On the flip side, cold storage never touches the internet.
For example, there’s paper wallets, hardware wallets, and brain wallets.
Paper wallets are literally pieces of paper with your private key printed on it.
You can generate fancy paper wallets on websites such as Bitcoinpaperwallet.com and Bitaddress.org.
For maximum security, these websites will ask you to download the entire website and run them locally, but only after shutting off your entire internet connection for maximum security.
They also warn of smart printers that cache files that it prints, and operating systems that might already be compromised.
In situations like these, users of paper wallets suggest using a dumber old fashioned printer, and also dedicating an entire new, fresh computer just for the purpose of printing paper wallets.
This is how far some people take security.
There are also hardware wallets such as Ledger, Trezor, Case, and Keep Key, which are little devices that plug into your computer or smartphone via USB or some other method and sign transactions for you.
The idea is that while your computer may be connected to the internet, the hardware wallet handles your private key and signs transactions in a trusted execution environment that runs separately from your computer and never touches the internet.
And then there’s brain wallets.
So imagine a wallet that is so secure that it’ s practically impossible to hack. Online web wallets might get hacked, your smartphone or hardware wallet might get stolen, or your house might burn down and take with it your paper wallet.
Imagine a wallet that’s immune to all of these disasters AND more.
Well look no further than your brain, the most secure wallet of them all.
Simply memorize your private key.
Just kidding.
While it is possible to memorize your raw private key, an easier alternative would to memorize a collection of words or phrases or a mnemonic.
The idea is to just have a more easily memorizable set of characters than your straight up private key.
On the right , you can see that I’ve chosen a list of 12 words.
Multiply, scrap, submit, select, adjust, end, accuse, fuel, nose, hope, chair, afraid.
After I’ve chosen this set, I would then hash them together to get my private key.
This way, I can have the security of a brain wallet, having no physical evidence of my private key and keeping everything in my head, and also get around memorizing my actual private key.
However, there’s a catch.
Humans aren’t as random as we think, so the words someone chooses for their brain wallet might easily be guessed — such an attack is called a dictionary attack.
Dictionary attacks are especially dangerous to those who take their brain wallet words from a famous quote from a speech or movie or book.
In general, so long as your words are not closely related, it’s still expensive and improbable that someone would be able to guess and successfully dictionary attack your brain wallet.