Posts Tagged ‘litecoin’

26
Jan

Secure and Backup Your Crypto Coins

by adminadam in articles

  • Secure and backup your cryptocurrency.

  • Create redundant encrypted local copies of your wallet.dat files.

  • Create a triple-encrypted, double-obfuscated volume containing all your crypto-wallets (using 7-Zip and TrueCrypt).

  • Securely upload, email, share, and place this volume on the cloud.

~ LA PRIMERA ETAPA ~

The first step is to secure your crypto-stash locally:

  1. Sync your wallet with the bitcoin-litecoin-dogecoin-whatevercoin network.
  2. Encrypt your wallet with a good, strong password, either 10+ random characters or 8+ random words. Ideally, you should use 14+ random characters, despite what the bitcoin-qt wallet shows you:

encrypt wallet
Now it is impossible for someone to pilfer your coins without some Mega-Serious Cracking Abilities (MSCA).

~ LA SEGUNDA ETAPA ~

Your wallet is secured, however, it must be backed-up in multiple (i.e. three or more) locations.

I save an extra wallet copy in a folder in My Documents, and another copy in another folder on my external hard-drive. I also occasionally backup my important folders and my whole system on a third hard-drive.

Typically you can find your original wallet location on your computer by typing the following into the Start Menu search area:

%APPDATA%

If you type this in exactly, it should show a folder called ‘Roaming’ in your start menu. Press ENTER and it will transport you to this typically-hidden folder. Inside you should see a number of folders containing application-data, including one titled Bitcoin, and perhaps others, Dogecoin, etc. if you have them installed.

When you enter the Bitcoin folder, you will see a number of things. One is ‘wallet.dat’. This small file contains your entire stash of coins, now protected if you’ve encrypted it in LA PRIMERA ETAPA.

Each time you want to duplicate and backup this ‘wallet.dat’ file, you should do the following:

  1. In your Bitcoin/Othercoin wallet program, choose ‘File > Backup Wallet’.
  2. NAME IT: Something indicating the Coin-type and the date would be good.
  3. CHOOSE A DESTINATION: Somewhere safe. Multiple media types are ideal: CD’s, USB’s, Hard-drives, Floppies, etc.

~ LA TERCERA ETAPA ~

Now your stash is encrypted and well backed-up — assuming you named and backed-up your wallet.dat file in 3+ places in a way and manner in which you will not lose or forget these files exist.

The next step is an added layer (or two) of extropy needed to protect your coins from totally ridiculous calamities, such as fires, floods, earthquakes, and nuclear bombs.

If your house burns down and your physical backup media are destroyed, you’ve also then lost your ‘wallet.dat’ backup files. Coins gone. Bummer, man!

This is where the cloud can be useful, however — CAVEAT EMPTOR — there is a smart way and a dumb way to do this. I will, of course, explain the smart way. (The dumb way would be to not add any additional protections… or to make the file public… or to advertise its existence to everyone.)

TWO DISTICT PROGRAMS will be explored here as means of adding two additional layers of protection to your entire stash (multiple wallets and coin types included). They are:

7-Zip — This compression program can also encrypt and password protect each of your ‘wallet.dat’ files while adding a layer of obfuscation which would prevent outside observers from viewing filenames contained within. (It encrypts the filenames, hiding transaction logs and address lists from view.)

TrueCrypt — This creates an encrypted, password-protected volume (think: folder) in which you can store each of your now-obfuscated, now-twice-encrypted ‘wallet.dat’ files.

Steps to follow using 7-Zip for each ‘wallet.dat’ file:

  1. Install 7-Zip.
  2. Right-click the first ‘wallet.dat’ file.
  3. Select 7-Zip in the menu, then click ‘Add to Archive’.
  4. In ‘Archive:’, change the name to something unrelated to wallets and coins and doges (oh, my!).
  5. In the ‘Add to Archive’ window, first check that ‘Archive format:’ shows ‘7z’.
  6. Ensure that ‘Encryption method:’ shows ‘AES-256’.
  7. Check the box for ‘Encrypt file names’.
  8. Create a strong password that is different from the one used to encrypt the ‘wallet.dat’ file intially. Again, ideally 14+ random characters or 8+ random words. (As with all steps in this process, you’re screwed if you forget or lose this password.)
  9. Press OK when your password is in.

