Why I’ve Settled On The Electrum Bitcoin Wallet

This is an opinion editorial by Arman The Parman, a Bitcoin educator passionate about privacy.Over several years, I have actually tinkered with different Bitcoin wallets and mentored many individuals to hold their private keys safely. I decided on “Electrum Desktop Wallet” as my favorite and most versatile software wallet. In this essay, I will lay out some of Electrums functions, and my likes and dislikes. This is not a comprehensive guide on how to use it and get the most out of it. I likewise will not be going into why you should hold your own Bitcoin keys; its presumed you know and prefer to do this, but if you require to know why its important, please have a look at “Six Reasons To Withdraw Your Bitcoin From Exchanges.”I have actually experienced first-hand Electrums traits and exercised solutions to overcome them – if utilized correctly, it is the most effective wallet I have come across.Electrum is for the individual who is, or desires be, a “power” user. Since it permits a lot control, and because of my familiarity with the software application, I pick to teach this wallet to many of the students as part of my Bitcoin privacy/security mentorship course (although some people require something simpler to use). The experience of teaching how to utilize it has actually definitely helped me understand what individuals discover instinctive and what they find tricky.For the new Bitcoiner going at it alone, Electrum would be completely safe to use, provided they take their time and utilize it in a testing environment with only a little number of sats at. Operating SystemElectrum can be set up on a Windows PC, Mac computer, or a Linux PC, and importantly for some, on ARM chip computers (i.e. Raspberry Pis). It can also be set up on a phone, but the mobile versions functionality is bad, and its connection to nodes has actually been erratic, so I do not suggest that version. BlueWallet is an excellent alternative for a phone wallet.Downloading And VerifyingDownloading and setting up the program is uncomplicated for Windows and Mac, and a little tricky for Linux users, particularly those who are still learning to use Linux.For those simply testing the program out, just downloading and using it without confirming the software is fine – I just would not do that for big amounts, or if personal privacy is a big concern (i.e. if you have KYC complimentary bitcoin, you require to practice excellent personal privacy to keep the coins unidentifiable). You need to find out to validate the software with gpg if you are in truth going to end up using this wallet for a significant sum. You can build your abilities around this here. You can do that while awaiting my guide on how to utilize Electrum safely/privately. The EnvironmentOne issue with Electrum is that if you run the program in the most intuitive way (i.e. just double click the icon) rather than the command line (with specific flags), you will almost definitely link to a random Bitcoin node which will expose your wallet and all its potential 8.6 billion addresses to the owner of the random node – the owner could be a security company, and there goes your privacy (they will get all your utilized and unused addresses, and your IP address). To overcome this, I will teach you, in the next installation, how to load up a disposable wallet initially, optimise your network settings (connect to your own node, or one you trust), and just then pack your real wallet into Electrum.Some people may be lost on what I imply by network settings or nodes. You can find out more about that here if you seem like going on a very important tangent.The Electrum Wallet has a spick-and-span layout showing your addresses, although you have to understand to go to the menu and choose “program addresses” to see it. Then youll get a list of your very first 20 getting addresses highlighted green (you have 4.6 billion of these but clearly not all shown), and a list of your first 10 receiving addresses highlighted yellow (again, you have 4.6 billion of this type). Numerous other software wallets dont show you a list of addresses and only supply an address when asked for to send coins to the wallet. This hides details from the user to keep things simple, however the user tends to stay oblivious, as the chance to learn is not presented. I have actually met many individuals who utilize Ledger Live or the Trezor suite, or Blue Wallet on their phone, and do not recognize they have endless addresses, not to mention something called “change” addresses.Electrum also reveals you a list of all your UTXOs (but you have to select “reveal coins”) to make it possible for that. Electrum Server Is NecessaryElectrum Wallet can not connect to your Bitcoin Core node directly. This is frustrating, however it does make electrum run quicker. Much quicker. You still need Bitcoin Core, but you will likewise require software called Electrum Server (of which there are various varieties each with their downsides and benefits, which I will not go into here). Installing Bitcoin Core is hard enough for some people. Installing Electrum Server is MUCH harder, you truly require to be fairly techy. For ease and favorable support, I recommend individuals set up, for their very first node, a node-package like MyNode (see my guide) or Raspiblitz (see my guide), before moving on to setting up a node and associated software on a regular PC. These plans have some weaknesses however are outstanding to start with because with a single installation process on a Raspberry Pi 4, you get lots of applications (like Electrum Server, Lightning, BTCPay Server, Mempool viewer – which you d otherwise have to install one by one, and potentially confirm) and the cost is only about $300 for all the equipment (the software application is free). As your abilities and interest advances, then I suggest people look into more innovative node setups (none of which get pricey). In case youre questioning why you should run a node at all, here are six exceptional