Thursday, January 11, 2018

More Thoughts on Paper Wallets

My last post gave a run-down of my experience in sending Bitcoin to a paper wallet, and later, using the Blockchain.info exchange to pull money off of the paper wallet. In that, I said that I wouldn't advise using this method, even though I'll probably use them again.

My plan would be to use them for long-term storage. Even using them that way, you might lose money (if not by accident, by normal rate fluctuation). 

What I didn't tell you is how I agonized over the decision of whether to create several "sloppy wallets" and send small amounts; or just split the full amount in the wallet and send it out in two or three chunks. If the former: fees, fees, fees. If the latter... what if I made a mistake, this being my first try? (And the exchange warning me, all the while, that this process is only for advanced users). 

I had to pat myself on the back and give myself a pep talk: "After all, the world won't end if you make a mistake and lose $100 in the Twilight Zone. You won't be happy, but you won't die from it."

Honestly, though, it's a wonder I didn't die from the stress of it. When I was searching high and low for that well-hidden "Import" button on Blockchain's site, for instance, I came close to having a meltdown. I broke out in a cold sweat and had to pep-talk myself again!

But loading small amounts on paper wallets: it could still work, if you already have a nice supply of Bitcoin in some third-party wallet that only charges small fees for sending. The paper wallets could be used as gifts, or could later be combined into one big account for sending or spending.

I can't easily get over the fact that fees seem to hit you coming or going. These could increase in the future, but then again, they could stabilize, as the vendors find some compromise that would make the fees better correspond to the amounts being sent, or different fees for different uses.

In my opinion, paper wallets (with other off-line backups) would still be better than third-party vendors for storing cryptocurrency in the long term. As long as the blockchain exists, for manually inputting keys (if necessary), it seems more reliable than hoping Jaxx or Coinbase doesn't go out of business or get hacked. 

For experimenting and holding average amounts of currency, I think vendor wallets (Jaxx, Bitcoin, etc.) or exchanges (Coinbase, Blockchain, Bitsane) are most convenient. Yes, you could lose money if exchanges or wallet generators got hacked. That's not much more worrisome than a billfold full of cash and credit cards, or an on-line banking account that might get hacked one day.

P.S.: I haven't tried a hardware wallet yet. Might be trustworthy. Then again, it might be like my flash drives. At least two or three times, I've plugged in an old, reliable flash drive only to get the message that it can't be read, or the technology of that particular drive is no longer supported, or just... my machine suddenly doesn't recognize it anymore. What? Why? It worked fine yesterday... :-(



Another Crack at Crypto - Harrowing Experience, But Kind of Fun?


Okay, in my last post, I wrote War and Peace. No, really, somebody else already wrote that half-million-word book, but my last blog post certainly was long. I gave a run-through of my personal experiences with cryptocurrencies. Learning to use them had been quite stressful, though I'd gained money, not lost it (I think). I'll have to do the math, but I think I'm still ahead.

In learning to use crypto, I had read lots of articles and watched tutorials, experimented with a few exchanges, sent money wallet to wallet, and used the blockchain to track my balances. I had put money into a paper wallet, but had not yet gotten money out of one. I was a little nervous, but not that fearful. I felt comfortable with the concepts involved in paper-to-web transfers, and only a little afraid of the interfaces I had seen, which were somewhat old-school techy--you know, solid gray boxes and fields, kind of like the old FTP interfaces that scared me so much (fearful geek that I am).

Tonight, I am older and wiser. I have used Blockchain.info to import my Bitcoin from my paper wallet and export it to two places: a wallet in the Bitsane Exchange, and a Jaxx wallet. Once again, the experience of doing something new with crypto proved harrowing. My advice is, "Don't try this at home." (Or anywhere else). Seriously, only use paper wallets if you're serious about cryptocurrency's long-term potential and you don't mind losing a few fees while you experiment. There are other good uses, of course, including person-to-person transfers, avoiding exchanges altogether.

My exchanges were successful, in spite of high fees. But figuring out how to do things involved a lot of trial and error and guesswork. I had watched some tutorials on YouTube and thought I knew how to do this thing. I should mention that, at some point during this process, I signed up on the Blockchain.info site using my email address, and verified it. I'm not sure if that was required. They emailed me a wallet-code/username to log in with. So now when I click "Get Free Wallet," the site recognizes me and that username comes up; I put in my password and log in.

On Blockchain.info's home page (even before logging in) I used the hash searchbox at the bottom of the home page to check the balance in my existing paper wallet again. It was slightly depleted by negative rate fluctuations over the past week or so, but I still had over $100 to play with. I gathered the various target wallets I planned to use to receive my funds (one at Jaxx, one at Bitsane, one at Blockchain).

I had already watched third-party tutorials on the process of emptying a paper wallet into a Blockchain wallet. All of the tutorials showed the Blockchain menu as having an "Import/Export" link at the top. First big snafu! This link did not exist. I looked and looked. It certainly wasn't at the top of the page with the other menu items. So, I clicked around in the site and still couldn't find it.

Screenshot of Blockchain.info's home page.

Closeup of Menu Items on Home Page:

Closeup of menu items on Blockchain's home page.

No Import/Export Item (including links in the drop-downs under each item). I went to the FAQ. Nothing. Then I did a quick Google Search. I found the usual maddening, chaotic mix of guesses and opinions (many quite rude), but couldn't find my answer. Finally, one person mentioned "Settings." I went there, and still no Import/Export link, nothing that looked like the tutorials. But at last, under "Addresses," I found a demure, nondescript little text link for imports. Here's how I found it:

From Blockchain.info's home page, I clicked on "Get Free Wallet." (Here, I'm working from memory: I don't think the code that came up at this point was the wallet. It may be the user identification, kind of like a username for your wallet. It is a longish, private key with hyphens in it).

