How would you like to be able to carry your wealth with you everywhere you go and yet have it totally undetectable by any outside observer? Imagine crossing borders, fleeing from dictators, or simply passing time in the gulag while confidently knowing that you can conjure up your wealth at the time of your choosing.
You can do this now with the advent of Bitcoin.
Bitcoin is the new, spendable financial asset that some are calling the ultimate offshore bank account. As a useful and scarce digital commodity, this data has become quite valuable. It is its nature as data that makes it exquisitely manipulable.
Without getting into a high-level technical discussion, bitcoins are simply entries in an open, global ledger. They are represented by a string of digits known as a “public address.” This public address is controlled by another string of digits known as the “private key.”
A good analogy is email. People can send (or “sign over”) bitcoins to your public address much like people can send emails to your email address. For email, the person with the password is the only one who can send emails from that address. The bitcoin private key acts much like the password for your email account. Without it, you can’t send bitcoins to any other address.
There are a “gazillion” possible bitcoin addresses and you can generate a new address (and its corresponding private key) anytime you want if you know what you are doing. Here I will show you how.
Using fancy math, a bitcoin address is derived from a private key. Private keys must simply adhere to a format that is recognized by the bitcoin software. One of these formats is Hexadecimal Format (64 characters [0-9A-F]). This consists of a 64 character string.
Through another trick of high-level math (SHA256) you can take any string of data, run it through a SHA256 calculator and come up with the required 64 character hexadecimal string.
What does this mean?
This means that you can take any memorable string of data, enter it into a SHA256 calculator and come up with a bitcoin private key. You can take this private key and use a tool like bitcoin software to generate the public address. This is the address where you can send and store your secret stash.
Let’s bring it all together in a few simple steps:
- Come up with an easy to remember but hard to guess passphrase (don’t do this without reading this tutorial!).
Paste this data (passphrase) into the SHA256 calculator (BitAddress does this too with their “brain wallet” function which is just a SHA256 calculator) and generate the corresponding private key. The same data input will always get you the same private key.
Go to BitAddress.org, click on “wallet details”, paste the private key and click “view details.” This will generate the corresponding public address that you can now send your money to (see “tips for the paranoid” below).
Repeat steps 2 thru 4 when you are ready to access your wallet and then load your private key into any good bitcoin wallet.
That’s it! You can create as many of these as you can remember and you are now ready to literally carry your wealth inside your head. Make sure you read the passphrase tutorial so you don’t end up like this guy. In that tutorial I show you how to easily memorize a super-random, 10 to 20 word passphrase in less than 10 minutes.
Note: You may want to set up a dead man’s switch to notify your heirs of the private key regeneration formula but deliver the actual passphrase through a separate channel or a different dead man’s switch.
Tips for the paranoid
When using BitAddress.org or the SHA256 calculator to generate/manipulate bitcoin addresses and private keys, disconnect the internet connection after loading the page and refresh the page several times. After generating the desired info, copy the public address to an easily accessible location so it is handy when you are ready to send money to it. Next, close the browser completely to terminate the session.
Extra paranoid people will never connect this machine to the internet again. They do this because they recognize the slight possibility that the machine may have been compromised with malware that could save and transmit the data to a bad actor once it is reconnected to the internet.
Read the passphrase tutorial.