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Inside Bitcoins Conference, Dec 10-11, 2013

Best Practices
for Using and
Securing
Bitcoins
10 December, 2013

Alan Reiner
Founder & CEO
Armory Technologies, Inc.
© Armory Technologies, Inc. 2013
List of Topics
•
•
•
•
•
•

Introduction
Bitcoin storage methods
Bitcoin Basics
The wedding of cryptography and money
Security Practices
The future of Bitcoin best practices

Learn to hold your own Bitcoins and let the
power of decentralized money shine!
© Armory Technologies, Inc. 2013
Who Am I?
• Alan Reiner
– “etotheipi” on the bitcointalk.org
• Mathematician, Statistician, SW Developer, Perfectionist
– With a sprinkling of cryptography and data mining
• Have been part of the Bitcoin community since 2011
– Contribute to documentation, standards, security discussions,
etc, on the “Development & Technical Discussion” forum

• A huge nerd! (you have to be to do what I do)
– Sub-category: “ultra-paranoid crypto-nerd”

© Armory Technologies, Inc. 2013
What is Armory?
• Armory Bitcoin Wallet is a free, open-source
desktop application for securing Bitcoins yourself
– One of four such applications featured on bitcoin.org
• Known for “security at all costs”
– Sometimes “convenience” is one of those costs...
– Currently a tool tailored to advanced/power users
– Recently funded, will develop beginner's interface
What is Armory?
• Even after two years, Armory is still one of the only
ways for non-experts to use “cold storage”
– Sign transactions from an air-gapped computer
• Also innovated many other features
– Multiple-wallet interface
– Wallets that only have to be backed up one time
– Printable paper backups (with fragmenting!)
• Not for Beginners!
– Need Bitcoin-Qt running in background (for security!)
– Need to download blockchain
– Lots of advanced features

I created Armory because the best practices I
wanted were not available elsewhere
© Armory Technologies, Inc. 2013
Bitcoin Basics
• Bitcoin has the potential to revolutionize payments
– The same way email changed written communications
• Bitcoin is complicated
– But it will get easier... hopefully
• Bitcoin creates both tremendous opportunities and
tremendous risks
– Harness the opportunities, mitigate the risks: win-win
• Positive: Take control of your own money (and save)!
• Negative: Take control of your own money (and lose it)!
(If you are using Bitcoin to remove third-parties from the equation, you have
to take over the responsibilities of those third-parties!)

© Armory Technologies, Inc. 2013
It's Just a Baby
• The infrastructure around Bitcoin is still being built
• Relatively speaking, Bitcoin is still in its infancy
– Started only five years ago (2009)
– Relatively unknown for years
• Lots of venture capital flowing in to turn it into
something much bigger
• Still a lot of soul-searching to do by the community

Bitcoin may end up being the TCP/IP of money –
advanced payment systems will be built off of it,
but only developers have to interact with it directly
© Armory Technologies, Inc. 2013
Why Bitcoin?
• Show me another payment system that you can pay
someone $10,000,000 USD:
– To and from anywhere in the world
– 24/7 without restrictions
– Nearly instantaneously
– Irreversible
– With $0.00 in fees*
– Can't be frozen or seized (without direct access to your wallet)
• Bitcoin is not perfect, but it certainly is powerful!

• There is no other payment system like this!
• If only we could make it safe and usable...
*Certain types of transactions may require fees, but it rarely exceeds $0.01 USD.
© Armory Technologies, Inc. 2013
Why Bitcoin?
• Decentralized
– Not controlled by any one entity: run by all users of
the system simultaneously!
• Limited Supply
– There will only ever be 21,000,000.00000000 Bitcoins
– The entire schedule of Bitcoin generation was
announced in 2009 and cannot be changed
– Predetermined inflation, no printing/debasing
• Secure! (theoretically)
– Built from standard, trusted crypto algorithms
Bitcoin shares many of the same properties as gold
(no one issues gold, the supply is limited, easy to
identify, fungible, durable)
© Armory Technologies, Inc. 2013
Bitcoin Storage Options
• With Bitcoin, now “data” is “money”
– A 32-byte secret (private key) can control $millions
– Raises the stakes of computer and network security
– Money now stored directly on phone, computer, paper, etc

• Store Bitcoin yourself
+ Full control over your money
+ Cannot be seized or stolen if secured properly
- It's easy to lose 32 bytes if you're careless!

• Let someone else hold your Bitcoin
+
-

May be more diligent about security than you
May hold BTC properly but use poor user auth
Counterparty risk
No Bitcoin insurance
© Armory Technologies, Inc. 2013
Third-Party Risk
• The history of Bitcoin is filled with users trusting
third-parties to hold their money
- Currently, there is no equivalent of FDIC for Bitcoin
Date

Service

Service
Type

BTC Lost /
Stolen

June 2011 Mt. Gox

Exchange

June 2011 MyBitcoin

Wallet

USD Value (at
time of loss)

2,000

$47,000

79,000

$1,100,000

May 2012

Bitcoinica (#1) Exchange

38,000

$91,000

July 2012

Bitcoinica (#2) Exchange

40,000

$305,000

Sep 2012

Bitfloor

Exchange

24,000

$250,000

Oct 2013

Inputs.io

Wallet

4,100

$1,200,000

Nov 2013

GBL (China)

Exchange

4,100

$4,100,000

Sometimes users get some of their own money back. Sometimes.
© Armory Technologies, Inc. 2013
Holding Your Own Bitcoin
• Holding your own is like harnessing fire
– Can be extremely useful... and dangerous!
– Keep your fires small until you are experienced
• Sometimes the biggest threat to users is
themselves
– Users are not used to truly irrecoverable data!
– Not everyone makes backups
– No one expects their hardware to fail
Educate yourself, learn the tools, learn the
risks, and experiment (with small amounts)

© Armory Technologies, Inc. 2013
Holding Your Own (cont)
• Most users should not be holding life-changing
amounts of Bitcoin themselves
• Most users should not be trusting third-parties to
protect life-changing amounts of BTC for them
• Wait... so, what are users supposed to do ?!?