You should now have an obfuscated, double-secured ‘wallet.dat’ file. Unless you tell someone (or give someone your password), at this point no one will be able to know what-the-crap this archive is, much less gain access to it, absent, again, Mega-Serious Cracking Abilities (MSCA).

Once you have 7-Zipped all your ‘wallet.dat’ files for all your coins, proceed to the TrueCrypt phase…

Steps to follow with TrueCrypt for your collection of Wallet Archives:

  1. Install TrueCrypt.
  2. Open TrueCrypt.
  3. Select ‘Create Volume’.
  4. Ensure ‘Create an encrypted file container’ is selected, and press NEXT.
  5. Here we have an option to create a ‘Standard’ or a ‘Hidden’ TrueCrypt volume. For now, we will simply create a ‘Standard’ volume (Hit NEXT). Later I will detail the steps necessary to create a Hidden volume, which is particularly useful if you believe you may be forced to reveal your password to someone under duress at some point in the future. For now, we’ll just assume a hidden volume isn’t necessary because A) you “don’t have that much money”, and B) you “surely haven’t advertised that you have this special TrueCrypt volume with a bunch of crypto-money in it”.
  6. Choose ‘Select File…’ and browse to a location where you would like to create your TrueCrypt volume, the Desktop, let’s say. We are merely creating a container right now.
  7. After browsing to your chosen location, come up with something inane to name your TrueCrypt container. “photos from joey”, or something to that effect. Type that name into the ‘File name:’ field and hit SAVE.
  8. Hit NEXT.
  9. The next screen allows us to select our encryption and hashing algorithms. For first-timers, the default options AES and RIPEMD-160 are recommended. Hit NEXT.
  10. Next we’ll choose a size for this volume we’re creating. Let’s see, what’s a good size for a spoofed folder full of pictures from Joey? How about 14MB? Should be plenty. The wallet.dat archives are only around 40KB each. Type in an amount ranging from 5 to 20MB. Hit NEXT.
  11. Now we’ll choose a final password. TrueCrypt recommends a 20+ character password, with no easily-guessable whole words. Type in and then re-enter your chosen password. BEFORE YOU HIT NEXT, read about Generating Entropy:

    In the next screen, TrueCrypt will ask you to ‘move your mouse around randomly’ for at least 30 seconds. The reason it is doing this is to collect random data — from your mouse movements — with which to scramble and improve the encryption of your TrueCrypt volume. Be ready to move your mouse around randomly for 30 to 90 seconds before you hit NEXT.

  12. Hit NEXT and begin moving your mouse around randomly. (The VOLUME FORMAT screen should be displayed now). Continue to move your mouse around for at least 30 seconds. After you are either content or tired of moving your mouse around for no apparent reason, click FORMAT. No need to edit any options here.
  13. After you hit FORMAT, wait for your volume to be created. NOTE: This may take a while if you chose a large volume size. When it has finished, it will show a dialog box indicating that “The TrueCrypt volume has been successfully created.” Hit OK.
  14. In the next screen, “Volume Created”, hit EXIT.
  15. Next we will browse to our TrueCrypt volume and mount it from the main TrueCrypt window. (NOTE: If you don’t have the main TrueCrypt window open any more, simply re-open TrueCrypt from the Start Menu.) From within the main window, select an available drive. If you have dozens of hard-drives or CD drives in your computer, you’ll have to choose from amongst the later drive letters in the alphabet. I’m choosing ‘M:’ for “Mega Serious”.
  16. Click ‘Select File…’ after choosing your drive letter.
  17. Browse to and select your inanely-named TrueCrypt Volume, ‘photos from joey’ — or whatever it is you called it. Hit OPEN.
  18. In the main TrueCrypt window, hit MOUNT.
  19. Enter your password and hit OK.
  20. If you have successfully mounted your volume, the name, size, encryption algorithm, and type will show up in the main TrueCrypt window next to the drive letter onto which you chose to mount it. You can now open the volume as you would any other drive or folder. Either double-click on the volume name from within the TrueCrypt window, or browse to your list of Hard Disk Drives in Computer and double-click on ‘Local Disk (M:)’. REMEMBER: You may have chosen a different drive letter than me. ;-)
  21. Now we may proceed to the final step of our Cryptocoin Backup Process…

~ LA CUARTA ETAPA ~

This stage is significantly easier than stage three.

  1. Now that you have your TrueCrypt volume created, encrypted, and opened, simply copy and paste (or drag-and-drop) your 7-Zipped ‘wallet.dat’ files into it. Once they are copied into this volume, you can consider them safe. Once you restart or shutdown your computer, even if the power just goes out, your files are encrypted and safe. You can also choose to DISMOUNT your volume from within the TrueCrypt window and EXIT now.

