary safety measure against potential attackers who could overload the system. Now, Unlimited supporters say the blockchain is robust enough that it doesnt need any limit at all.
While most agree the blockchain is stronger, critics such as Peter Todd, a key coding contributor to bitcoin, say that removing the data cap is a risky move which will leave bitcoin vulnerable to governments and global banks. Without a limit, large organizations would use their resources to out-muscle smaller miners and effectively take control of the blockchain and bitcoin itself.
Bitcoin Unlimited is simply irredeemably broken, Todd said in an interview on Mar. 11. Large miners have every reason to vote the size up to push their competition out of business.
Todds camp contends that a better approach to easing the congestion is to make the blockchain more efficient. Last fall, the group released their own solution, called SegWit, which uses a different method to verify transactions. Todd says adoption has been slow due to resistance from Unlimited supporters.
Ver said the lack of support is evidence that SegWit doesnt address the actual problem: Say you havent had any water to drink for a day and a half, and you also need a haircut. Do you drink some water or go to the barber shop? SegWit is like going to the barber shop.
While the rift over bitcoins future has gone on for more than two years, Todds group have mostly held the upper hand and received support from the majority of miners who prefer to wait for a consensus-based solution instead of rocking the boat. Thats helped pave the way for speculators to bid the digital currency higher, to total market value of about $20 billion.
But with Wu and Ver last week striking out in support of Unlimited, the question now is whether other major miners will follow suit. Ver says he plans to step up lobbying efforts, especially in China which is home to the majority of bitcoin mining.
If and when the Unlimited camp attracts a comfortable majority, Ver says the next step would be choosing a date on which to upgrade the blockchain to the Unlimited software. If Todd and others in the bitcoin community decide not to join and embrace the existing system with their own software, it could effectively splinter bitcoin.
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What happens after that is unclear, but a precedent exists in ethereum, the worlds second-most popular digital currency. Last year, a disagreement caused one side of the ethereum community to back one version of the software, and the other side to adopt another version. That resulted in ethereum being divided in to two different currencies, each with its own individual price. Both versions tumbled in the months after the split.
Ver says its worth taking the risk because inaction will only worsen the crippling backlog: If bitcoin is more expensive or slower than traditional financial systems, people arent going to use it.
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Bitcoin Miners Signal Revolt in Push to Fix Sluggish Blockchain - Bloomberg
Norway Asks Online Drug Dealers to Pay up, in Bitcoin – newsBTC
Prosecutors in Norway are demanding three darknet drug dealers to pay the penalty in Bitcoin. Read more...
Bitcoin has been portrayed as the most favored currency among the criminal kind. Thanks to increased usage of the likes of Bitcoin among the darknet marketplaces. However, the pseudonymous nature of Bitcoin leads to criminals getting caught on a regular basis. But usually, those who face the trial usually end up having their cryptocurrencies, devices confiscated, sentenced to jail time with or without a monetary penalty slapped on them.
The penalties paid by the dark net drug or weapons dealer caught in the act is usually in the form of fiat currency, but not in Norway. Recently, reports have emerged that the Norwegian prosecutors are demanding three convicts, charged with dealing drugs on dark web marketplaces, including the Silk Road to repay the profits in Bitcoin. If the court does allow the prosecutors to have it their way, then the dealers will be forced to pay about 120 bitcoins, which is worth around $140,000. But it doesnt end here. They are also demanding 3.1 million in the countrys native fiat currency, Norwegian Kroner as well.
The case dates back to the Silk Road days, and the three men were arrested way back in June 2015 for running an online drug distribution ring. The arrests were the result of a 2-year long investigation by Norways law enforcement authorities along with other international investigators. The arrests which took place in Oslo, Norway, also resulted in the seizure of a considerable amount of narcotics, computers and even an indoor marijuana farm.
News articles on media outlets state the prosecution saying that they have enough evidence for the sale in Bitcoins to convict the drug-dealing trio. However, the demand for profit repayment in Bitcoin is heard for the first time in the Norwegian judicial system. The demand made by prosecutors could soon set a precedent for other courts within and beyond the region to adopt a similar practice.
The governments interest in seeking Bitcoin payment, which is not even a recognized currency in Norway also sets a milestone in Bitcoins timeline, pushing it one step closer to recognition as a mainstream currency.