Answer: Most users should not be putting lifechanging amounts of money into Bitcoin yet!
• Bitcoin is still the Wild West of money
• People like me are building safer tools & infrastructure
– But we're not done yet

© Armory Technologies, Inc. 2013
Cryptography & Bitcoin
A Short, Non-Technical Introduction

© Armory Technologies, Inc. 2013
Public-Private Key Crypto
• On the internet, there are two main concerns:
– Privacy of communications (encrypt & decrypt)
– Authenticity of communications (sign & verify)
• Bitcoin protocol does not use encryption
– The Bitcoin protocol only uses “authentication”
– “Are you authorized to move this money?”
• All users create a private key (secret) and a public key
(distributed)

© Armory Technologies, Inc. 2013
Public and Private Keys
• Think of Bitcoin as a decentralized, public bank
- is like a bank account number

- is the signing authority on that bank account

• All users make keypairs for “account” management
- give to payers to deposit money in your “account”

- keep it secret so only you can authorize payments
A Bitcoin address is just a representation of a
public key:
Such as: “1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa”

© Armory Technologies, Inc. 2013
Example Network
• All Bitcoins have a
public “unlock”
condition
• Most coins have a
simple unlock
condition: provide a
signature that
verifies against a
specified public key
• If you have the
private key, you can
create those
signatures! (so your
wallet includes them in
your balance)

© Armory Technologies, Inc. 2013
A Bitcoin Transaction
Bitcoin might make a lot more sense
after this demo...

© Armory Technologies, Inc. 2013
© Armory Technologies, Inc. 2013

Initial Conditions
• Assume the Bitcoin
network has 21 coins
• All coins are locked using
public keys A, B and C
(so far)
• Alice and Bob have all the
private keys associated
with those coins (and a
couple extra unused keys)
© Armory Technologies, Inc. 2013

Bitcoin Transactions
© Armory Technologies, Inc. 2013

Bitcoin Transactions
© Armory Technologies, Inc. 2013

Who owns what?
© Armory Technologies, Inc. 2013

Payment Request
• Bob will request 4 BTC
from Alice
• Bob's wallet will select
unused private key E, and
then create a payment
address (based on the
public key E)

• Bob sends the address to
Alice requesting payment
© Armory Technologies, Inc. 2013

Create Transaction
• Alice's wallet selects some
coins that she knows she
can sign for (at least 4 BTC)
• She will use the 6 BTC
associated with A
(think of it like a $6 bill)

• Alice creates a transaction
spending the 6 BTC
–

She also selects an unused key
(D) to send the 2 BTC back to
herself (change)
© Armory Technologies, Inc. 2013

Bitcoin Transactions
• Alice uses private key A
to sign the transaction
• The signature is
mathematically linked to
every detail of the
transaction
–

If the transaction changes at
all, the signature will break
(the math stops working)
© Armory Technologies, Inc. 2013

Bitcoin Transactions
• Alice “broadcasts” the
transaction to the Bitcoin
network
• Users of the network verify:
–
–
–

The 6 BTC is unspent
The sig corresponds to
public key A
The sig is valid for this
particular transaction
© Armory Technologies, Inc. 2013

Final Condition
• The original 6-BTC bill is
destroyed and 2 new bills
totaling 6 BTC created
• All users update their
databases
What Have We Learned?
• Private keys let you “unlock”
and “re-lock” coins under
other public keys (i.e. send to
others)
• Public keys let you:
–
–

Receive money
See available coins/balance

• Transactions usually have 2
parts (payment & change)
• Signatures are mathematically linked to the
signed data
– Handwritten sigs can be (maliciously) transplanted
between documents, Bitcoin signatures can't be

• Wallets contain a lot of private keys
– Uses a new key for every receiving operations
© Armory Technologies, Inc. 2013
Cold Storage
• Now we can appreciate “cold
storage” (aka “offline wallets”)
– Only public keys are
required to receive
payments and verify
transactions
– Private keys are only
required to move the coins
It is possible to keep the private keys on an
offline computer and receive money to it
using the public keys

Armory was designed to do exactly this!
It is the gold standard of wallet security best practices
© Armory Technologies, Inc. 2013
Security Best-Practices
(for varying levels of paranoia)

© Armory Technologies, Inc. 2013
Security vs. Convenience
• Nearly all system become more inconvenient as
you increase security!
– The easiest systems are usually the least secure!
– Commit to doing security right
• A lot of users don't have the patience for this
– Honestly, this is why Bitcoin may not be ready for
primetime!
If you're going to hold a lot of Bitcoin it's
worth sacrificing some convenience to
protect yourself

© Armory Technologies, Inc. 2013
GPG-Verify Your Installers
• Risks:

– You download installers from a malicious website
– An attacker tampered with the installers on the real website
– The installers are replaced during or after download

• Mitigation:
– All wallet devs sign their installers using known GPG keys
• Most devs keep a special offline GPG private key just for this!
–

Get the developer's GPG public key and verify!

If the installer has a valid signature from
the correct GPG key, it does not matter
where you got it from!

There are slides at the end that explain in detail

This is very easy in Linux & Mac, but a lot of work in Windows!

© Armory Technologies, Inc. 2013
Backup Your Wallets
• Risks:
– The most common reason users lose coins is due to not
having an unencrypted backup!
• You lose all your Bitcoins if your hard drive fails
• You lose all your Bitcoins if you forget your password
• Your family cannot inherit your Bitcoins if you get hit by a
bus
– It is critical your backup be unencrypted!
• An encrypted backup is useless if you forget the password
• An encrypted backup is useless if you get hit by a bus and
your family would like to inherit your fortune

For most users, digital security is the most important
For most users, physical security is not a concern
THEREFORE: Make an unencrypted backup offline and secure it!
(paper, DVD or USB key)
Backups: Digital vs. Paper
• How much are you willing to bet
that your CD or USB key will still
work in 5-10 years from now?

Armory Paper Backup

– If it's more than your wallet value,
don't use it
• If you use digital backups, make
multiple copies
– Store together, at least one will
work
• Paper fades over time, but the data
will be recoverable in 50+ years
Armory Technologies recommends that you use paper
backups whenever possible
Copy the data by hand if necessary
Most things that destroy paper also destroy digital
Backup Frequency
• IMPORTANT: At the time of this writing (Dec 2013):
– Bitcoin-Qt wallets must be backed up every 100 transactions
– Multibit and Bitcoin Wallet for Android require regular
backups unless you always reuse addresses (not good practice!)
• Address reuse is bad, but probably better than losing money
– Armory and Electrum wallets only require one backup, ever
• Infinite private keys generated from a single seed
• Print your seed on a piece of paper for reliable storage
If you use Armory or Electrum, make a paper
backup, one time, then never worry again!
In the next few months, all wallet developers will be implementing
the one-time-only backup features
Fragmented Backups
• Risks:
– If you are concerned about physical security, a single-sheet
unencrypted backup is a single-point of failure
• Mitigation:
– Use M-of-N “Shamir's Secret Sharing”
– For instance, 3-of-5: print 5 “fragments”, need any 3
– Store each fragment in a different location
• Security—Attacker needs to steal multiple fragments
• Redundancy—you can lose pieces and it still works!
Currently, Armory is the only wallet offering this!
It is called “Fragmented Backups”
Graphic for 3-of-5 Backup
Fragmented Backups
Armory's Fragmented Backup Interface
Wallet Passwords
• IMPORTANT: Your wallet password is your encryption
key for your wallet!
• If you forget your password, your wallet will be
permanently encrypted and your coins will be lost!
...unless you have an unencrypted backup
• No really: I'm serious your coins will be lost forever
– Users are not used to the idea of truly, irrecoverable data
– Make an unencrypted backup!