Next time you want to access your files now, remember you will have to:

  1. Open TrueCrypt.
  2. Select File…
  3. Select the volume and click OPEN.
  4. Hit MOUNT.
  5. Enter your password; hit OK.
  6. Double-click on the volume once it is mounted.
  7. Right click on the wallet file you want to open. Choose ‘Open Archive’ with 7-Zip.
  8. Enter the 7-Zip Archive password.
  9. You now have access to your coin wallet again. (REMEMBER: You also encrypted this file. Good on you!)

~ LA QUINTA ETAPA ~

The final stage.

Share/upload/distribute your triple-encrypted, double-obfuscated TrueCrypt Multi-Wallet Backup System Volume (just one single file now) to a few trusted friends or locations.

You can now safely store this file in your email account, your dropbox, on your smartphone, on a friend’s hard-drive, and so on. The sky’s the limit!

~ LA EXTRA ETAPA: Can you Grok it? ~

I personally can’t grok any more today. I intended to add a section on creating a special hidden volume with TrueCrypt in which to place our ‘wallet.dat’ files. For now I’m quite content with this beginner’s guide. Please see: http://www.truecrypt.org/docs/hidden-volume to read up on Hidden Volumes and try it yourself if you feel so inclined. I may choose to update this guide in the future with a Hidden Volumes tutorial section. We’ll see.

~ LOS RECURSOS QUE UTILICÉ PARA ESCRIBIR ESTA GUÍA ~

(1) http://www.bitcoincreator.com/bitcoin-wallet/how-to-backup-bitcoin-wallets/
(2) http://www.nextofwindows.com/using-7-zip-to-compress-and-encrypt-your-files-and-folders/
(3) http://www.truecrypt.org/docs/tutorial
(4) http://www.7-zip.org/
(5) http://www.truecrypt.org/

23
Dec

The Extropy of Bitcoin

by adminadam in articles

What is Bitcoin?

Bitcoin is a highly extropic virtual currency and payment platform. It is resistant to entropy, theft, political corruption, and market manipulation (i.e. arbitrary inflation).

Here is an under-two-minute Bitcoin intro video from weusecoins.com:

What are Bitcoin’s novel features (both as a currency and as a technology)?

  • The coins themselves cannot be burnt or destroyed, nor can they be stolen (if encrypted and backed-up properly). Coins can also be stored offline in a paper wallet or an indestructible, encrypted aluminum wallet.
  • Bitcoin is a peer-to-peer, decentralized currency and banking/ledger system with no single point of failure.
  • It has worldwide appeal and utility; different people are interested in it for different reasons and all can participate freely.
  • A whole cryptocurrency ecosystem has evolved from it. See: Litecoin, Namecoin, or Anoncoin for examples of this.

What are its downsides commonly thought to be?

There are a number of arguments leveled against Bitcoin. Most posit that it will either be rendered null or that there are no legitimate uses for it. Briefly, here are a few of the more common arguments:

  1. That governments and banks will soon feel so threatened by it that they will shut it down.
  2. It’s volatile; it’s difficult to speculate on; it’s not a good investment.
  3. Only criminals and tax-evaders use it. (And/or high frequency traders.)
  4. It’s not accepted anywhere; you can’t really use it for anything.
  5. It would fail if the internet went down.

Now to examine these arguments.

First, that someone or some entity might shut it down:

Bitcoin cannnot be shut down by any authority as could Napster, or Wikileaks, or even the Pirate Bay for that matter. It is completely decentralized and has spread around the world. It is not dependent on ICANN or any centralized protocol or institution controlled by any one entity. I don’t think any conceivable level of coordination could remove enough copies of the peer-to-peer software necessary to run it — existing on many millions of devices around the world at this point — in order to shut it down. Also, as we move forward people are increasingly meeting in person to exchange bitcoin and other coins for cash, meaning that 3rd party bitcoin services (like Coinbase or Mt. Gox) are non-essential to obtaining cryptocurrencies.

