Much ink has been spilt discussing the finer points of self-custody cold wallets. From heads-up comparisons, to in-depth security analyses, to the best cold wallets for 2023, the internet will take good care of you when it comes to choosing the right self-custody cold wallet.
What doesn’t receive as much attention is how to create and maintain a proper cold wallet safety regimen. This deserves as much or more attention then choosing the very best cold wallet.
That’s because self-custody cold wallets are like guns. You probably need one, but if you don’t know what you’re doing, you’re much more likely to hurt yourself rather than some hacker absconding with your crypto. So this article will be focusing on just that. How to avoid shooting yourself in the face with your self-custody cold wallet.
So behold! I present to you the Four Cold Wallet Security Commandments . . . and some other considerations.
Commandment #1: Write Down Your Recovery Phrase
Disheveled Dan didn’t have the patience for his Ledger Nano X setup booklet. That’s why he failed to write down his recovery (or “seed”) phrase. So when Disheveled Dan predictably lost his Nano X, he also poured his all his BTC down the drain forever.
Explanation
The golden rule of cold wallets is to write down your recovery phrase. The recovery phrase recovers your crypto in the event that your cold wallet device is lost, stolen, or damaged. Simply input the recovery phrase in a new cold wallet device and those funds are then recovered there. Note that when a recovery phrase is used, the old wallet is automatically wiped clean, so the funds will no longer be accessible on the former device.
Remember this: you can lose your cold wallet device, or you can lose your recovery phrase, but you cannot lose both.
If you lose your device, use your recovery phrase to recover your funds. If you lose your recovery phrase (assuming no one stole and used it), retrieve it again from your device. But if you lose both, well then it’s game over, thanks for playing. Your crypto is gone forever.
Commandment #2: Write Your Recovery Phrase on Physical Paper
Tech Timmy was a real tech genius. Paper and pen are so 17th century, so who needs these silly hard-copy recovery phrase sheets that came with his new Trezor Model T. Instead, Tech Timmy emailed himself his recovery phrase. That worked great until someone gained access to his account, stumbled across the email titled “Trezor Recovery Phrase”, input the phrase on a new device, and was granted all of Timmy’s ADA stash. Poor Tech Timmy was in for a real surprise when he later opened his Trezor to see a zero balance.
Explanation
Never write your recovery phrase in any digital format. This phrase should only be transcribed and kept on physical paper. Having the recovery phrase in digital form exposes you to online threats, and thus defeats the entire purpose of a cold wallet.
Commandment #3: Store Your Recovery Phrase and PIN in a Separate and Secure Location from Your Cold Wallet
Efficient Elenor was all about efficiency. That’s why she stored her recovery phrase, access PIN code, cold wallet together neatly in her office desk drawer. That wasn’t an issue until her ex came looking for revenge and found this package. He got his…
David learned about bitcoin in 2015 and has closely followed the crypto industry since then.
His professional interests center around bitcoin, layer-one blockchain protocols, decentralized finance, and clean energy.
An attorney by trade, David has held licenses to practice law in the State of Hawaii and in US federal courts.
