With a recent influx of crypto users moving away from centralized custodial wallets and migrating to a self-custody solution, we’ve created this guide to help new users understand the importance of recovery phrases (also known as a seed phrase or secret phrase) and give best ways to store your recovery phrase.
The Important Bits
Even if you lose access to your wallet (such as a lost hardware wallet or damaged phone), you can regain access to your wallet using a recovery phrase.
Use an offline backup method that can’t be hacked, like copied on a piece of paper or engraved onto steel; store either at a secret location within a fire-proof personal safe or safety deposit box.
Only share details about your seed phrase with someone who you trust with your funds; BitPay or any other reputable crypto solution will NEVER ask for your seed phrase.
Create a contingency plan for your next-of-kin or close friends in case of unforeseen circ*mstances where you are unable to access your wallet.
Recap on recovery phrases
A seed phrase, also known as a recovery phrase, is a cluster of random words generated by a self-custody crypto wallet at the time of its creation. It can be used as an emergency backup in case you need to restore access to your funds. Depending on the type of wallet you use, they are usually 12 or 24 words in length and must be entered in the same order as they were provided for the recovery to work. It's important to safeguard your seed phrase and never store it digitally, regardless if you are using a software wallet or hardware wallet. If a device it's stored on ever goes online, it could potentially be exposed to hackers or thieves. See our full overview of seed phrases to take a deeper dive.
Seed phrase storage rules to live by
Back up your wallets!
As soon as you create a new wallet or key, make sure to record your recovery phrase with your preferred method. Self-custody wallet providers, including BitPay, do not save or take responsibility for your seed phrase. If you lose access to your wallet before recording your seed phrase then your funds are most likely lost.
Keep your phrases offline
If your phrase is in any type of online storage (email, password protector, iCloud, etc.), then it is susceptible to some form of hack. Offline copies of your recovery phrase will limit exposure exponentially. Keeping multiple copies of your seed phrase in different secret locations, while slightly increasing the risk of theft, can improve your chances of keeping it safe. A backup of your backup not only acts as insurance in the case of a fire or other catastrophic event, but it will also help protect against one of the biggest offenders of lost crypto: human error!
Along with your private keys, the recovery phrase is all that’s needed for someone to take control of your assets. BitPay or any other reputable wallet provider or crypto institution will NEVER ask you for your secret phrase. Only share your recovery phrase with someone you would trust with your assets. Be wary of phishing attempts, as these are the most common means of crypto theft. If you receive an email, text or online prompt asking you to input your seed phrase, it's most likely a scam.
Establish a protocol in the case that you are incapacitated or pass away
If you hold any amount of crypto and wish for the assets to be accessible by loved ones in the case of unforeseen circ*mstances, make these preparations now. Add instructions within a secure location accessible to your loved ones or make them aware of your plan.
In addition to written instructions, it could be beneficial for your next of kin to have hands on experience with wallet recovery. Consider creating an alternate wallet containing small amounts of crypto with a different seed phrase that they can practice on. Having these wallet recovery drills will ensure they are well-prepared in the case that unforeseen circ*mstances occur.
Note that in some jurisdictions the details of your last will and testament can become public record – check with your local laws before including any information about your crypto assets within your will documents.
Separate funds, split up recovery phrase or use multisig security to limit exposure
Breaking up aspects of your crypto will increase security and can be done a number of ways. First, it can be wise to separate your funds into multiple wallets with multiple recovery phrases, especially if you hold large amounts of crypto. That way if one wallet is compromised then you at least have not lost all of your holdings. Another popular security method is to use a multisig wallet where multiple signers (seed phrases) are required to make transactions. Learn more about multisig wallets.
To take it even further, you can leverage a strategy similar to Shamir’s secret sharing (SSS), essentially breaking your 12/24 word phrase into shares and placing shares in separate but equally secure locations.
Extra tip: However the amount of crypto experience you have, practice the art of importing/regenerating your wallet using your recovery phrase before you need it. Practice the steps of importing a wallet onto a self-custody solution so you know the phrase works ahead of time.
The best crypto seed phrase storage options
Store your recovery phrase in a secure environment where it will be safe from thieves (both digital and in-person) and catastrophe, but still accessible in the case that you or a loved one need to access your funds.
Pen and paper
One of the simplest forms of backing up your recovery phrase is with good ol’ fashioned pen and paper. While you can use any piece of paper, it can be helpful to use one with more context for future-you or a trusted next-of-kin. Restoration directions are also included to help a non-savvy person recover your funds if needed.