If you've ever forgotten a password, make
an unencrypted backup!
Password Length
• Armory and Bitcoin-Qt both use “key-stretching”
– Converting your password into the encryption key is a
computationally-intense process
– Armory's key-stretching is resistant to GPU-acceleration
• If someone gets your encrypted wallet, they can guess:
– Without stretching: 1,000,000 - 5,000,000 passwords/sec
– With stretching:

5 - 50 passwords/sec

• If key-stretching is not used, must longer passwords
– Recommended 12-16 characters for no key-stretching
– Recommended 10-12 characters with key-stretching
Use a strong password, make unencrypted backups!
Password Length
Time to brute-force your wallet password*

Password Length

1 Computer

1,000,000 Computers

6 chars (no stretching)

10 min

Instant

8 chars (no stretching)

8 days

Instant

12 chars (no stretching)

16,800 years

6 days

6 chars (with stretching)

170 days

Instant

8 chars (with stretching)

416 years

4 hours

12 chars (with stretching)

337,000,000 years

337 years

If your wallet is valuable enough, a bot-net of 1,000,000
computers could be used to break your wallet encryption
*Caveats: used 30-character alphabet to simulate poor
entropy of human-generated passwords. Truly random
passwords of these lengths will be much more secure.
Do Not Reuse Addresses
• Risks:

– Bitcoin is actually not very good at anonymity
– When you reuse addresses you make it far worse
– Reusing addresses can hurt other users' privacy as well

• Mitigation:
– Bitcoin-Qt, Armory and Electrum do not reuse addresses by default
–

Some users force reuse due to lack of understanding or simplicity of backups

–

This is doing more harm than good in Armory & Electrum

– Multibit & Android Bitcoin Wallet reuse addresses by default
–

Usually have an option to explicitly create

If you are using Bitcoin-Qt, Multibit or Android
Bitcoin Wallet, you may want to reuse addresses
anyway if you do not create backups regularly.
(lack of privacy is usually preferred to losing coins)

© Armory Technologies, Inc. 2013
Address Reuse & Privacy
• Discussion:

– Address reuse is mostly a privacy issue, not a security issue
– Reusing the same public-private keypair is expected & safe
throughout the rest of internet security
– But it is egregiously bad for privacy in Bitcoin

• There are contexts in which it is okay, but not
standard

– Donation addresses: all users donating know it is heavily
reused, and accept being linked to it

Users do not realize just how much privacy
information is leaked by interacting with
heavily-reused addresses!

© Armory Technologies, Inc. 2013
Address Reuse & Privacy
• If you are using Armory or Electrum, you have no
excuse for reusing addresses!
– Both automatically generate new addresses for all
operations – you have to go out of your way to reuse
– Both produce backups that work forever
• No matter how many new addresses you use, a
backup made when the wallet was created will
always work!

© Armory Technologies, Inc. 2013
What are Confirmations?
• Bitcoin transactions are not instantaneous
• Each confirmation is increased consensus that the
transaction actually happened
– More confirmations means more confidence
– The first confirmation is the most important
– Six confirmations is generally considered irreversible
• Confirmations come
on average every 10
minutes
– Actually exponential
random: usually
30 sec to 45 min

© Armory Technologies, Inc. 2013
Confirmation Risks
• Do not trust zero-confirmation transactions unless
there is pre-existing trust!
– Or, you're willing to eat the loss when reversed
• Attacks on zero-confirmation tx are easy and cheap
– Just not that many people doing it right now
• Attacks on oneconfirmation tx
require a bit more
resources
• But they are
possible!

© Armory Technologies, Inc. 2013
Call-to-Verify Addresses
• If you are sending large amounts of Bitcoin:
– You want to make sure you send it to the right place!
– An attacker could replace the correct address with his
own on its way to your wallet software
• This is a serious security issue!
– The “payment protocol” hopes to solve this by using SSL
concepts to prevent address tampering
– This will not work in all environments (not everyone has
an SSL certificate)

• Pick up the phone and call the other parties
– Make sure they are who you think they are!
– Manually verify the address before execution
– This is much more reliable with an offline computer
Cold Storage
and the Holy Grail

© Armory Technologies, Inc. 2013
Hot vs. Cold
“Hot” Wallet
– The private keys are on an
internet-attached system
– All wallets are “hot” by
default

“Cold” wallet (“offline wallet”)
– Gold standard of security
– Private keys created and never
leave the offline computer
– Transactions are signed offline
Hot vs. Cold Security
• All known, major Bitcoin
breaches to date:
– Coins stored on a hot wallet
– Or unencrypted backups
stored on an “hot”
computer

• Compromising a cold wallet
requires one of the following:
– Physical access
– Extremely advanced USB
viruses
– User accidentally installing
malicious software
Setting up the Offline Computer
Online computer

• (1) Install Armory

Offline computer

• (1) Install Armory
• (2) Create new wallet
• (3) Create paper backup
–

Copy by hand, if necessary

• (4) Create “watchingonly” copy of wallet
• (5) Copy to USB drive
• (6) Import “watchingonly” wallet

Your “watching-only” wallet has only public
keys, no private keys!
Doing an Offline Transaction
Online computer

Offline computer

• (1) Create transaction
–

Same as you would with a
hot wallet

• (2) Save unsigned
transaction to USB
• (3) Load tx from USB
• (4) Review for accuracy!
–

• (6) Load signed
transaction,
broadcast to
network

All benefit is lost if you don't
review on the clean, offline
computer

• (5) Sign the transaction,
save to USB
Splitting roles
Online computer

• The watching-only wallet
behaves identically to a
regular wallet, but
cannot sign/spend
– Generate addresses
– Confirm incoming
transactions
– See balances

• An attacker
getting the online
wallet is a breach
of privacy, not
security

Offline computer

• This computer cannot
display balances
– It has no access to the
network to know
where your money is!
– It can review
transactions and
request confirmation
• Remember, the offline wallet
is the signing authority.
– It does nothing else but read
and sign transactions!
Doing it Right
• If you are running any kind of online Bitcoin business,
offline-wallets are an invaluable tool
– Keep bulk of your funds in an offline computer
• You can even keep it in a safe-deposit box!
– All webservers and on-site computers should only use
watching-only wallets!
• Securely collect payments to the offline wallet
• Track your wallet balance
• Track and verify all payments/transactions
• No one who gains access to the server can steal it!
– Includes employees

If you need a hot wallet, keep it small,
periodically refill from the cold wallet
© Armory Technologies, Inc. 2013
FAQ
• There is no special version of Armory for offline
– It's an offline computer because the computer is
offline
• Mix and match versions to your heart's content
– The following setup works fine:
• Offline: Ubuntu 10.04 using Armory 0.87.2
• Online: Windows XP using Armory 0.90

© Armory Technologies, Inc. 2013
Use Linux
• Once you go down the “cold storage” path you are
implementing serious security
• As of this writing, the best way to move data
between online & offline computer is USB drives
– Linux has a much better history of resisting USBbased attacks
– We are working on better methods for secure transfer
• Armory website has Ubuntu “Offline Bundles”
– Will install and run on the first boot of a fresh install
of Ubuntu 10.04 or 12.04
– The offline computer needs no other software at all!

