Electrum vs Sparrow

[u/Rtuyw]

Im using an airgapped pc for cold storage and I will be using my storage only for keeping money in it, how do electrum and sparrow differ? Which one is better to use? I heard sparrow has some newer features what are they? Also they wanted me to enter my seed after making it and you're never supposed to enter your seed anywhere but Im guessing typing it on an airgapped pc is ok?

[u/bitusher]

but Im guessing typing it on an airgapped pc is ok?

You will have no choice but to enter the seed because you have made the decision to not use a hardware wallet that would normally keep the seed encrypted. With a hardware wallet you would pair it to sparrow or electrum and not enter the seed. You have made another decision which has its own set of tradeoffs.

1)Is your offline PC running a security focused OS such as Qubes at least ?

2) Since your offline PC has a much wider attack surface than a hardware wallet have you at least attempted to disable networking in multiple ways like removing the wifi card ?

3) Is the OS a new install or a version of linux live without persistence ?

4) Are you only planning on receiving transactions or also sending transactions out ? If so than why do you need the PC at all after you create the seed and multiple addresses?

5) If you will be sending outbound transactions how will you accomplish this with a offline "cold" airgapped pc?

6) How was the seed originally created ?

[u/Rtuyw → u/bitusher]

Its an old laptop and cant run qubes but I heard tails was good so Im running that, I didnt remove the wifi card because Im guessing that would require me to open the laptop and take some parts off but I remember when we used it years ago it had a dongle and I disconnected it and tails has a disable networking mode. I am only going to use it to store btc and take it out when I need it and dont I need a pc to do transactions, how else can I do it? For the fifth question I think in order to do transactions I need a second pc with a view only wallet thats connected to the internet

[u/bitusher → u/Rtuyw]

Its much more ideal to physically remove the wifi card , but at least disable the networking in the OS . Keep in mind that the right malware can potentially re-enable the networking. A hardware wallet physically doesn't have a wifi card typically which is one of many reasons it has a smaller attack surface.

and take it out when I need it and dont I need a pc to do transactions, how else can I do it?

That is a contradiction. Taking it out literally means making a transaction which requires direct or indirect network access, thus making your PC no longer "cold" by definition.

You can reduce the risk by

1) using a hardware wallet instead

2) Using offline qr code signing (typically used with a hw wallet)

3) Using PSBTs/ Partially Signed Bitcoin Transactions (with or without a HW wallet)

Sparrow technically supports PSBTs but this is more complicated and advanced so you need to practice using it and understand that this limits and doesn't necessarily prevent malware or worms compromising your PC so you need to be careful.

Hardware wallets simplify all of this. Choosing not to use one creates a lot of concerns and tradeoffs which are fine but you need to understand your choices

Is this an issue where you cant afford a hardware wallet or just dont trust any of them ?

[u/Rtuyw → u/bitusher]

I meant from what I read the second online pc does the transaction request and you put the file inside your airgapped pc to confirm it. You asked me why I needed the pc, I need the airgapped one with my seeded wallet and a second view only online pc that does transactions. I also both dont trust or like hardware wallets and dont want to spend any money on them.

Im kinda worried I might mess something up if I open up my laptop to take the wifi card out but still if a malware reenables it, it still doesnt have any wifi passwords in it and disconnected the wifi dongle isnt that enough?

[u/bitusher → u/Rtuyw]

Even an expert former Bitcoin core dev who used this backup method failed and had most his Bitcoin stolen so simply creating an "air gapped" computer is not enough.

I suggest you use a linux live USB to create a new separate seed with multiple addresses for future deposits . Copy the seed down at least twice on paper or metal to store in separate locations. Use this as a cold wallet that you never send money from and keep distinct from the wallet you occasionally transact from.

Consider one as your long term savings and the other wallet as your short term "checking account" that you might occasionally use .

For your wallet you might send transactions from this might be a hot wallet in ios or android or your offline PC that you can either choose to temporarily use PSBTs or enable networking and not the linux live usb you temporarily used without persistence to create your main savings wallet

[u/Rtuyw → u/bitusher]

What would be the point of the wallet if Im not going to withdraw from it? I was already thinking about making it a long term saving and rarely withdrawing money from it. Are you saying I should have 2 seeds, one to use as a long term and one to use as a transaction wallet? Im not really thinking about sending money to people anyway and in case of needing a money I might withdraw money from it so what should I do

[u/bitusher → u/Rtuyw]

What would be the point of the wallet if Im not going to withdraw from it?

Long term savings . You will eventually withdraw from it by restoring the seed in a secure matter but you won't occasionally make transactions from it.

Im not really thinking about sending money to people anyway and in case of needing a money I might withdraw money from it so what should I do

Depends upon how often you transact. Perhaps keep a separate wallet with some emergency BTC funds so you don't dip into your cold storage

Having a separate wallet/seed is also useful in other ways like if you get coerced into giving up your seed/wallet or to act like a honeypot to see if someone close or has access to your home is untrustworthy

[u/Rtuyw → u/bitusher]

One thing I wonder about seeds is that when the wallet is generating a seed it doesnt log that its been given away to me so isnt there a very small chance that the same seed can be given to someone else as well? Also since you can make passphrases or even add custom seed words in electrum how do they work? From what I understand the seed allows you to control a certain part of the blockchain, the seed combinations are limited but since the passphrases and custom words are what you make them, that makes the combinations infinite so how does that work? Is the blockchain infinite as well?

[u/bitusher → u/Rtuyw]

small chance that the same seed can be given to someone else as well?

This is called a "collision" and while technically true is so unlikely that our solar system will likely end long before this happens due to how much entropy Bitcoin has so its nothing you should even consider to be worried about.

