How to Secure Your Bitcoins and Prevent Irrecoverable Wallet Loss

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bitcoin-seed

Last Updated: Jun 21, 2016 @ 6:54 am

Your Bitcoin wallet is like a Swiss bank account in your pocket. It’s not easy for others to view it, and if you work it right, it’s as anonymous as cash. But having your own bank means you have to be responsible for it yourself.

Bitcoin has no recourse mechanism in case you lose access to your coins, and the developers of Bitcoin and Bitcoin wallets can’t be held liable if someone hacks your computer or phone and steals your funds.

While exchanges can theoretically be made responsible for coins they lost, this does not work in practice. The legal precedents are not set, and likely won’t be for a while. Besides, trusting your cryptocurrency with an exchange or online wallet defies the very idea of Bitcoin. It’s supposed to be decentralized and trustless money.

When setting yourself up with a Bitcoin wallet, it’s important to think about accessibility, security, and redundancy.

ExpressVPN Recommended Bitcoin Wallets

iOS: Breadwallet
Android: Mycelium
Windows Phone: Copay
Mac, Windows, Linux: Electrum

ExpressVPN’s favorite Bitcoin wallets for Android, iOS, Mac OS X, Windows, and Linux are all HD (hierarchical deterministic) wallets. An HD wallet means that all your Bitcoin addresses are created simultaneously when the application is started for the first time.

Creating the Bitcoin addresses requires a seed, which comes in the form of 12-13 random English words. These words are all you need to back up your bitcoins, so if you ever lose your phone, PC, or hard drive, you can re-generate the same Bitcoin addresses (and the funds in them) just by typing in the seed words.

This system does mean that everyone who has access to the seed can get hold of your Bitcoins, so you have to be extra careful about keeping your seed words private.

bitcoin-wallet-security
An example of seed words.

How to Keep Your Wallet Seed Words Private

Write Them on a Piece of Paper

If you are mostly worried about hackers, you can easily protect yourself by writing the seed on a piece of paper. Don’t print them out or keep a copy of them on any electronic device. You can keep the paper where you store your other valuables or sensitive documents, such as a secret compartment, a safe, or a safety deposit box at a bank. What’s not electronic can not be hacked, right?

Put Them in Your Password Manager

If you are not already using a password manager, this is a great time to get one. A password manager not only encrypts and stores all your passwords, but it also generates unique and long passwords, and can also pre-fill forms online for you. If you are worried more about burglars or the government, a password manager is probably a more safe place than your home or a safety deposit box, which the police can easily, and legally, get access to. If you are familiar with PGP, it is also a great option to safely backup any files.

Divide and Distribute!

You might be worried about a mix of attackers who could get hold of your Bitcoin wallet seed and steal your money. The could include burglars, hackers, the government, or even loss by fire and flooding. To defend against everything, you can distribute your seed around cleverly.

Divide your seed equally into three parts of 4 words each. (If your seed has 13 words, make sure that the third paper includes five words.)

  • Write each block of four words on two pieces of paper.
  • Place the six pieces of papers in three different locations in a way that if each location is lost, you are still able to recover the full seed.
  • If an attacker finds any of the three locations, they are not able to steal your Bitcoins.

See diagram:

remember-bitcoin-seed

Memorize Your Seed Words

The trick to memorizing 13 English words is to construct them into a story in your head and use them regularly.

A Password Manager with a Secure Master Password Works Best to Protect Your Bitcoins

All methods have their pros and cons, but ExpressVPN recommends a password manager as the best place to save your seed words.

Generate a four-word master password with Diceware to get the highest security for your password manager.

Featured image: ussr / Deposit Photos

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