To address this issue, Austrian bitcoin-wallet software makers Mycelium created a simple, elegant solution: A single-application USB device that only generates paper wallets. The device is named Entropy, and it’s designed to prevent a randomly generated private/public keypair from ever being exposed to online view.
The device plugs directly into the port of any compatible printer, powering up to create a unique keypair from the random states of tens of thousands of SRAM cells. Once the keypair generated, the device also creates a JPG image with the keys, as well as the QR codes. Once the paper wallet is printed and Entropy stick removed, the RAM-stored JPG and keys are destroyed. At no point are the keys exposed to the internet, and no digital copy is stored.
Entropy can also create “M-of-N split keys,” allowing a private key to be split into pieces to increase security. If a key is split into 3 pieces, for instance, two paper wallet private keys would be needed to initiate a transfer. As Mycelium views it, Entropy is the most secure method to safely store your bitcoin:
Since the Mycelium Bitcoin Wallet has full support for spending from paper wallets, using Mycelium Entropy in combination with the Mycelium Bitcoin Wallet can be a very safe and easy way to store and protect your savings. Think of it as being able to create your own bank deposit certificates, while keeping only a bit of spending cash on your Android wallet. With this combination, the idea of “Be Your Own Bank” comes much closer to reality, and gets much easier as well.”
The Mycelium team claim that the prototype devices are already fully functional, and that the devices are only a “few minor software tweaks” away from being ready to release. The company is raising funds via Indigogo for a second batch, which they hope to order in a large enough supply to bring the price down.
Here’s a demo of Entropy in action: