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Here is the method I plan to use for creating a cold storage. I am very new to all this, and have never used Bitcoin before. I am not very technical either. Anyway, here it is:

  1. Create a live-cd with Ubuntu (on a DVD, not install anything on the hard-drive, I assume everything will be deleted once I turn off the system).

  2. Install Armory on Ubuntu, create an encrypted wallet using the client (encryption just in case the wallet files does not delete for some reason when I turn off the OS). I write down the encryption key on paper.

  3. Generate an address for receiving bitcoin, write down the private and public key on paper.

  4. Generate a paper backup for my Armory wallet, write down the root-code to this on a paper using the "create paper backup" feature of Armory.

  5. If I ever want to send any bitcoins from my wallet and address I delete the wallet and address later. I only send bitcoins by generating a send signature using an Armory offline wallet that is temporary installed on a live CD, and activate the send signature with a "watch only" online wallet. The offline-wallet will never and have never touched the Internet.

This way I should be able to always have access to receive and send my bitcoins if I still have the paper where I wrote down wallet encryption key, bitcoin addresses and wallet root code, and don't have to worry about data corruption or other hardware/software problems.

Is this a safe method? I plan to put about US$10000 in Bitcoins in cold storage now, but I just want to hear what you think about it before :)

Sorry for beeing a noob to this. I have read about generating codes offline using bitaddress.org as an HTML file, but I have not heard from enough people checking their code to see if the "random addresses" is pre-generated by some way and not as "random" as one might think.

  • Good point about checking code to see if they are not pre-generated. Armory could be doing this as well (right), but hopefully others have checked their code enough. – Fraggle Jun 18 '14 at 13:11
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It sounds like a lot of hassle to send bitcoins because you have to re-install you offline armory each time. Also, the fact you're trying to do it on a live CD tells me you likely don't have an air-gapped machine. If you think your wallet won't "touch the Internet" in such a case, think root-kit. I would advise against this.

Instead, get a cheap Raspberry Pi (disable the Ethernet) and use that as your offline wallet. If you encrypt the wallet and generate your paper backup, your coins will be very safe, (provided you don't lose your paper backup) and will be less of a headache to access your funds.

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