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Norway Asks Online Drug Dealers to Pay up, in Bitcoin - newsBTC
New Hampshire’s Bill to Deregulate Bitcoin Passes House – CryptoCoinsNews
New Hampshires House of Representatives have moved a proposed law that would excuse people who use virtual currencies such as bitcoin from money transmitter regulations in the state.
House Bill 436, which passed by a vote of 185-170, will now proceed to the state Senate for further consideration. The bill was sponsored by Rep. Barbara Biggie, co-sponsored by Rep. Keith Ammon and John Hunt, all of which were early adopters of the digital currency.
If approved House Bill 436 will free consumers leaving choices in their hand instead of having to register with transmitter regulators. It would also mean that many companies in the state of New Hampshirewould be capable of operating without following strict KYC and AML systems.
New Hampshire is considered a bitcoin-friendly state.
Before the proposal of House Bill 436, digital currency exchanges, including cryptocurrency exchange Poloniex, had announced that they had decided to suspend activity for New Hampshire customers in October 2016. This was down to the states strict digital currency regulations.
At the time, the states 2016 law for licensing money transmitters included digital currency.
On its website, Poloniex, said:
Due to changes in New Hampshires regulatory statute as it applies to cryptocurrency, Poloniex will temporarily suspend New Hampshire account creation until further notice.
Poloniexs decision to suspend its services to customers was down to the fact that the state was attempting to introduce its own New York BitLicense regulatory framework.
A $500 nonrefundable application fee was required for each license application. Each money transmitter applicant was also obliged to post a continuous surety bond amounting to $100,000, while an applicant or licensee needed to maintain a net worth of less its daily average outstanding money transmissions for the previous calendar year or $1 million.
Naturally, with the approval of House Bill 436, this will then reverse the regulation that caused Poloniex and other exchanges to cease functioning in New Hampshire, standing in contrast to New Yorks BitLicense.
With the passing of the bill in the House and potentially in the Senate too, it appears that those in support of the bill are keen to see wider adoption of Bitcoin in New Hampshire.
If the Senate passes House Bill 436, it could lead the way for an ease in regulations within other states in the country who are interested in adopting new technologies such as bitcoin, but weary of the strict and, often, expensive regulations involved in doing so.
Featured image from Shutterstock.
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New Hampshire's Bill to Deregulate Bitcoin Passes House - CryptoCoinsNews
Bitcoin Miners in Venezuela Forced to Pay Bribes or Face Arrests as Government Tries to Shut it Down – newsBTC
As the government in Venezuela cracks down on Bitcoin miners without legal grounds, corruption raises its ugly head. Read more...
The Bitcoin community in Venezuela faces an unusual situation. They are uncertain about their operations as the law enforcement agencies in the country are trying to put a stop to it. Meanwhile, if the cops do come knocking, they are left with two options to shut shop or pay up and hope they take a lenient view and let them operate.
People have found a use for Bitcoin under a variety of circumstances, some of them when faced with a dire need. Venezuelans probably fall into the category of desperate people trying to overcome the countrys failing ecosystem by opting for an alternative currency.
Many news reports in the past few months have offered a detailed description of Venezuelas Bitcoin market and how people are using the digital currency to order essential goods and supplies including medicines from online stores. While Venezuela faces the worst possible inflation, the government seems to be more concerned about curbing the use of Bitcoin.
The Venezuelan government agencies have been cracking down on cryptocurrency businesses and miners. Recently, the countrys largest Bitcoin exchange, SurBitcoin was forced to temporarily suspend services after Banco Banesco froze its accounts. Also, the law enforcement authorities recently arrested Bitcoin miners and confiscated their mining equipment.
The main reason for such a condition to arise is the mismatch between Venezuelas laws and governments interests. As Bitcoin miners continue to exploit the cheap, highly subsidized electricity supplied to the residents, the government feels that the resources are being misused. At the same time, Bitcoin mining is a legitimate activity, and no law in the country states otherwise.
Recently few news outlets published reports of miners being forced to pay bribes, as high as $1000 per piece of confiscated mining hardware. With any viable mining operation running at least 100 hardware units, the extent of bribes collected in one single operation can go as high as $100,000. Few miners have allegedly paid the sum as they were scared of being jailed on various charges including terrorism, money laundering, computer crimes and anything the agents could come up with.
Even people who are remotely involved with Bitcoin businesses are being detained and questioned in Venezuela. All these developments make it quite evident that the government is not comfortable about the rise of an alternative economy while it fails to rein in the one that has gone haywire.
The future of Bitcoin businesses in Venezuela is constantly under threat and unless the situation improves, the country may lose out on much more than Bitcoin.
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Bitcoin Miners in Venezuela Forced to Pay Bribes or Face Arrests as Government Tries to Shut it Down - newsBTC
Bitcoin ‘mining’ is big business in Venezuela, but the government … – Washington Post
By Mariana Zuiga By Mariana Zuiga March 10
CARACAS, Venezuela Venezuela has become widely known as an economic basket case in recent years. But with its cheap electricity and volatile national currency, the country has at least one competitive advantage: Its a good place to make the digital cash known as bitcoin.
Bitcoins are increasingly accepted online for buying real-world goods and services. And, unlike the Venezuelan bolivar, the virtual currency has been going up in value.
Making bitcoins is known as mining, but it requires a powerful computer instead of a pick and shovel. Those computers produce bitcoins by creating elaborate algorithms, but they also suck up a lot of electricity. In many countries, the cost of running a mining terminal can run higher than the value of the actual bitcoins.
Thats not the case in cash-poor, oil-rich Venezuela, where state-subsidized electricity is so cheap its virtually free. But Venezuelas government isnt pleased. Its cracking down on bitcoin mining, even though the country has no laws on the books outlawing the currency or its manufacture.
In November, Venezuelas secret police raided the house of two brothers in Caracas and found more than 90 mining terminals. The agents demanded $1,000 in bribes for each machine, according to the brothers, who spoke on the condition of anonymity because they fear arrest. The brothers said they paid the bribes to stay in business.
This isnt an isolated case and such operations appear to be expanding. In January, Venezuelan federal police arrested four bitcoin miners in the town of Charallave. They were accused of Internet fraud and electricity theft. According to an Instagram post published by Douglas Rico, the director of the federal police agency CICPC, the miners were endangering the stability of the towns electrical service. During that same week, Edward and Erick Tapia Salas were also arrested in Caracas for selling bitcoin-mining machines through a Venezuelan e-commerce site.
Miners have taken to websites such as Reddit to share their fears of being caught. Miners are getting jailed and accused of terrorism, money laundering, computer crimes and many other crimes,read one commentfrom a user who claimed to be Venezuelan. It's getting crazy here and I really don't want to waste my life for money.
Those who keep mining in Venezuela said they have started taking extreme precautions to hide their activities. Luis Len, 25, a business student and bitcoin miner, said miners have learned not to keep all of their computers in one place. If they do, the state power corporation can detect the abnormal amount of electricity the mining terminals use.
That was [the brothers] big mistake, Len said. They were consuming 20 times the normal level of electricity for that house.
Venezuelas crackdown on the bitcoin industry started in March 2016 with the arrest of two miners in the city of Valencia. According to news accounts of their arrest, Joel Padrn, 31, and Jos Perales, 46, were charged with electricity theft and possessing contraband computers.
But miners and bitcoin users are not the only ones at risk. When Padrn and Perales were detained, Daniel Arraez, a 30-year-old economist who was working as a consultant for a Venezuelan bitcoin market called Surbitcoin, was called by the secret police to testify in their case. Padrn had told the agents that he and Perales had exchanged money through Surbitcoin.
Arraez was asked to come to the secret police offices in Valencia. To my surprise, I never returned home, he said. He was placed in the same cell with Padrn and Perales and charged with making illegal transactions and criminal association.
Arraez said his arrest was a way for the government to blame someone else for its ruinous policies, including chronic mismanagement of public utilities. We were only the scapegoats of the disastrous situation in the countrys electricity sector, he said.
After eight months in jail, Arraez was released in October. Hes awaiting a pretrial hearing. Despite having to share a small cell with eight other men and seeing the sunlight only twice a week, he said Venezuelan miners should keep making bitcoins to advance technologically like other countries.