Recently China declared that Bitcoin would not be accepted as currency there and that 3rd party Bitcoin/Renminbi exchanges would have to shut down at the end of 2013. This caused the prices to halve as there was great excitement and a surge of interest in Bitcoin in China previously. And while it will be harder for Chinese people to get and sell potentially, it certainly doesn’t spell the end for Bitcoin around the world. For example, Germany accepts it, as do the US, the Netherlands, Canada, Japan, France, and others. (I expect even in China it will continue to play some, albeit marginalized, role.) Note also: Swiss lawmakers are considering treating it as they would any other foreign currency as we speak.

Second, on the volatility, the usefulness for investment purposes:

It is difficult to speculate on, but less so, I believe, if you think in longer time frames than does a high-frequency trader.

BTC price history - all time - to Dec 11, 2013

Looking at this chart of the all-time price history of Bitcoin (above), we can see a number of big peaks and valleys, but the general trend is up — in a big way. It is new and subject to an extent to hype and speculation (as is any new commodity or currency, of course). One glance at the overall trajectory, however, and it appears to be more of an exponential trend than a linear one. I cannot conceive of traditional commodities or other physical currencies growing in this fashion, and believe it is only possible with a digital, peer-to-peer, distributed, low-barriers-to-entry system such as Bitcoin. Take a look at this all-time price history with weekly (instead of daily) price points and tell me that the growth is not astonishingly exponential in appearance…!

BTC price history - all time - to December 2013

I think over the long term the value will continue to increase. If we look at a few examples of how Bitcoin (and the underlying protocol) are already being used I think it will become obvious why its value — and the value of other cryptocurrencies — is likely to increase over time.

Who uses it, where, and for what:

Bitcoin is a freely accessible, open-source, distributed, digital currency. That means that anyone with a smart phone or computer and internet access can use it. This ease-of-use and convenience may allow for it to supersede conventional payment and banking technologies, like paypal, moneygram, and bank transfers. As there is no bureaucracy involved, coins can be transferred to anyone, from anyone, at any time and for any reason. All this within minutes. All this without fees.

Here’s a few example uses:

  • Trade sanctions can be bypassed. Cubans in the US can send their families money without hassle.
  • Money can be sent anonymously (and if not then at least pseudonymously) over the internet for the first time in history. For more on the issue of true anonymity and the technical discussions surrounding it see: Zerocoin.
  • Woodlank Patchwork, a new micronation which is both an enclave and an exclave of Japan, has chosen Bitcoin as its official currency.
  • WordPress users can pay with Bitcoin.
  • Reddit accepts it for advertising, tipping other users, and other promotional uses.
  • Shopify allows merchants to accept it.
  • OKcupid accepts it for premium services.
  • Nesbit’s Fine Watch Service (near me in Seattle) accepts it.
  • Seattle-based Accountable Moving & Storage accepts it.
  • Cheapair.com accepts it for purchasing plane tickets.
  • Khan Academy accepts it for donations.
  • Tesla accepts it for the purchase of their electric cars.
  • Virgin Galactic recently sold their first ticket into space purchased with Bitcoin.
  • See CoinMap.org and useBitcoins.info for 1000’s more locations worldwide where Bitcoins are accepted.

Here, additionally, are some fascinating non-monetary uses:

  • Proof of Existence allows users to anonymously time-stamp and create a record of a document’s existence. The cryptographic signature of this time-stamp is then stored for all time in the Bitcoin blockchain, the redundant, distributed ledger of transactions. With this you can certify that a given document/idea/etc exists without the need for a central authority. Think patent/copyright office, but peer-to-peer and open-source. Also, think censorship-proof publishing platform. Proof of Existence is built on top of the Bitcoin protocol.
  • Namecoin is an ‘altcoin’, an alternative cryptocurrency with features that distinguish it from Bitcoin. Namecoin is specifically designed to create an open-source, distributed DNS network. While most every website you would visit currently is ultimately controlled by ICANN (who assigns domain names like thrivenotes.com), Namecoin is creating an alternative, decentralized system, whereby censorship will be impossible, and anyone will be able to create and host a website without risk of it being removed from the internet by ICANN or other influential parties (See: Homeland Security domain name seizures). Namecoin is a fork of the Bitcoin source-code.

What if the internet went down? Are there any other security issues to be aware of?

Besides the fact that the whole internet going down would be disastrous for everyone and all internet-based services, consider the following way in which Bitcoin could possibly even survive or thrive were the net to go down:

In an amazingly ambitious announcement, Bitcoin Developer Jeff Garzik declared his intention to launch cubesat Bitcoin nodes into space to store extra redundant copies of the blockchain in case of certain types of attack or internet outages. This apparently would cost only around $2 Million to do and would provide an additional layer of extropy (higher-order, complexity, and resiliency) to Bitcoin. I find this just fascinating. Perhaps Bitcoin would be okay..!