reasons.Wallet CreationI believe its helpful to define the 2 types of wallets prior to going much further: Software wallet – this is the program that manages your Bitcoin private secrets and addresses. Eg Electrum, Sparrow, Blue Wallet.Bitcoin wallet – by this, I suggest the collection of unique addresses that are developed deterministically (and reproducibly) from your mnemonic seed expression (typically 12 or 24 words) – each seed expression has 8.6 billion distinct addresses that it can access/create. Electrum, by default, produces wallets that are not basic which is very frustrating. The most typical procedure is called BIP39 (Bitcoin Improvement Proposal 39) that almost all wallets will use. That implies that the 12 or 24 words that your BIP39 wallet developed will work with other BIP39 wallets, such that if you lose your software application (or hardware) wallet, then you can get it back by entering your seed words into any compatible BIP39 wallet – it does not need to be the exact same brand. The Electrum developer, nevertheless, has his own plans and thinks the industry requirement is risky (he has an insanely unrealistic concern about BIP39). Rather of BIP39, Electrum creates wallets based upon its own procedure – which no other wallet uses by default. Regrettably, if you create an Electrum seed phrase, you can just utilize that seed expression with Electrum.Importantly, Electrum will allow you to restore a BIP39 wallet into it, but you have to know how. It will not, nevertheless, create a BIP39 wallet for you. There are ways around this.You can likewise simply load a single address into Electrum to observe its balance – it doesnt even have to be yours (although, do not get ideas about investing the balance, thats not possible unless you pack in the personal key, in which case the address would be yours). When creating or bring back a Bitcoin wallet with Electrum, you can choose what address type to have: Legacy – these addresses begin with 1 – the original Bitcoin addresses. Pay-to-Script-Hash – these addresses all begin with 3. Segwit – From 2017 after the Segwit soft fork, you could create “Pay-to-witness-public-key-hash” (also called “Native Segwit”, or “Bech32”). These are the most frequently used now. They all start with “bc1q.”Taproot. This is brand-new and not yet supported by Electrum. Taproot was a soft fork in 2021. Addresses start with “bc1p.”The first three address types listed have extended public keys that look a little different from each others. They begin with xpub, zpub, and ypub, respectively. I believe taproot is tPub but Im still getting knowledgeable about that. For more education product about Bitcoin personal and public secrets, you can check out here.LabelsThis feature is not distinct, however extremely essential to have if you wish to keep personal privacy through excellent coin control. By identifying your UTXOs, youll understand which ones you may desire to prevent spending together with others. For instance, if you have a KYC-free or mixed coin, and you choose it together with a KYC coin and send the combined overall somewhere, then the personal coin can be identified as belonging to whoever owns the KYC coin (considering that somebody had the capability to spend both together). Do not do that. The labels can be conserved to a file so they can be uploaded to a different computer should you have duplicate wallets.Coin SelectionCoin choice is a fantastic function. You can go to your address windows, and choose the coin you wish to spend – or group numerous of them for spending. If you do not select which coin you wish to spend, like any other software, Electrum will choose the “finest” coin to spend for you – but the software application doesnt always understand whats finest. It does not know which coins not to combine, which ones are dust attacks, and which ones are mixed. You understand this, due to the fact that youve labeled them, and then you can choose how to manage it.Sending/ ReceivingThe procedure of sending out bitcoin payments is extremely “great tunable.” You can keep it basic, but theres likewise an innovative button which I motivate individuals to always utilize – a minimum of find out to get familiar. Here you can see precisely the essential elements of the Bitcoin transaction – the inputs (with Tx IDs and addresses), the outputs, whether any listed addresses are discovered in your own wallet or not (through colour-coding), the mining cost and a capability to fine-tune it, the size of the transaction (in bytes), if there is a lock time, and if replace-by-fee is made it possible for. You do not require to know right now what all these things indicate, but a minimum of they are there and as you get experienced, youll know what things to discover about.When getting, you can go to the receiving tab and the next unused address will be provided – with that you can copy/paste as needed or create a QR code. Alternatively, you can go to the address window and choose any address you see to create a billing. You can right-click, select information, and youll see a button to create a QR code of the address or you can just copy the address text. As quickly as a payment is made to an address, and is waiting in the mempool, Electrum will reveal you the payment sitting with the address, which is helpful – you do not require to wait for a miner to mine the coin for you to understand the payment is coming. Electrum also permits you to invest such an unofficial coin. If a sender has set a very low charge and confirmation is taking a while, you can rush the payment by spending the unofficial deal to another among your addresses. Because second (downstream) transaction, you could add a high mining charge. To gather the fee, a miner would have to include the very first deal (not financially rewarding) and the downstream deal you produced (lucrative) – why? Due to the fact that the second transaction is void until the first deal is valid (as you cant spend coins that theoretically dont exist). This strategy is called “child spends for