The crackdown has not stopped Venezuelans from using the currency, either. The continued decline of the Venezuelan bolivar has fueled a growing internal demand for bitcoins. According to Surbitcoin, the number of bitcoin users in the country rose from 450 in 2014 to 85,000 last year.
In a country with the worlds highest inflation rate and strict controls on currency exchange, users see bitcoins as a safe alternative to protect their savings. People have also used bitcoins to buy basic products online that have disappeared from Venezuelan shelves.
But the widespread adoption of the currency seems unlikely any time soon: nearly one-third of the population doesnt even have a bank account.
Read more:
Thousands march against Maduro government in Venezuela as crisis deepens
Venezuelas currency is so devalued it no longer fits in ordinary wallets
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Bitcoin 'mining' is big business in Venezuela, but the government ... - Washington Post
Let’s Be Real: Bitcoin is a Useless Investment – Wall Street Journal (subscription) (blog)
Wall Street Journal (subscription) (blog) | Let's Be Real: Bitcoin is a Useless Investment Wall Street Journal (subscription) (blog) The Winklevoss twins are an unlikely source of philosophical musings about the nature of money. But the rejection by U.S. regulators of their plan for an exchange-traded product holding bitcoin is a good time to ask why bitcoin might have any value ... |
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Let's Be Real: Bitcoin is a Useless Investment - Wall Street Journal (subscription) (blog)
Bitcoin May Go Boom: A Guide to This Week’s Big SEC Decision (Update) – Fortune
[Update : The SEC rejected the ETF proposal on Friday afternoon, causing the price of bitcoin to slump. ]
Bitcoin is at a critical juncture. Any time now, the Securities and Exchange Commission will issue a decision that could throw open the door to a flood of new capital, and change how many investors regard the digital currency.
The SEC's bitcoin decision, which is over three years in the making, is due by Friday. Here's a plain English guide to what might happen, including why the decision is so important and how it could affect the price of bitcoin.
The agency must decide if the BATS stock exchange can change its rules to offer a bitcoin ETF (exchange traded fund), which would let people buy bitcoin like a common stock. The ETFcalled the Winklevoss Bitcoin Trust ETFis the creation of the Winklevoss brothers, who once fought Mark Zuckerberg for control of Facebook, and now own a large stock of bitcoins.
It's all about liquidity. While there are plenty of places to buy bitcoin, many investment funds can only hold assets that meet certain regulatory standardssuch as approval from the SEC. If the agency approves the ETF application, money managers who want to include bitcoin in their portfolio are likely to jump in. Meanwhile, millions of ordinary people will have an easy new way to buy the digital currency. I can't really phrase it any better than this quote from BitMex , a bitcoin analysis site:
If the SEC approves the Bats rule change, all manner of American muppet retail investors can yolo into Bitcoin via a regulated ETF. The pool of eligible money that can easily obtain exposure to Bitcoin will dramatically rise. There are various predictions about the amount of money that could flow into Bitcoin. In short, it will be Yuge.
The SEC is obliged to make the decision by March 11, which is this Saturday. That means the ruling is almost certain to come out on Thursday or Friday.
According to Blake Estes , an alternative asset expert at the law firm Alston & Bird, the decision will appear on this SEC web page , and everyone will find out at the same time.
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People are calling this a coin toss. Those who think the SEC will approve the ETF point to the skillful work carried out by the Winklevoss lawyers, and to the fact that bitcoin is far more mainstream than it was even two years ago. Today, many more peopleincluding regulatorsare familiar with digital currency and how it works. There is also a sense that a bitcoin ETF is sooner or later inevitable.
Pessimists, on the other hand, can point to two sets of concerns that could lead the SEC to give the thumbs down. The first of these relates to how the Winklevoss intend to run the operation. Some people are uneasy that the proposed ETF would use Winklevoss-controlled businesses to source and store the bitcoins that would back the shares. The other set of concerns lie with bitcoin itself. The digital currency has been subject to wild price fluctuations, driven in part by heists and insider antics. According to Estes, the SEC may worry the agency's approval of an ETF could lead to a bubble inflated by bitcoin novicesa bubble that could then pop.
"Some fear it could be a g ood opportunity for legacy players to find the next sucker to take it off their hands," said Estes.