Regardless, I would like to provide some additional details on the security of the Bitcoin ecosystem, but thought it best to leave it to the experts for this one. Here is some useful Q&A from the Bitcoin Security FAQ:

Is Bitcoin secure?

The Bitcoin technology – the protocol and the cryptography – has a strong security track record, and the Bitcoin network is probably the biggest distributed computing project in the world. Bitcoin’s most common vulnerability is in user error. Bitcoin wallet files that store the necessary private keys can be accidentally deleted, lost or stolen. This is pretty similar to physical cash stored in a digital form. Fortunately, users can employ sound security practices to protect their money or use service providers that offer good levels of security and insurance against theft or loss.

The best way to be safe is to be sure of who you’re dealing with (trusted exchanges, for instance, are a good place to start) when purchasing, and then to store your wallet encrypted (with an 8+ word password, for example) in multiple (that is, 3+) locations.

Hasn’t Bitcoin been hacked in the past?

The rules of the protocol and the cryptography used for Bitcoin are still working years after its inception, which is a good indication that the concept is well designed. However, security flaws have been found and fixed over time in various software implementations. Like any other form of software, the security of Bitcoin software depends on the speed with which problems are found and fixed. The more such issues are discovered, the more Bitcoin is gaining maturity.

There are often misconceptions about thefts and security breaches that happened on diverse exchanges and businesses. Although these events are unfortunate, none of them involve Bitcoin itself being hacked, nor imply inherent flaws in Bitcoin; just like a bank robbery doesn’t mean that the dollar is compromised. However, it is accurate to say that a complete set of good practices and intuitive security solutions is needed to give users better protection of their money, and to reduce the general risk of theft and loss. Over the course of the last few years, such security features have quickly developed, such as wallet encryption, offline wallets, hardware wallets, and multi-signature transactions.

I love this line: a bank robbery doesn’t mean the dollar has been compromised. So perfect. I feel this is very important to consider in discussions of crytocurrencies: ‘Is this a local vulnerability that’s been exploited, or a global/universal one tatamount to the annihilation of Bitcoin (et al.)?’

Could users collude against Bitcoin?

It is not possible to change the Bitcoin protocol that easily. Any Bitcoin client that doesn’t comply with the same rules cannot enforce their own rules on other users. As per the current specification, double spending is not possible on the same block chain, and neither is spending bitcoins without a valid signature. Therefore, It is not possible to generate uncontrolled amounts of bitcoins out of thin air, spend other users’ funds, corrupt the network, or anything similar.

However, a majority of miners could arbitrarily choose to block or reverse recent transactions. A majority of users can also put pressure for some changes to be adopted. Because Bitcoin only works correctly with a complete consensus between all users, changing the protocol can be very difficult and requires an overwhelming majority of users to adopt the changes in such a way that remaining users have nearly no choice but to follow. As a general rule, it is hard to imagine why any Bitcoin user would choose to adopt any change that could compromise their own money.

Consensus-based, democratic, open-source projects FOR THE WIN.

Is Bitcoin vulnerable to quantum computing?

Yes, most systems relying on cryptography in general are, including traditional banking systems. However, quantum computers don’t yet exist and probably won’t for a while. In the event that quantum computing could be an imminent threat to Bitcoin, the protocol could be upgraded to use post-quantum algorithms. Given the importance that this update would have, it can be safely expected that it would be highly reviewed by developers and adopted by all Bitcoin users.

Just imagine: Quantum-Encryption-Protected Bitcoin. What would we call it? QuBitcoin? Bitcoin-Cubed? 5th-DimensionalCoin? Whatever form it takes, whatever it’s called, I love their assertion that Bitcoin and Cryptocurrency Developers will continue to develop and maximize the extropian potential of these liberating technologies — even in the face of quantum-supercomputer highway-robbery-attempts.

TL;DR – What about Bitcoin?

  • You can send money to anyone, anytime.
  • It can’t be shut down by governments.
  • It can’t be controlled by corporations or the Federal Reserve.
  • It may be protected from other conceivable, future forms of interference through the use of space-based redundancy satellites.
  • And you can buy everything from a cup of joe to an electric car with it.
Seems pretty awesomely versatile, valuable, and revolutionary to me!

bitcoin-logo-3d

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