© Armory Technologies, Inc. 2013
Extra Credit
• Dedicate a small USB key for offline transactions
– Minimize exposure to potential viruses
• Dedicate a computer for the creating transactions
– Minimize exposure to potential viruses
– Make it exclusive for Bitcoin processing
• Use full-disk encryption to protect privacy
– Without it, someone not authorized can still see the
wallet value and transaction history
– Also adds an extra layer of security

Did I mention, make unencrypted backups?
© Armory Technologies, Inc. 2013
The Future
Coming Soon!

© Armory Technologies, Inc. 2013
Hardware Wallets
• A great tradeoff for security
and convenience

Trezor Hardware Wallet

• Hardware wallets hold the
private keys and sign on
the device
– The private keys cannot be
read from it
– It will only emit the public
keys

• The Trezor is the most anticipated HW wallet
• Should be released in January, 2014

© Armory Technologies, Inc. 2013
Hardware Wallets
• Hardware wallets are an 80%
solution
– They lack flexibility
– Another layer of trust required
– More difficult to audit
– Connect directly to online
computer via USB
• The wallets they use are standardized
– Should be supported by all major wallet apps
• Will be a huge win for convenience & security

© Armory Technologies, Inc. 2013
Multi-Signature Transactions
• Most coins have a simple unlock condition:
– Here's a public key, sign with its private key to move
• Much more complex conditions are possible:
– Here's 3 public keys, sign with any 2 private keys
– This is a 2-of-3 multi-signature transaction

© Armory Technologies, Inc. 2013
Multi-Sig vs. Fragmenting
• Wait a sec, this sounds familiar!
– Haven't we seen M-of-N before?
• Yes! Fragmented backups also use “M-of-N”
M-of-N Backups

M-of-N Multi-Sig

Fragmented backups are for
securing your backup

Multi-signature transactions
are network-enforced

All transactions still require a
single signature, from a
single computer

Multiple public keys are
included in the unlock
conditions of the coins

The fragments only need to
be collected if wallet is lost

Network expects multiple sigs
for every transaction

© Armory Technologies, Inc. 2013
Multi-Sig vs. Fragmenting
M-of-N Backups

M-of-N Multi-Sig

© Armory Technologies, Inc. 2013
A Critical Puzzle Piece
• Multi-signature transactions are
critical for large organizations
– Wallets are managed by
employees, who may steal
– All wallets currently have a single
point of failure
• You can have:
– Five board members of a
company all create
wallets
– All money handled by the
company goes into 3-of-5
– All money requires 3
signatures to be moved
© Armory Technologies, Inc. 2013
Extras
Stuff that I wanted to present but
couldn't fit

© Armory Technologies, Inc. 2013
Who Am I?
• Alan Reiner
– “etotheipi” on the bitcointalk.org
• Mathematician, Rocket Scientist, Software Developer,
Perfectionist
– With a sprinkling of cryptography and data mining
• Have been part of the Bitcoin community since 2011
– Contribute to documentation, standards, security discussions,
etc, on the “Development & Technical Discussion” forum

• A huge nerd! (you have to be to do what I do)
– Sub-category: “ultra-paranoid crypto-nerd”

© Armory Technologies, Inc. 2013
Accomplishments
• Be careful who you trust!
– But I do have some street cred...
• Core Developer of Armory Bitcoin Wallet
– Secure wallet software: open-source, popular, trusted
– Innovated cold storage, one-time paper backups
• Discovered the “whoops-your-wallet-isn't-actuallyencrypted” bug in Bitcoin-Qt 0.4
– Yeah, whoops...
• Spoke on multiple discussion panels at
Bitcoin conferences, including the
“Security” Panel at San Jose 2013.
© Armory Technologies, Inc. 2013
Verify Your Installers
• GPG is a powerful, thoroughly-trusted crypto tool
– Presintalled in Linux & Mac; takes effort in Windows
– Because it's hard in Windows, I verify my Windows installers in Linux

Steps

• (1) Get GPG and file-hashing tool
– Linux & Mac: Do nothing, it's all pre-installed!
– Windows: Download gpg4win and SHA256 file hash tool (HashCalc is good)
• (2) Import the GPG keys to your keyring (only done once)
– Most tools have search & import function (Linux & Mac: “gpg --recv-keys <keyID>”
– Each developer's “keyID” should be well-known: mine is 98832223

• (3) Download the installers and signed hash files*
– Hash the installer file (Linux & Mac: “sha256sum <filename>” )
– The result looks something like this: f98c7a798122167c98c0a798122167f9030a7
– Compare to the hashes in the signed file
• (4) Verify the signature on the hashes file
– Win: use right-click gpg4win menu; Linux & Mac: “gpg -v sha256hashes.txt.asc”
– MAKE SURE THE FINGERPRINT MATCHES THE EXPECTED KEY
– Anyone can create a “valid” signature – but not from the developer's key!

*If it is a .deb installer (Linux), it may be signed directly, only need “dpkg-sig –verify *.deb”
GPG Keys of Major Wallets
• The most sensitive part of using GPG keys is the fingerprint distribution
• So here they are! (most GPG apps only show last 8 chars)

© Armory Technologies, Inc. 2013
Brainwallets (don't use them!)
• Humans are really bad at memorizing things
• You will lose coins
• Your family will never recover your coins if you die
– You literally take your wealth with you to your grave
• Any system that requires your brain to be useful
is essentially a brainwallet
• This is why Armory hates encrypted backups:
– If all your wallets are encrypted
– And all your backups are encrypted
– You have a brainwallet!

© Armory Technologies, Inc. 2013
Segregate Funds by Security
• Risks:

– Having all your funds in a single wallet, means all funds
have the same security
– Usually means funds are super-secure-but-inconvenient, or
not properly secured

• Mitigation:
– Use multiple wallets (Armory & Multibit have native support)
– Exercise all the best practices on the majority of your funds
– Keeps most of your funds secured, periodically refill lowsecurity wallets
Sweep vs. Import
• Definitions:

– “Sweeping” an address/key means sending all the coins owned by
that key to a new address (one you control)
– “Importing” an address means to add the private key to your
wallet – usually so it can be reused

• When to sweep vs import
– Sweep if anyone else has ever had access to the private key
– Importing really only makes sense with address reuse
• I already told you not to do that!