moms and dad.”Another strategy possible with Electrum, to speed up payments, is called RBF (replace by cost). This is not possible for the receiver to do as described above with “child pays for moms and dad.” Rather, a restless receiver needs to ask the sender to carry out a RBF. The sender will resend the original UTXO which has been “spent” however not yet mined to the blockchain. That UTXO can be put in an alternative deal (spending to the very same address as the first transaction, or another), and with a greater mining charge. Whichever of the 2 deals gets mined initially will stand and the other becomes invalid.As a side note, RBF enables the capacity for fraud. If a receiver (merchant) accepts an unconfirmed deal as “payment got” and provides the items to the sender of the payment, the sender has a chance to perform a RBF deal before the original payment gets mined. They would use their own address as the recipient of the payment, and include a high cost. When that gets mined, the original deal ends up being invalid, is visited all the nodes from the mempool, and the balance from the merchants wallet vanishes. This is why youll notice that Bitcoin exchanges, when you transfer bitcoin, will wait for confirmation on the blockchain prior to crediting your account.Multisignature walletsElectrum manages multisignature wallets really well, and for a time I believe it was the only software application wallet you could utilize. You can have cosigners with hot secrets (software application wallets) or cold secrets (link hardware wallets). The multisignature public keys can be made one at a time, on different days, in different locations on various computers (or hardware wallets) – spreading it out lowers the risk of a single point of failure/attack. How far you take the preventative measures depends on you.Extra details about multisig wallets and keys can be found here, and Ill have a guide on making these wallets in the future. The wallet production procedure is outstanding however with some peculiarities which become unimportant once you learn about them. I truly like how Electrum handles partly signed Bitcoin deals (PSBTs), a crucial function of multisig wallets, gone over next.PSBTsAn Electrum bitcoin transaction is represented by simply a lot of text (which themselves represent binary numbers, as all computer data is). You have the ability to save that text to a file, a QR code, or to the clipboard (as text, for copy/paste into an email for example). That text can be sent anywhere, and however you desire. If you are so likely, you can draw out the text and send it by e-mail, a physical letter, Morse code, smoke signals, gravitational waves back in time via a black hole, or interpretive dance – thats up to you.Electrum gives you the ability to extract that text and wait, prior to its signed, after its signed, or in a multisignature setting when its partially signed.Multisignature is particularly intriguing. If there are for instance 3 key holders around the globe, you can sign a transaction on your computer system, extract the partly signed Bitcoin transaction, email it (or QR code over a video call) to another individual overseas, they can import it, sign it, then send it to the 3rd person for signing and broadcasting. No, this is not special to Electrum, I just like how Electrum manages it. The workflow is not intuitive though, and takes practice.Pay To Many (PayJoin And CoinJoin)There is a hidden feature (search the menus) where you can choose numerous locations (several outputs) when costs. For instance you can take 6.15 bitcoin, and send 0.01 bitcoin to 615 different employees, all in one deal. This function allows you to create PayJoins by hand – something only a minority of individuals would do, and even comprehend, but its cool nonetheless.Pay to Many likewise allows you to create your own manual CoinJoins. For more info on what that is and how to do it, see this guide. Gap LimitAn essential feature that not all wallets have is the ability to set the gap limit. As I pointed out earlier, every wallet is a collection of 8.6 billion addresses. If an address has actually bitcoin associated with it, the software application wallet need to link to a node and ask. Its not going to check all 8.6 billion of them. Electrum requests the very first 20 addresses. If they are uded, it will ask for another 20, and so on. It will keep this up till the node returns 20 unused addresses in a row. This is a method to explain that the default space limit is 20, however you can alter that. Why would you? Since in some cases merchants permit customers to produce bitcoin addresses themselves through a payment app (like my donation page, hint-hint). If the very first 20 clients make invoices (one address each, sequentially provided by the app), and then the 21st customer generates an invoice and pays, then the Electrum wallet will appear empty. This takes place due to the fact that the first 20 addresses will be queried, found to be unused, and after that Electrum will stop searching. Electrum allows you to alter the gap limit, eg to 500 but there are no directions, you d have to research study online, or discover it right here: Youll have to initially go to the menu: view → show console, and then type this command in the console (of course the “500” can be altered to another number): wallet.change _ gap_limit( 500 )With this command, youll see 500 new addresses in the address window.Watching WalletsThese are wallets without private secrets, essential for hardware wallets to connect to. The majority of individuals with a hardware wallet utilize the software application on the computer that “included” the gadget, however they are not generally open source. Electrum is an alternative that can be utilized with any hardware device.Air-Gapped ComputersIts possible to set up Electrum on a computer that cant ever connect to the web (Air-gapped computer). That computer can be used to examine that the seed expression a hardware wallet provides, developed the correct addresses from the