Bitcoin has been on another tear of late, nudging a record of $1,300 per unitmore than an ounce of gold. Some of this likely reflects investor optimism the SEC will approve the ETF, meaning a future price rise is partly baked-in. Nonetheless, there are broad expectations the short term price of bitcoin will go crazy if the SEC says yes.
If the SEC says no, it will have a negative effect, though probably not a very dramatic one. The reason is there are two other ETF application before the agency. One is called the Bitcoin Investment Trust, and was developed by Barry Silbert, a well known figure in the digital currency world. The other, called SolidX, is distinct in that proposes to insure its bitcoin assets.
As noted above, there is a general feeling that approval for a bitcoin ETF of one type or another is inevitable, and so a rebuff by the SEC to the Winkelvoss proposal would only be a temporary setback.
That's something only you can decidepreferably after a lot of research. Today, many people see bitcoin as another alternative asset class to add to a diversified portfolio. But bitcoin has an extremely volatile history , and has been prone to spectacular crashes, so if you're averse to risk, it's probably not for you.
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Bitcoin May Go Boom: A Guide to This Week's Big SEC Decision (Update) - Fortune
China’s Top Bitcoin Exchanges Extend Suspension of Withdrawals – Bloomberg
Chinas three largest bitcoin exchanges have extended a self-imposed moratorium on all coin withdrawals for an indefinite period, as they seek regulatory approval for a crypto-currency thats gained popularity with local investors as an alternative to the yuan.
BTC China, Huobi and OKCoin said in separate statements Wednesday that the suspension will lift only after regulators approve internal compliance upgrades. The three temporarily halted withdrawals last month, citing central bank requirements to re-tool such systems. Huobi and OKCoin have said it will take about a month to adjust to the new guidelines. BTC China didnt give a time.
Bitcoin prices were down 2.6 percent at 5:58 p.m. local time, paring a loss of as much as 6 percent earlier. The price recovery began soon after the exchanges made their announcements around 4 p.m.
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The digital currency, which last week passed the price of an ounce of gold for the first time, has come under increased scrutiny by Chinese authorities worried about money laundering and capital flight. Wednesdays move suggests Chinese authorities are sticking to their hard-line stance on the cryptocurrency.Peoples Bank of China official Zhou Xuedong told Bloomberg News on Tuesday that bitcoin regulation introduced previously wasnt temporary.
China has taken a central role in the bitcoin market in recent years as its citizens became leading traders and miners, deploying the vast computing power needed to make transactions with the cryptocurrency possible. Their interest was fueled by a hunt for alternative assets, zero exchange fees and the low cost of electricity to run mining computers.Demand from investors in Asias largest economy, home to most of the worlds bitcoin trades, has fueled a three-fold increase against the dollar over the past year.
But the authorities are concerned, among other things, that bitcoins being used to spirit money out of the country, undermining official efforts to clamp down on capital outflows and prop up the yuan.The PBOC told nine bitcoin exchanges during a meeting in Beijing last month that it will close exchanges that violate rules on foreign exchange management, money laundering, payments and settlement.
With assistance by Gary Gao, and Benjamin Robertson
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China's Top Bitcoin Exchanges Extend Suspension of Withdrawals - Bloomberg
Bitcoin Price Technical Analysis for 03/09/2017 Last Line of Defense! – newsBTC
Bitcoin price seems to be down to its line in the sand for the uptrend, as a break below this area could lead to a longer-term selloff.
Bitcoin Price Key Highlights
Bitcoin price seems to be down to its line in the sand for the uptrend, as a break below this area could lead to a longer-term selloff.
Technical Indicators Signals
The 100 SMA is still above the longer-term 200 SMA on the 4-hour time frame, confirming that the path of least resistance is to the upside and that the climb is likely to continue. Also, the gap between the moving averages is widening to indicate that bullish pressure is strengthening.
Price broke below the 100 SMA to show that sellers are trying to push it lower, but the 200 SMA appears to be holding as dynamic support so far. This coincides with the channel support and a former resistance level, which suggest that there could be plenty of orders waiting right here.
