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How to Back Up Your Hardware Wallet: Best Practices

A hardware wallet is the most secure way to personally store your crypto. Just be sure to follow best practices so that you are able to recover it should you lose it.

Gemini-How to Back Up Your Hardware Wallet- Best Practices

Summary

There are two general concerns when using a hardware wallet to store cryptocurrencies: 1) Not being able to regenerate an inaccessible or unusable wallet. 2) Theft of your wallet and PIN or recovery phrase and losing control of your funds as a result.

Knowing how to regenerate your crypto hardware wallet is critically important, especially if you are using it to store significant amounts of crypto. You can access your funds without having a recovery phrase as long as you still have a working cryptocurrency wallet and know the PIN. However, it’s recommended that if you transfer your funds to a hardware wallet you back it up immediately with a recovery phrase, also known as a seed phrase, to avoid losing access to your cryptocurrency if you forget your PIN.

Regenerate Your Hardware Wallet With a Recovery Phrase

Even if you take precautions, your wallet may become unusable or inaccessible. Fortunately, you can regenerate your wallet with its recovery phrase. A recovery phrase is a series of 12-24 words you are prompted to write down when setting up your hardware wallet. Many recommend neatly writing two to three copies of this backup phrase with a pen and storing the various versions in safe places. Be sure no one can see you do this, and avoid storing your recovery phrase online where it would be more vulnerable to remote attack.

Steel Is Ideal

Since paper is fragile and easily mishandled, a better way to store your recovery phrase is to stamp it into metal, making it immune to water and fire damage. The easiest way to do this is to acquire a steel recovery phrase kit that can be purchased at popular online retailers. You may even want to purchase two or three kits, as this recovery phrase is a back-up to your wallet, it’d be wise to have durable and multiple copies.

Recovery Phrase: To Split, or Not to Split? 

Some cryptocurrency holders will break their recovery phrase into two or three chunks stored in separate locations. While this makes it harder for others to steal your recovery phrase, it also requires more responsibility on your part, and you would need to combine the disparate portions of your recovery phrase in the proper order to recover your wallet.

If you choose to split up your recovery phrase, you should consider keeping a few copies of each portion stored in secure and geographically distributed locations. However, while you may want to make the recovery process difficult for any potential thief, you don’t want to make it so difficult that you can’t recover it yourself.

Recovery Phrase vs. Recovery Shares

Some wallets may offer the option of recovery shares. Like a recovery phrase, a recovery share is also a sequence of words. You can generate several shares and decide what percentage of words is needed to regenerate a wallet. While you can create more than 10, many recommend a 2-of-3 or 3-of-5 scheme, meaning you would need, in the first case, two of the three shares to regenerate your wallet. Using recovery shares may be especially useful if there are multiple individuals or entities that have joint ownership of a wallet.

You can set up whatever scheme you like. You could do seven shares and choose a recovery threshold of 4 of 7, 5 of 7, or 6 of 7. You need all parts of a split recovery phrase to regenerate your wallet, whereas you only need a specific predetermined fraction of the recovery shares to ensure that you can recreate your wallet.

Back-Up Hardware Wallet

Instead of relying solely on the recovery phrase (or a shares scheme), some simply regenerate their primary account on a second hardware wallet backup when they’re setting up their first wallet. In this way, you’d already have a functioning back-up device that doesn’t need to be regenerated. You may want to keep one hardware wallet easily accessible with the back-up stored in a safe.

One benefit of this arrangement is that you know your recovery phrase was recorded correctly and works when you immediately regenerate your wallet on a second device. You’ll know that you can recover it again should you have issues with both hardware wallets. Be sure you don’t store a back-up hardware wallet and PIN together under any circumstances in order to avoid combining potential points of security failure.

Do I Need to Restore My Wallet on an Identical Device?

If a hardware wallet manufacturer ceases operations, you can regenerate your wallet on any other hardware wallet since the recovery phrase for hardware wallets uses a universal standard. Some wallets accept all recovery phrase lengths, while others may require you to convert a 24-word phrase into a 12-word phrase.

Although it isn’t recommended, you could even restore your hardware wallet on a non-custodial software wallet if you needed. A non-custodial software wallet is accessed through a downloaded application on your computer or cell phone, and gives you complete control of your keys, as opposed to using a wallet hosted by an exchange, for example. Instead, many would simply recommend purchasing two identical hardware wallets, regardless of whether you choose to immediately regenerate your wallet on the backup hardware wallet device. Doing this will also ensure you are familiar with the controls of the backup hardware wallet, an important point given the set-up and functionality can vary somewhat between hardware wallet manufacturers.

Extra Security for Recovery Phrases

Some hardware wallets have the option to include a passphrase as an added layer of security that creates a secondary key pair you can use to confuse malicious actors. You can think of this passphrase as an extra password providing access to a hidden wallet. The recovery phrase, initially set up when you launched your wallet shows your primary account, and your passphrase would send you to a secondary account. This can allow you to have two or more multi-currency supported accounts on the same hardware wallet.

Recovery Phrases Are Critical to Securing Your Crypto Hardware Wallets

While physically securing your wallet and PIN is vital, the storage of your recovery phrase is equally important. Remember to safely store any copies offline as unauthorized access would allow the regeneration of your wallet. Recovery phrases stamped onto steel should be kept in secret and locked locations. Consider splitting up your recovery phrase or using recovery shares. You could also have a passphrase for a secret account to enhance anti-theft measures. Be sure to follow these best practices if you’re using a hardware wallet; you don’t want to be left without your keys and your coins.

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