• Serious Security to consider
– You import a key that someone else has
– That person pays you for services/goods
– They sweep the key after you have delivered

When in doubt, SWEEP
© Armory Technologies, Inc. 2013

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Inside Bitcoins_AlanReiner

  • 1. Inside Bitcoins Conference, Dec 10-11, 2013 Best Practices for Using and Securing Bitcoins 10 December, 2013 Alan Reiner Founder & CEO Armory Technologies, Inc. © Armory Technologies, Inc. 2013
  • 2. List of Topics • • • • • • Introduction Bitcoin storage methods Bitcoin Basics The wedding of cryptography and money Security Practices The future of Bitcoin best practices Learn to hold your own Bitcoins and let the power of decentralized money shine! © Armory Technologies, Inc. 2013
  • 3. Who Am I? • Alan Reiner – “etotheipi” on the bitcointalk.org • Mathematician, Statistician, SW Developer, Perfectionist – With a sprinkling of cryptography and data mining • Have been part of the Bitcoin community since 2011 – Contribute to documentation, standards, security discussions, etc, on the “Development & Technical Discussion” forum • A huge nerd! (you have to be to do what I do) – Sub-category: “ultra-paranoid crypto-nerd” © Armory Technologies, Inc. 2013
  • 4. What is Armory? • Armory Bitcoin Wallet is a free, open-source desktop application for securing Bitcoins yourself – One of four such applications featured on bitcoin.org • Known for “security at all costs” – Sometimes “convenience” is one of those costs... – Currently a tool tailored to advanced/power users – Recently funded, will develop beginner's interface
  • 5. What is Armory? • Even after two years, Armory is still one of the only ways for non-experts to use “cold storage” – Sign transactions from an air-gapped computer • Also innovated many other features – Multiple-wallet interface – Wallets that only have to be backed up one time – Printable paper backups (with fragmenting!) • Not for Beginners! – Need Bitcoin-Qt running in background (for security!) – Need to download blockchain – Lots of advanced features I created Armory because the best practices I wanted were not available elsewhere © Armory Technologies, Inc. 2013
  • 6. Bitcoin Basics • Bitcoin has the potential to revolutionize payments – The same way email changed written communications • Bitcoin is complicated – But it will get easier... hopefully • Bitcoin creates both tremendous opportunities and tremendous risks – Harness the opportunities, mitigate the risks: win-win • Positive: Take control of your own money (and save)! • Negative: Take control of your own money (and lose it)! (If you are using Bitcoin to remove third-parties from the equation, you have to take over the responsibilities of those third-parties!) © Armory Technologies, Inc. 2013
  • 7. It's Just a Baby • The infrastructure around Bitcoin is still being built • Relatively speaking, Bitcoin is still in its infancy – Started only five years ago (2009) – Relatively unknown for years • Lots of venture capital flowing in to turn it into something much bigger • Still a lot of soul-searching to do by the community Bitcoin may end up being the TCP/IP of money – advanced payment systems will be built off of it, but only developers have to interact with it directly © Armory Technologies, Inc. 2013
  • 8. Why Bitcoin? • Show me another payment system that you can pay someone $10,000,000 USD: – To and from anywhere in the world – 24/7 without restrictions – Nearly instantaneously – Irreversible – With $0.00 in fees* – Can't be frozen or seized (without direct access to your wallet) • Bitcoin is not perfect, but it certainly is powerful! • There is no other payment system like this! • If only we could make it safe and usable... *Certain types of transactions may require fees, but it rarely exceeds $0.01 USD. © Armory Technologies, Inc. 2013
  • 9. Why Bitcoin? • Decentralized – Not controlled by any one entity: run by all users of the system simultaneously! • Limited Supply – There will only ever be 21,000,000.00000000 Bitcoins – The entire schedule of Bitcoin generation was announced in 2009 and cannot be changed – Predetermined inflation, no printing/debasing • Secure! (theoretically) – Built from standard, trusted crypto algorithms Bitcoin shares many of the same properties as gold (no one issues gold, the supply is limited, easy to identify, fungible, durable) © Armory Technologies, Inc. 2013
  • 10. Bitcoin Storage Options • With Bitcoin, now “data” is “money” – A 32-byte secret (private key) can control $millions – Raises the stakes of computer and network security – Money now stored directly on phone, computer, paper, etc • Store Bitcoin yourself + Full control over your money + Cannot be seized or stolen if secured properly - It's easy to lose 32 bytes if you're careless! • Let someone else hold your Bitcoin + - May be more diligent about security than you May hold BTC properly but use poor user auth Counterparty risk No Bitcoin insurance © Armory Technologies, Inc. 2013
  • 11. Third-Party Risk • The history of Bitcoin is filled with users trusting third-parties to hold their money - Currently, there is no equivalent of FDIC for Bitcoin Date Service Service Type BTC Lost / Stolen June 2011 Mt. Gox Exchange June 2011 MyBitcoin Wallet USD Value (at time of loss) 2,000 $47,000 79,000 $1,100,000 May 2012 Bitcoinica (#1) Exchange 38,000 $91,000 July 2012 Bitcoinica (#2) Exchange 40,000 $305,000 Sep 2012 Bitfloor Exchange 24,000 $250,000 Oct 2013 Inputs.io Wallet 4,100 $1,200,000 Nov 2013 GBL (China) Exchange 4,100 $4,100,000 Sometimes users get some of their own money back. Sometimes. © Armory Technologies, Inc. 2013
  • 12. Holding Your Own Bitcoin • Holding your own is like harnessing fire – Can be extremely useful... and dangerous! – Keep your fires small until you are experienced • Sometimes the biggest threat to users is themselves – Users are not used to truly irrecoverable data! – Not everyone makes backups – No one expects their hardware to fail Educate yourself, learn the tools, learn the risks, and experiment (with small amounts) © Armory Technologies, Inc. 2013
  • 13. Holding Your Own (cont) • Most users should not be holding life-changing amounts of Bitcoin themselves • Most users should not be trusting third-parties to protect life-changing amounts of BTC for them • Wait... so, what are users supposed to do ?!? Answer: Most users should not be putting lifechanging amounts of money into Bitcoin yet! • Bitcoin is still the Wild West of money • People like me are building safer tools & infrastructure – But we're not done yet © Armory Technologies, Inc. 2013
  • 14. Cryptography & Bitcoin A Short, Non-Technical Introduction © Armory Technologies, Inc. 2013
  • 15. Public-Private Key Crypto • On the internet, there are two main concerns: – Privacy of communications (encrypt & decrypt) – Authenticity of communications (sign & verify) • Bitcoin protocol does not use encryption – The Bitcoin protocol only uses “authentication” – “Are you authorized to move this money?” • All users create a private key (secret) and a public key (distributed) © Armory Technologies, Inc. 2013