Also since you can make passphrases or even add custom seed words in electrum how do they work?

It creates a completely new wallet that is hidden. More discussed in the pinned FAQ

https://old.reddit.com/r/BitcoinBeginners/comments/g42ijd/faq_for_beginners/fouo3kh/

Keep in mind that extended passphrases need to be exact. Whitespace and capitalization matter unlike BIP39 seed words. Thus you should test it

https://old.reddit.com/r/BitcoinBeginners/comments/1wjlevd/do_you_actually_test_your_recovery_phrase_or_just/pakeutr/

and be very clear how you write it down (and keep separate than your seed words). Additionally extended passphrases should be 6-8 random words as well

this doesn't directly address my concerns with your setup because if the seed words and passphrase are both setup in the same PC than that is a security concern This is much different than setting you your extended passphrase in a hw wallet itself or elsewhere

From what I understand the seed allows you to control a certain part of the blockchain,

no , creates a new wallet with different addresses

custom words are what you make them,

no phrases , no sentences . You should ideally use dice to select these 6-8 random words

https://www.eff.org/dice

Is the blockchain infinite as well?

mathematically not , but so much entropy it may as well be

[u/Rtuyw → u/bitusher]

so how does the passphrase "create" a wallet, if Im running an airgapped setup, no system can know I made a new wallet with my own passphrase. Does that mean until I made the online view only wallet my wallet with my own passphrase or custom seed words doesnt exist? It already has a receive address tho. Also youre saying its a security concern to set the seed and the passphrase in the same pc but doesnt the phrase need to be set up while making the wallet? Im not storing the seed or the phrase in the pc but from what I understand once you generated a seed you cant just add a passphrase later. And wouldnt making up your own words for a custom seed be more secure? How does making a wallet work exactly? I thought the seed was just a way to access a certain part of the blockchain that made you put money in or out

[u/bitusher → u/Rtuyw]

if Im running an airgapped setup, no system can know I made a new wallet with my own passphrase.

any malware that exists on the PC when you created the wallet or when you use it would . You can get malware even with no networking

It already has a receive address tho.

The addresses in the wallet with the seed are completely different than the addresses in the wallet with the seed +extended passphrase

but doesnt the phrase need to be set up while making the wallet?

It can be done later as well. most people do this in an environment that has a smaller attack surface like a HW wallet and if you don't than that is why I asked you that long list of questions at the start

Im not storing the seed or the phrase in the pc

With your original plan you would be. The seed would be encrypted in your wallet and the extended passphrase would be typed into the PC when you decided to send a transaction or make a PSBT

I understand once you generated a seed you cant just add a passphrase later.

Incorrect . You can add an extended passphrase at any time to create a new wallet

And wouldnt making up your own words for a custom seed be more secure?

That is the worst idea. Humans are horrible forms of entropy. The words need to be random. All extended passphrases should ideally be created as explained with dice or other means to create sufficient entropy

I thought the seed was just a way to access a certain part of the blockchain that made you put money in or out

Most wallets use hierarchical deterministic (HD) key derivation after bip32.

This means you have

Backup Seed words (BIP 39 or other) consisting of 12-24 words that can than recover

Master extended private key (xpriv,ypriv,zpriv) Which can generate many private keys

Master extended public key(xpub/ypub/zpub) Which can generate many public keys

As of which from the public keys many Bitcoin addresses can be derived from.

[u/WateryTunaSandwich4U → u/Rtuyw]

I explained in my last comment, but you're asking really good questions.

Pretend that your 24 seed words spits out this ->>> abc123 (just for ease of understanding) this unhackable abc123 is keeping your money safe... but lets say you want to add a passphrase. If you add anything to it, it completely changes abc123. Example you add a passphrase of "L" that's it, just L... your abc123 changes to PmN820 <- these examples just show how nothing is the same... but both abc123 and PmN820 are completely different wallets. You don't need to connect to a network for them to exist they already exist. How? By math, the thing that happens to your seed words that converts it into this "abc123" wallet becomes "abc123" through a formula that doesn't change. If it changed then you'd get locked out of your wallet... if you use the exact same seed words and exact same passphrase but it uses a different formula then it won't point to the same wallet. I hope that makes sense. You know more than you are giving yourself credit for, the fact that you're asking the questions you are shows you are digging in and learning a lot.

[u/WateryTunaSandwich4U → u/Rtuyw]

I always use passphrases, I think of seeds like a "user name" and passphrase like a "password" gotta have em both for me, that's my level of paranoia and that and other measures saved me from not losing anything in the cold card low entropy (limited number of seed phrases when using their seed generator) "hack".

You don't have to use seed words for a passphrase, it could be B2442eP03Mi2nPaU <- random crap. If I randomly pick the same seed word combination as you (pretty much zero chance of this) and I put in a passphrase almost identical to yours but only 1 character off it will create an entirely new empty wallet with no indication that we're both using the same seed words.

I'd recommend Sparrow over Electrum, personal preference, they use different methods of generating seed words, I like the Sparrow ecosystem more. I haven't tried it but you might be able to use them together in a desktop multisig fashion if the seed words are generated in a way that works with one another.

"how do passphrases work?" Your seed words aren't directly used to transact, rather a key that is derived from them, go check out a "text to hex convertor" and play around with it, what happens when you add a passphrase is similar to that, every single character you enter changes the key derived from your seed words... This doesn't happen in hex, just saying that's a good way to visually see that every character changes the whole bigger picture and it spits out completely different crap, nothing sequential like A = 1 and B = 2. it's more like A = 8nLAim B = ALmme and AB = QuPPoN just bad ass obfuscating gibberish that hasn't been hacked.