As Bitcoin continue to gain traction and increase in price, the importance of understanding and protecting your digital assets become increasingly critical. Many of us are still coming to terms with the idea of “owning” something that is completely digital.
If something is only data, how do I prove that I own something? How is it not copied, and how do I lay claim to it?
Well, in simple terms, you do so by having a unique key that only you know the combination.
In Bitcoin, this is known as your private key, and most of us today interact with that key via a set of words known as a mnemonic phrase. It is one of the most vital components of Bitcoin security as these phrases not only prove ownership and allow you to access funds but also allow you to restore access to your wallet.
What is a Bitcoin seed phrase?
A Bitcoin seed phrase, also known as a recovery phrase or mnemonic phrase, is a series of 12, 18, or 24 words that serve as the key to your Bitcoin wallet. The seed phrase is generated when you create a new wallet and is a human-readable representation of your wallet’s private key. By entering the correct seed phrase, you can restore access to your wallet and its funds, even if your device is lost, stolen, or damaged.
While much is made of the signing device, these are merely devices to manage your keys and interact with your wallet. Hardware wallets help protect you from leaving your keys on an online device to sign transactions and protect you against unauthorised use of your keys.
Hardware wallets are a great addition to your security stack, but the seed phrase is by far the most important part of your Bitcoin storage.
The importance of protecting your seed phrase
Your seed phrase is the ultimate key to your Bitcoin. If someone gains access to your seed phrase, they can access your wallet and potentially steal your funds. Conversely, if you lose your seed phrase and cannot remember it, you risk losing access to your wallet and its contents permanently.
Therefore, it is crucial to protect your seed phrase from both online and offline threats.
Dangers of keeping your seed phrase on paper
When creating a Bitcoin wallet, you must generate a seed phrase with your signing device’s or your own entropy. Once the seed creation process is done, you’ll be handed 12,18 or 24 words which you need to secure offline if you want to keep this wallet safe for long-term storage.
You will also need to write down the words in the order they are presented or its bye-bye Bitcoin. While writing your seed phrase on paper may seem like a simple solution, it carries significant risks:
- Physical damage: Paper is susceptible to water, fire, and other environmental factors that could render your seed phrase unreadable.
- Theft or loss: A piece of paper can easily be misplaced or stolen, leaving your seed phrase exposed to malicious actors.
- Lack of redundancy: Storing your seed phrase on a single piece of paper means you have no backup if the original is lost or damaged.
- Decay: Relying on paper, ink or lead to store the secret key to your wealth isn’t a good idea since the medium can become brittle with time.
Now that you have your seed phrase written down on paper, what can you do to protect it for the long term? Surely one piece of paper with 24 words on it isn’t exactly ideal for long-term storage.
Splitting your single seed phrase
If you’ve generated a single signature wallet, one method to protect your seed phrase is to split it into multiple parts and store them in separate locations. By doing so, you reduce the risk of a single point of failure.
However, this method is not foolproof, as losing one part of the seed phrase can render the entire phrase useless. You can get pretty creative with this method splitting the 24 words up into 2, 3 or 4 sections, and you can number them accordingly or have your own secret numbering system to put your phrase back in order.
Let’s say; for example, you split your phrase into four sections; instead of naming each section 1,2,3 and 4, you could name them 2008, and only you know that year is the one that will provide the correct order.
Single-sig with a passphrase
Using a single-signature (single-sig) wallet with a passphrase provides an additional layer of security for your seed phrase. In this setup, you use a standard seed phrase along with a unique passphrase, which will then unlock your funds.
To access your wallet in the future, you require both the seed phrase and passphrase, and you can store these two things separately. This way, even if someone discovers your seed phrase, they still cannot access your wallet without the passphrase.
Creating a multi-sig wallet
A multi-signature (multi-sig) wallet is another method of protecting your seed phrase. This type of wallet requires signatures from multiple parties to authorise transactions. For example, you could create a 2-of-3 multi-sig wallet, where at least two out of three signatures are needed to access funds. By splitting the responsibility of holding the seed phrases among trusted parties, you can mitigate the risk of a single point of failure.
Using a steel seed plate
A steel seed plate is a durable, fire-resistant, and waterproof method of storing your seed phrase. By engraving or stamping your seed phrase onto a metal plate, you can protect it from environmental damage and physical wear.
This solution is more robust than paper storage, but it is still essential to keep the plate in a secure location to prevent theft or unauthorised access.
Safe or secure storage space
Regardless of the method you choose to protect your seed phrase, having a safe or secure storage space is essential. Consider using a high-quality safe or a safety deposit box at a bank to store your seed phrase, steel seed plate, or other storage methods. Keeping your seed phrase in a secure location minimises the risk of theft or unauthorised access.
Backup and redundancy
In addition to the primary storage method you choose for your seed phrase, it’s essential to have backups in place. Redundancy is crucial in case your primary storage method is lost or damaged.
Consider creating multiple backups using different methods, such as a steel seed plate, encrypted digital storage, or a separate secure location. This way, even if one backup fails, you still have access to your seed phrase and your cryptocurrency assets.
Digital security measures
When protecting your seed phrase, it’s also essential to consider digital security. If you opt for an encrypted digital backup, make sure to use strong encryption and secure your password or passphrase.
Additionally, avoid storing your seed phrase on devices connected to the internet, such as smartphones or computers, as they are vulnerable to hacking and malware.
Periodic verification and updating
It’s vital to periodically verify and update your seed phrase storage methods to ensure they remain secure and effective. Check the physical condition of your storage methods, like paper or steel seed plates, and replace them if they show signs of wear or damage. Additionally, review your digital security measures and update encryption methods, passwords, and passphrases as needed.
Educating trusted parties
If you choose to involve trusted parties in the protection of your seed phrase, such as with a multi-sig wallet, it’s crucial to educate them on the importance of seed phrase security. Make sure they understand the risks associated with mishandling the seed phrase and the need for proper storage and security measures.
Protect your seed against others’ greed.
Protecting your Bitcoin seed phrase is critical to ensuring the security of your future wealth. By understanding the risks associated with various storage methods and implementing a combination of secure techniques, you can effectively safeguard your seed phrase from both online and offline threats.
Remember to periodically review and update your security measures to maintain the highest level of protection for your digital assets. What might feel secure today might not feel the same tomorrow, especially as the price of Bitcoin rises.
Do you take self-custody of your stack?
If you’re new to Bitcoin and have not ventured down the self-custody rabbit hole, what is stopping you? If you’re already self-sovereign, how has the experience been since you took hold of your funds? Let us know in the comments down below. We’re always keen to hear from bitcoiners from around the world.