  • 16. Public and Private Keys • Think of Bitcoin as a decentralized, public bank - is like a bank account number - is the signing authority on that bank account • All users make keypairs for “account” management - give to payers to deposit money in your “account” - keep it secret so only you can authorize payments A Bitcoin address is just a representation of a public key: Such as: “1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa” © Armory Technologies, Inc. 2013
  • 17. Example Network • All Bitcoins have a public “unlock” condition • Most coins have a simple unlock condition: provide a signature that verifies against a specified public key • If you have the private key, you can create those signatures! (so your wallet includes them in your balance) © Armory Technologies, Inc. 2013
  • 18. A Bitcoin Transaction Bitcoin might make a lot more sense after this demo... © Armory Technologies, Inc. 2013
  • 19. © Armory Technologies, Inc. 2013 Initial Conditions • Assume the Bitcoin network has 21 coins • All coins are locked using public keys A, B and C (so far) • Alice and Bob have all the private keys associated with those coins (and a couple extra unused keys)
  • 20. © Armory Technologies, Inc. 2013 Bitcoin Transactions
  • 21. © Armory Technologies, Inc. 2013 Bitcoin Transactions
  • 22. © Armory Technologies, Inc. 2013 Who owns what?
  • 23. © Armory Technologies, Inc. 2013 Payment Request • Bob will request 4 BTC from Alice • Bob's wallet will select unused private key E, and then create a payment address (based on the public key E) • Bob sends the address to Alice requesting payment
  • 24. © Armory Technologies, Inc. 2013 Create Transaction • Alice's wallet selects some coins that she knows she can sign for (at least 4 BTC) • She will use the 6 BTC associated with A (think of it like a $6 bill) • Alice creates a transaction spending the 6 BTC – She also selects an unused key (D) to send the 2 BTC back to herself (change)
  • 25. © Armory Technologies, Inc. 2013 Bitcoin Transactions • Alice uses private key A to sign the transaction • The signature is mathematically linked to every detail of the transaction – If the transaction changes at all, the signature will break (the math stops working)
  • 26. © Armory Technologies, Inc. 2013 Bitcoin Transactions • Alice “broadcasts” the transaction to the Bitcoin network • Users of the network verify: – – – The 6 BTC is unspent The sig corresponds to public key A The sig is valid for this particular transaction
  • 27. © Armory Technologies, Inc. 2013 Final Condition • The original 6-BTC bill is destroyed and 2 new bills totaling 6 BTC created • All users update their databases
  • 28. What Have We Learned? • Private keys let you “unlock” and “re-lock” coins under other public keys (i.e. send to others) • Public keys let you: – – Receive money See available coins/balance • Transactions usually have 2 parts (payment & change) • Signatures are mathematically linked to the signed data – Handwritten sigs can be (maliciously) transplanted between documents, Bitcoin signatures can't be • Wallets contain a lot of private keys – Uses a new key for every receiving operations © Armory Technologies, Inc. 2013
  • 29. Cold Storage • Now we can appreciate “cold storage” (aka “offline wallets”) – Only public keys are required to receive payments and verify transactions – Private keys are only required to move the coins It is possible to keep the private keys on an offline computer and receive money to it using the public keys Armory was designed to do exactly this! It is the gold standard of wallet security best practices © Armory Technologies, Inc. 2013
  • 30. Security Best-Practices (for varying levels of paranoia) © Armory Technologies, Inc. 2013
  • 31. Security vs. Convenience • Nearly all system become more inconvenient as you increase security! – The easiest systems are usually the least secure! – Commit to doing security right • A lot of users don't have the patience for this – Honestly, this is why Bitcoin may not be ready for primetime! If you're going to hold a lot of Bitcoin it's worth sacrificing some convenience to protect yourself © Armory Technologies, Inc. 2013
  • 32. GPG-Verify Your Installers • Risks: – You download installers from a malicious website – An attacker tampered with the installers on the real website – The installers are replaced during or after download • Mitigation: – All wallet devs sign their installers using known GPG keys • Most devs keep a special offline GPG private key just for this! – Get the developer's GPG public key and verify! If the installer has a valid signature from the correct GPG key, it does not matter where you got it from! There are slides at the end that explain in detail This is very easy in Linux & Mac, but a lot of work in Windows! © Armory Technologies, Inc. 2013
  • 33. Backup Your Wallets • Risks: – The most common reason users lose coins is due to not having an unencrypted backup! • You lose all your Bitcoins if your hard drive fails • You lose all your Bitcoins if you forget your password • Your family cannot inherit your Bitcoins if you get hit by a bus – It is critical your backup be unencrypted! • An encrypted backup is useless if you forget the password • An encrypted backup is useless if you get hit by a bus and your family would like to inherit your fortune For most users, digital security is the most important For most users, physical security is not a concern THEREFORE: Make an unencrypted backup offline and secure it! (paper, DVD or USB key)
  • 34. Backups: Digital vs. Paper • How much are you willing to bet that your CD or USB key will still work in 5-10 years from now? Armory Paper Backup – If it's more than your wallet value, don't use it • If you use digital backups, make multiple copies – Store together, at least one will work • Paper fades over time, but the data will be recoverable in 50+ years Armory Technologies recommends that you use paper backups whenever possible Copy the data by hand if necessary Most things that destroy paper also destroy digital
  • 35. Backup Frequency • IMPORTANT: At the time of this writing (Dec 2013): – Bitcoin-Qt wallets must be backed up every 100 transactions – Multibit and Bitcoin Wallet for Android require regular backups unless you always reuse addresses (not good practice!) • Address reuse is bad, but probably better than losing money – Armory and Electrum wallets only require one backup, ever • Infinite private keys generated from a single seed • Print your seed on a piece of paper for reliable storage If you use Armory or Electrum, make a paper backup, one time, then never worry again! In the next few months, all wallet developers will be implementing the one-time-only backup features
  • 36. Fragmented Backups • Risks: – If you are concerned about physical security, a single-sheet unencrypted backup is a single-point of failure • Mitigation: – Use M-of-N “Shamir's Secret Sharing” – For instance, 3-of-5: print 5 “fragments”, need any 3 – Store each fragment in a different location • Security—Attacker needs to steal multiple fragments • Redundancy—you can lose pieces and it still works! Currently, Armory is the only wallet offering this! It is called “Fragmented Backups” Graphic for 3-of-5 Backup
  • 38. Wallet Passwords • IMPORTANT: Your wallet password is your encryption key for your wallet! • If you forget your password, your wallet will be permanently encrypted and your coins will be lost! ...unless you have an unencrypted backup • No really: I'm serious your coins will be lost forever – Users are not used to the idea of truly, irrecoverable data – Make an unencrypted backup! If you've ever forgotten a password, make an unencrypted backup!