seed.For example, you may purchase a BitBox02 hardware wallet, and it produces a 24 word seed for you, and from that, develop addresses (with associated private keys hidden from view). Depending on the level of paranoia you have (and the quantity of bitcoin you are storing), you might pick not to rely on the ingrained software, and presume initially that the addresses it creates come from the CEO to start with.To examine the addresses are genuine, you need to put the seed words into (bring back) a various wallet – eg Electrum; and make certain Electrum produces similar addresses. Thats easy enough, but you cant just type seeds into any old computer with Electrum on it. Well, you can however you truly really shouldnt – malware can possibly extract your keystrokes and take your bitcoin.One option is to get in the seeds into Electrum on a clean and protected air-gapped computer (or a different brand hardware wallet). The cheapest method is with a Raspberry Pi Zero – They utilized to cost about $10 before pandemic-induced shortages. The ARM chip on these gadgets means not all software application wallets are suitable. Electrum is and works magnificently. Heres how to build your own. Its like a seed signer however has the complete performance of Electrum.Sign/ Verify A MessageA Bitcoin deal is a payment that consists of a coin that was previously “locked” by an address. To open the coin (with regard to the rules of Bitcoin) and be permitted to spend it, using public/private crucial cryptography, one should prove they own the private secret to the address consisted of within. That is done with a signature (using the private secret, however not revealing it). The signed transaction is itself a message; a little computer information, although following a stringent protocol.Using public/private essential cryptography, beyond Bitcoin, you can really sign ANY message. Here is a message I signed after I picked an address (and therefore its personal secret). Below is the signature, the message and the address (nonsense-looking text), which was produced after I clicked “sign.”Now you or anyone can take the address, the message, and the signature, put it in Electrum (or other software application), and verify that it actually was the appropriate private key (matching the address) that produced that message (this is actually the exact same kind of confirmation that Bitcoin nodes provide for any Bitcoin deal). Ill open another wallet that hasnt got the pertinent personal key, to show confirmation. I went into the “validate message” window, then went into all the details as you see above, and then clicked Verify: Encrypt/Decrypt A MessageInstead of signing a message with public/private key cryptography, the output can be an encrypted variation of the message (i.e. jumbled up and unreadable) using another persons public key/address. The encrypted variation can then be sent out to anybody who has the corresponding personal key, since the text can just read when the personal key is utilized to reverse the process.For example, you might have been given my bitcoin public key, encrypted this message as above, emailed me the cyphertext (the random-looking text in the bottom field), and since I have the private secret to the general public key, I can reverse the encrypted message to the initial type and read your wrong-think message. In this method, you can send out text to me throughout an insecure interaction channel, and only I can check out it.This is the magic of public/private key cryptography, and among the primary elements that made Bitcoin possible. We should all be glad that the cypherpunks combated hard, and won, against the US federal government who tried to prohibit it in the 1990s. Summary This was a long evaluation of the Electrum Desktop Wallet. Ideally, that has ignited your interest to find out how to utilize it – I will launch a guide on this extremely soon. In the meantime, it may deserve practicing very basic Bitcoin transactions by following this exercise.This is a visitor post by Arman The Parman. Viewpoints revealed are totally their own and do not always reflect those of BTC Inc or Bitcoin Magazine.

The EnvironmentOne issue with Electrum is that if you run the program in the most instinctive method (i.e. just double click the icon) rather than the command line (with specific flags), you will nearly certainly connect to a random Bitcoin node which will expose your wallet and all its possible 8.6 billion addresses to the owner of the random node – the owner might be a monitoring business, and there goes your personal privacy (they will get all your utilized and unused addresses, and your IP address). When creating or restoring a Bitcoin wallet with Electrum, you can pick what address type to have: Legacy – these addresses start with 1 – the original Bitcoin addresses. Electrum enables you to change the space limit, eg to 500 but there are no directions, you d have to research online, or find it right here: Youll have to first go to the menu: view → show console, and then type this command in the console (of course the “500” can be altered to another number): wallet.change _ gap_limit( 500 )With this command, youll see 500 brand-new addresses in the address window.Watching WalletsThese are wallets without personal secrets, required for hardware wallets to connect to. That computer can be used to inspect that the seed phrase a hardware wallet gives, developed the proper addresses from the seed.For example, you may buy a BitBox02 hardware wallet, and it produces a 24 word seed for you, and from that, create addresses (with involved personal keys hidden from view). Depending on the level of fear you have (and the amount of bitcoin you are keeping), you may pick not to rely on the ingrained software application, and presume at very first that the addresses it develops belong to the CEO to start with.To inspect the addresses are authentic, you need to put the seed words into (bring back) a various wallet – eg Electrum; and make sure Electrum generates similar addresses.