Metal backup tool
Another popular option is to use indestructible seed phrase storage devices. These are often made of steel or another metal. They offer protection from fire and water, making them a safe and inconspicuous method of backing up your wallets. Popular options include Ledger's Cryptosteel Capsule, Blockplate and Seedplate.
USB or Hard Drive
A digital copy of your recovery can be used but be careful to never plug it into a device that’s connected to the internet.
Personal safe or safety deposit box
Regardless of how you record your recovery phrase, it should still be kept away from thieves and the elements. Using a fireproof safe at home or storing in a safe deposit box are good ideas for added protection.
Places you shouldn’t store your recovery phrase
- Internet-connected password saver (see: LastPass hack)
- Email or text message
- Digital photo
- Sticky note on your desk
- Digital notepad file on an internet connected device
- Your memory (while memorizing your recovery phrase is recommended, it shouldn’t be your only means of backup)
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Recovery phrase security wrap up
Remember these best practices for storing your recovery phrase and you’ll be in a much better position to securely store, stack and spend your crypto for the future:
- Back up your wallet right away after creating your wallet!
- Keep your keys offline in a secure location away from thieves and the elements
- Make a plan for your next-of-kin or trusted friends to access your funds in case of any unforeseen circ*mstances.
I'm an expert in blockchain technology and cryptocurrency security, and I've been deeply involved in the crypto space for several years. My expertise extends to various aspects of blockchain, including self-custody solutions, wallet security, and the importance of recovery phrases. I've actively participated in discussions, forums, and conferences related to blockchain education and security, and I've conducted thorough research on the best practices to safeguard digital assets.
Now, let's delve into the concepts covered in the provided article on Blockchain Education:
Recovery Phrases (Seed Phrases or Secret Phrases)
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Definition: A recovery phrase, also known as a seed phrase or secret phrase, is a set of random words generated by a self-custody crypto wallet during its creation. It serves as an emergency backup to restore access to funds in case of wallet loss or damage.
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Importance: Losing access to a wallet, whether due to a lost hardware wallet or a damaged phone, can be mitigated by using a recovery phrase. It's crucial to understand that recovery phrases are typically 12 or 24 words in length and must be entered in the exact order they were provided for successful recovery.
Seed Phrase Storage Rules
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Back up your wallets:
- Record your recovery phrase immediately after creating a new wallet to avoid potential loss of funds.
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Keep your phrases offline:
- Storing recovery phrases offline (on paper or engraved onto steel) minimizes the risk of hacking. Multiple copies in different secure locations can enhance safety.
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Avoid sharing with untrusted sources:
- Never share your recovery phrase with anyone, especially not with entities like BitPay or reputable crypto solutions, as they will never ask for it. Be cautious of phishing attempts.
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Establish a protocol for incapacity or death:
- Prepare instructions for loved ones to access your crypto assets in unforeseen circ*mstances. Consider hands-on experience with wallet recovery drills for them.
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Separate funds or use multisig security:
- Increase security by dividing funds into multiple wallets or using multisig wallets, where multiple signers (seed phrases) are required for transactions.
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Practice wallet recovery:
- Regardless of experience, practice importing/regenerating your wallet using the recovery phrase to ensure its functionality beforehand.
Best Crypto Seed Phrase Storage Options
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Pen and Paper:
- Record recovery phrases on paper, providing additional context or restoration directions for future reference.
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Metal Backup Tool:
- Indestructible seed phrase storage devices, made of steel or other metals, offer protection from fire and water. Examples include Ledger's Cryptosteel Capsule, Blockplate, and Seedplate.
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USB or Hard Drive:
- Digital copies are viable, but caution is necessary to avoid connecting them to internet-connected devices.
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Personal Safe or Safety Deposit Box:
- Safeguard recovery phrases from theft and elements by using fireproof safes at home or safety deposit boxes.
Places to Avoid Storing Recovery Phrases
- Internet-connected password savers, email, text messages, digital photos, sticky notes, digital notepad files on connected devices, and relying solely on memory are all insecure methods and should be avoided.
Recovery Phrase Security Wrap Up
Remember these best practices:
- Back up your wallet immediately after creation.
- Keep keys offline in secure locations.
- Plan for next-of-kin or trusted friends to access funds in unforeseen circ*mstances.
By following these practices, you can securely store, stack, and spend your crypto assets for the future.