  • 39. Password Length • Armory and Bitcoin-Qt both use “key-stretching” – Converting your password into the encryption key is a computationally-intense process – Armory's key-stretching is resistant to GPU-acceleration • If someone gets your encrypted wallet, they can guess: – Without stretching: 1,000,000 - 5,000,000 passwords/sec – With stretching: 5 - 50 passwords/sec • If key-stretching is not used, must longer passwords – Recommended 12-16 characters for no key-stretching – Recommended 10-12 characters with key-stretching Use a strong password, make unencrypted backups!
  • 40. Password Length Time to brute-force your wallet password* Password Length 1 Computer 1,000,000 Computers 6 chars (no stretching) 10 min Instant 8 chars (no stretching) 8 days Instant 12 chars (no stretching) 16,800 years 6 days 6 chars (with stretching) 170 days Instant 8 chars (with stretching) 416 years 4 hours 12 chars (with stretching) 337,000,000 years 337 years If your wallet is valuable enough, a bot-net of 1,000,000 computers could be used to break your wallet encryption *Caveats: used 30-character alphabet to simulate poor entropy of human-generated passwords. Truly random passwords of these lengths will be much more secure.
  • 41. Do Not Reuse Addresses • Risks: – Bitcoin is actually not very good at anonymity – When you reuse addresses you make it far worse – Reusing addresses can hurt other users' privacy as well • Mitigation: – Bitcoin-Qt, Armory and Electrum do not reuse addresses by default – Some users force reuse due to lack of understanding or simplicity of backups – This is doing more harm than good in Armory & Electrum – Multibit & Android Bitcoin Wallet reuse addresses by default – Usually have an option to explicitly create If you are using Bitcoin-Qt, Multibit or Android Bitcoin Wallet, you may want to reuse addresses anyway if you do not create backups regularly. (lack of privacy is usually preferred to losing coins) © Armory Technologies, Inc. 2013
  • 42. Address Reuse & Privacy • Discussion: – Address reuse is mostly a privacy issue, not a security issue – Reusing the same public-private keypair is expected & safe throughout the rest of internet security – But it is egregiously bad for privacy in Bitcoin • There are contexts in which it is okay, but not standard – Donation addresses: all users donating know it is heavily reused, and accept being linked to it Users do not realize just how much privacy information is leaked by interacting with heavily-reused addresses! © Armory Technologies, Inc. 2013
  • 43. Address Reuse & Privacy • If you are using Armory or Electrum, you have no excuse for reusing addresses! – Both automatically generate new addresses for all operations – you have to go out of your way to reuse – Both produce backups that work forever • No matter how many new addresses you use, a backup made when the wallet was created will always work! © Armory Technologies, Inc. 2013
  • 44. What are Confirmations? • Bitcoin transactions are not instantaneous • Each confirmation is increased consensus that the transaction actually happened – More confirmations means more confidence – The first confirmation is the most important – Six confirmations is generally considered irreversible • Confirmations come on average every 10 minutes – Actually exponential random: usually 30 sec to 45 min © Armory Technologies, Inc. 2013
  • 45. Confirmation Risks • Do not trust zero-confirmation transactions unless there is pre-existing trust! – Or, you're willing to eat the loss when reversed • Attacks on zero-confirmation tx are easy and cheap – Just not that many people doing it right now • Attacks on oneconfirmation tx require a bit more resources • But they are possible! © Armory Technologies, Inc. 2013
  • 46. Call-to-Verify Addresses • If you are sending large amounts of Bitcoin: – You want to make sure you send it to the right place! – An attacker could replace the correct address with his own on its way to your wallet software • This is a serious security issue! – The “payment protocol” hopes to solve this by using SSL concepts to prevent address tampering – This will not work in all environments (not everyone has an SSL certificate) • Pick up the phone and call the other parties – Make sure they are who you think they are! – Manually verify the address before execution – This is much more reliable with an offline computer
  • 47. Cold Storage and the Holy Grail © Armory Technologies, Inc. 2013
  • 48. Hot vs. Cold “Hot” Wallet – The private keys are on an internet-attached system – All wallets are “hot” by default “Cold” wallet (“offline wallet”) – Gold standard of security – Private keys created and never leave the offline computer – Transactions are signed offline
  • 49. Hot vs. Cold Security • All known, major Bitcoin breaches to date: – Coins stored on a hot wallet – Or unencrypted backups stored on an “hot” computer • Compromising a cold wallet requires one of the following: – Physical access – Extremely advanced USB viruses – User accidentally installing malicious software
  • 50. Setting up the Offline Computer Online computer • (1) Install Armory Offline computer • (1) Install Armory • (2) Create new wallet • (3) Create paper backup – Copy by hand, if necessary • (4) Create “watchingonly” copy of wallet • (5) Copy to USB drive • (6) Import “watchingonly” wallet Your “watching-only” wallet has only public keys, no private keys!
  • 51. Doing an Offline Transaction Online computer Offline computer • (1) Create transaction – Same as you would with a hot wallet • (2) Save unsigned transaction to USB • (3) Load tx from USB • (4) Review for accuracy! – • (6) Load signed transaction, broadcast to network All benefit is lost if you don't review on the clean, offline computer • (5) Sign the transaction, save to USB
  • 52. Splitting roles Online computer • The watching-only wallet behaves identically to a regular wallet, but cannot sign/spend – Generate addresses – Confirm incoming transactions – See balances • An attacker getting the online wallet is a breach of privacy, not security Offline computer • This computer cannot display balances – It has no access to the network to know where your money is! – It can review transactions and request confirmation • Remember, the offline wallet is the signing authority. – It does nothing else but read and sign transactions!
  • 53. Doing it Right • If you are running any kind of online Bitcoin business, offline-wallets are an invaluable tool – Keep bulk of your funds in an offline computer • You can even keep it in a safe-deposit box! – All webservers and on-site computers should only use watching-only wallets! • Securely collect payments to the offline wallet • Track your wallet balance • Track and verify all payments/transactions • No one who gains access to the server can steal it! – Includes employees If you need a hot wallet, keep it small, periodically refill from the cold wallet © Armory Technologies, Inc. 2013