Stochastic is on the move down to show that sellers are in control of price action. However, this particular oscillator is already dipping into oversold territory to indicate seller exhaustion. If buyers are able to take over and stochastic heads back up, bitcoin price could follow suit. RSI is also heading south and has a ways to go before hitting the oversold area.
Market Events
Dollar strength has been in play over the past few days as traders continue to build up expectations for a Fed rate hike in the next meeting. Not only have most policymakers affirmed their hawkish bias but data has been mostly upbeat so far.
For one, the ADP figure for February printed a huge gain of 298K versus the projected 185K rise. To top it off, the January reading was upgraded so market watchers are expecting the same results for the official NFP report due on on Friday, sealing the deal for a March hike.
Charts from SimpleFX
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Bitcoin Price Technical Analysis for 03/09/2017 Last Line of Defense! - newsBTC
How to Set Up a Bitcoin Cold Wallet – The Merkle
Bitcoin cold wallets are the best way to store a large amount of coins on. By definition, cold wallets are set up in a way that prevents the theft of your funds as a result of a compromised machine or a Bitcoin stealing malware. This guide will teach you how to set up your own Bitcoin cold storage wallet using Electrum in a few easy steps.
Electrum is one of the best Bitcoin clients available for desktops and laptops. It contains a vast amount of features yet appeals to the average user at the same time. It is the best wallet to use for newbies because it does not require the download of the whole blockchain, since it connects to other user-run servers which already have the whole chain downloaded. The benefit of such a system is the quick set up time, but the negative is that by connecting to random servers there is a potential that someone may find a zero-day exploit and possibly create a malicious server which would steal users Bitcoins.
Such a scenario is highly unlikely but if you have a vast amount of bitcoins, one can never be too careful. Luckily, you can also setup whats called a watching-only wallet using Electrum. These types of wallets are also commonly called offline-wallets because the machine containing the private keys never touches the internet. Lets set up a watch-only wallet using Electrum using 4 simple steps.
In order to set up the wallet we need to download the Electrum client first.Select your operating system, then download and install the appropriate client.
This process needs to be done on an offline machine, meaning a computer that has never been connected to the internet. That is the only way to ensure 110% that there are no possible spyware or any other programs that could possibly compromise the private keys. Create the wallet like you would any other regular wallet and make sure to save the recovery seed phrase.
Navigate to Wallet -> Master Public Keys. The MPK will show up in a small box and will look like this:
Take that master key and copy it onto a notepad, take that .txt file and put it onto a flash drive. Take the flash drive and plug it into the online computer which will contain corresponding watch-only wallet.
Using the master public key from your offline machine, create a new Electrum walletby going to File -> New/Restore. Select a name for your wallet then in the prompts select Standard Wallet -> Use public or private keys. Enter your MPK and Electrum should create the wallet. You will receive a warning saying that the wallet you just created is watching-only. Meaning any Bitcoins sent to addresses of this wallet will not be able to be spent. You would needthe offline wallet to sign transactions in order to successfully spend the coins.
Congratulations! You have just created your first cold storage wallet. Now if you do want to send a transactionyou would need first to create an unsigned transaction using the watching-only wallet. Simply fill out the fields under the Send tab like you normally would and then click preview, a window will popup with the transaction details. Save the transaction by clicking the save button and put it onto your flash drive. What you have is an unsigned transaction, there are 2 things left to do, sign it and broadcast it.
Navigate back to your offline machine and select Tools -> Load Transaction -> From File. Select the transaction you just created. This time the same window will pop up but you will see an option to Sign. Click the Sign button and enter your cold wallet password. Once the transaction is signed you will also see a transaction id at the top of the window. You are not done yet, as now you have to transfer that signed transaction to your online computer and broadcast it to the network.
On your online machine go to Tools -> Load Transaction -> From file. Select that same file but this time the button will change to broadcast. Click that and the transaction will be sent to the network. Now you are finally done, while it may seem like a tedious process of moving a txt file between two computers just to send some Bitcoins, the amount attacking vectors that you are preventing by keeping your wallet offline is well worth the 2 extra minutes of fussing around with flash drives. You coins security is priceless and I hope this guide will entice you to look at your own Bitcoin wallet security more closely, and while you may not set up a cold wallet, at least make sure all your seeds are backed up!
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How to Set Up a Bitcoin Cold Wallet - The Merkle