Using the wallet/log-in ID that Blockchain sent me and the password I created, I logged into my wallet/dashboard interface.

The resulting screen is a dashboard, similar to the one below (accessed Jan. 10, 2018). It says "Be Your Own Bank." It has "Your Balances" ($0 until you deposit something). And it has some charts.

On the dashboard, in the left-hand sidebar: 

Click "Settings."

The next screen shows your Wallet ID (PRIVATE!) and a Mobile Pairing Code/QR (also private).

In the left-hand sidebar:

Click "Addresses" and get the screen below:

It says "Be Your Own Bank." Under that are two buttons ("Send" and "Request"); an alert; a link for Bitcoin and Bitcoin Cash; a default wallet ("My Bitcoin Wallet"); a link that says "+ Add" (to add a wallet); a title ("Imported Bitcoin Addresses" with an informational alert, "Not backed up..."); and FINALLY, this link:
+ Import Bitcoin Address. 
(Note: The actual link is in plain gray text, not highlighted). 
Screenshot of dashboard in my logged-in wallet settings at Blockchain.info
Clicking on the link ("+ Import Bitcoin Address") brought up a pop-up box with a white field to enter an address, but it did not actually say which address to enter. They suggest that only advanced users do imports. I almost made the mistake of entering my Private Key here, but intuited that, as I was importing a wallet, not yet spending funds, I should enter my PUBLIC key here. So I did:

Screenshot: Blockchain.info's pop-up box for inputting a public key
in order to import an existing wallet from elsewhere.
 The text message in the pop-up above is the "advanced user" warning:


My guess, to input the PUBLIC key, turned out to be correct. Success! My wallet, that had previously existed on a printed piece of paper, now appeared as a link on the Blockchain site, and my USD balance appeared on the dashboard. I don't recall if this was immediate--I think it was. Of course, I had kept a copy of my private key so I could later spend my coins. Now I felt "safe." The first step in my paper-to-web transfer was complete.

Afterwards, I could have played around with my balance, sending small amounts of bitcoin here and there (biting the bullet on fees). But I had a specific purpose in mind for my coin. I wanted to exchange some of it for some lesser cryptocurrencies, in hopes that they will one day be "big."

I next used the "Send" Button. The next steps were pretty familiar to me--not unlike Coinbase, except that this was the first time I'd had to enter my own private key. The process for doing this is pretty straightforward. For the recipient address, I entered an existing Public Key. The field for the corresponding private key was clearly marked. A pop-up then asked for the pin that I had created when I first created my paper wallet. I had to do some subtraction (subtracting the stated fee) to determine how much I could send. It gave me a summary, to make sure of everything before I sent it.

For my second transaction, I wanted to use my total balance. Interestingly, Blockchain tried to double the fee, here, to $11. I was shocked, but then realized that I could customize the fee. I changed the fee to about $5-$6 (it wouldn't let me do less). I subtracted the fee from my total balance, and sent the difference. That emptied my wallet. My dashboard showed a $0 balance. Success!

Elsewhere on my dashboard, I could see the pending transactions and confirmations. My transactions remained pending for a very short while before being confirmed and showing up in my other wallets. I immediately exchanged some of my Bitcoin for Ripple. Maybe not a wise decision, if Ripple flops. But I've done something new and exciting, for a fearful newbie. That makes me very happy.

A little byword: none of this is anonymous. All these companies now have my "real" email address, one or more of them have my full name and street address, and one of them (Coinbase) has just about everything about me, including my bank-account routing info. The only way to get hold of Bitcoin anonymously, besides mining, would be to find another Bitcoin user and make a trade, person-to-person, wallet-to-wallet, without ever going on-line. Likewise, you'd then have to make any Bitcoin-to-fiat exchanges in person or through LocalBitcoins, or something like that. It all sounds rather back alley. However, I have sent a small amount of Bitcoin from my Coinbase and Jaxx wallets to another person's Jaxx wallet. Still, my original Bitcoin buy was on Coinbase, so it's all traceable. But, if I'd made my first buy in person, I guess it would be untraceable, if that's a big concern.

I wouldn't advise using paper for anyone who isn't trying to protect huge sums, or wanting to keep them for a long, long time -- or maybe wanting to physically transfer paper, as a chunk of "cash," to someone else. Some of the tutorials tell you to do a lot of paper wallets loaded with small amounts, for the purpose of experimenting. For every wallet you load (paper or otherwise), you may have to pay a fee to Coinbase, or Jaxx, or Blockchain, or an individual seller, or whatever you're using to send it. You may end up paying a $5-$15 fee to send, say, $5, $10, $20. Some of the exchanges or currencies set a minimum amount or a reserve to keep you from sending small amounts. Getting funds from paper wallets onto the exchanges is tricky, especially since exchanges may change the rules or update their interfaces so that you can't figure out how to use them. The idea of paper wallets is attractive to me, but the actuality of using them, outside of experimenting, is a little scary.

Another thought: --about $5 per transaction (on relatively small amounts). I don't know where I got the impression that Blockchain's fees were reasonable. Still, I'm sure these companies, like me, are still learning. With the price of servers, electricity, customer service, lawyers, et al, they must inevitably raise their fees. And if fees are high now, what might they be in the future? Hmmm, maybe those good old fiat-bank fees don't seem so insane now. I mean, I could spend $25 or $5,000 greenbacks any old day (if I had that much) without paying any fee at all...