  • 54. FAQ • There is no special version of Armory for offline – It's an offline computer because the computer is offline • Mix and match versions to your heart's content – The following setup works fine: • Offline: Ubuntu 10.04 using Armory 0.87.2 • Online: Windows XP using Armory 0.90 © Armory Technologies, Inc. 2013
  • 55. Use Linux • Once you go down the “cold storage” path you are implementing serious security • As of this writing, the best way to move data between online & offline computer is USB drives – Linux has a much better history of resisting USBbased attacks – We are working on better methods for secure transfer • Armory website has Ubuntu “Offline Bundles” – Will install and run on the first boot of a fresh install of Ubuntu 10.04 or 12.04 – The offline computer needs no other software at all! © Armory Technologies, Inc. 2013
  • 56. Extra Credit • Dedicate a small USB key for offline transactions – Minimize exposure to potential viruses • Dedicate a computer for the creating transactions – Minimize exposure to potential viruses – Make it exclusive for Bitcoin processing • Use full-disk encryption to protect privacy – Without it, someone not authorized can still see the wallet value and transaction history – Also adds an extra layer of security Did I mention, make unencrypted backups? © Armory Technologies, Inc. 2013
  • 57. The Future Coming Soon! © Armory Technologies, Inc. 2013
  • 58. Hardware Wallets • A great tradeoff for security and convenience Trezor Hardware Wallet • Hardware wallets hold the private keys and sign on the device – The private keys cannot be read from it – It will only emit the public keys • The Trezor is the most anticipated HW wallet • Should be released in January, 2014 © Armory Technologies, Inc. 2013
  • 59. Hardware Wallets • Hardware wallets are an 80% solution – They lack flexibility – Another layer of trust required – More difficult to audit – Connect directly to online computer via USB • The wallets they use are standardized – Should be supported by all major wallet apps • Will be a huge win for convenience & security © Armory Technologies, Inc. 2013
  • 60. Multi-Signature Transactions • Most coins have a simple unlock condition: – Here's a public key, sign with its private key to move • Much more complex conditions are possible: – Here's 3 public keys, sign with any 2 private keys – This is a 2-of-3 multi-signature transaction © Armory Technologies, Inc. 2013
  • 61. Multi-Sig vs. Fragmenting • Wait a sec, this sounds familiar! – Haven't we seen M-of-N before? • Yes! Fragmented backups also use “M-of-N” M-of-N Backups M-of-N Multi-Sig Fragmented backups are for securing your backup Multi-signature transactions are network-enforced All transactions still require a single signature, from a single computer Multiple public keys are included in the unlock conditions of the coins The fragments only need to be collected if wallet is lost Network expects multiple sigs for every transaction © Armory Technologies, Inc. 2013
  • 62. Multi-Sig vs. Fragmenting M-of-N Backups M-of-N Multi-Sig © Armory Technologies, Inc. 2013
  • 63. A Critical Puzzle Piece • Multi-signature transactions are critical for large organizations – Wallets are managed by employees, who may steal – All wallets currently have a single point of failure • You can have: – Five board members of a company all create wallets – All money handled by the company goes into 3-of-5 – All money requires 3 signatures to be moved © Armory Technologies, Inc. 2013
  • 64. Extras Stuff that I wanted to present but couldn't fit © Armory Technologies, Inc. 2013
  • 65. Who Am I? • Alan Reiner – “etotheipi” on the bitcointalk.org • Mathematician, Rocket Scientist, Software Developer, Perfectionist – With a sprinkling of cryptography and data mining • Have been part of the Bitcoin community since 2011 – Contribute to documentation, standards, security discussions, etc, on the “Development & Technical Discussion” forum • A huge nerd! (you have to be to do what I do) – Sub-category: “ultra-paranoid crypto-nerd” © Armory Technologies, Inc. 2013
  • 66. Accomplishments • Be careful who you trust! – But I do have some street cred... • Core Developer of Armory Bitcoin Wallet – Secure wallet software: open-source, popular, trusted – Innovated cold storage, one-time paper backups • Discovered the “whoops-your-wallet-isn't-actuallyencrypted” bug in Bitcoin-Qt 0.4 – Yeah, whoops... • Spoke on multiple discussion panels at Bitcoin conferences, including the “Security” Panel at San Jose 2013. © Armory Technologies, Inc. 2013
  • 67. Verify Your Installers • GPG is a powerful, thoroughly-trusted crypto tool – Presintalled in Linux & Mac; takes effort in Windows – Because it's hard in Windows, I verify my Windows installers in Linux Steps • (1) Get GPG and file-hashing tool – Linux & Mac: Do nothing, it's all pre-installed! – Windows: Download gpg4win and SHA256 file hash tool (HashCalc is good) • (2) Import the GPG keys to your keyring (only done once) – Most tools have search & import function (Linux & Mac: “gpg --recv-keys <keyID>” – Each developer's “keyID” should be well-known: mine is 98832223 • (3) Download the installers and signed hash files* – Hash the installer file (Linux & Mac: “sha256sum <filename>” ) – The result looks something like this: f98c7a798122167c98c0a798122167f9030a7 – Compare to the hashes in the signed file • (4) Verify the signature on the hashes file – Win: use right-click gpg4win menu; Linux & Mac: “gpg -v sha256hashes.txt.asc” – MAKE SURE THE FINGERPRINT MATCHES THE EXPECTED KEY – Anyone can create a “valid” signature – but not from the developer's key! *If it is a .deb installer (Linux), it may be signed directly, only need “dpkg-sig –verify *.deb”
  • 68. GPG Keys of Major Wallets • The most sensitive part of using GPG keys is the fingerprint distribution • So here they are! (most GPG apps only show last 8 chars) © Armory Technologies, Inc. 2013
  • 69. Brainwallets (don't use them!) • Humans are really bad at memorizing things • You will lose coins • Your family will never recover your coins if you die – You literally take your wealth with you to your grave • Any system that requires your brain to be useful is essentially a brainwallet • This is why Armory hates encrypted backups: – If all your wallets are encrypted – And all your backups are encrypted – You have a brainwallet! © Armory Technologies, Inc. 2013
  • 70. Segregate Funds by Security • Risks: – Having all your funds in a single wallet, means all funds have the same security – Usually means funds are super-secure-but-inconvenient, or not properly secured • Mitigation: – Use multiple wallets (Armory & Multibit have native support) – Exercise all the best practices on the majority of your funds – Keeps most of your funds secured, periodically refill lowsecurity wallets
  • 71. Sweep vs. Import • Definitions: – “Sweeping” an address/key means sending all the coins owned by that key to a new address (one you control) – “Importing” an address means to add the private key to your wallet – usually so it can be reused • When to sweep vs import – Sweep if anyone else has ever had access to the private key – Importing really only makes sense with address reuse • I already told you not to do that! • Serious Security to consider – You import a key that someone else has – That person pays you for services/goods – They sweep the key after you have delivered When in doubt, SWEEP © Armory Technologies, Inc. 2013