Why You Should Backup Your Hardware Wallet
Last updated: October 26th, 2021
How to Stay Safe
The following assumes you are using a Ledger Nano S or Trezor hardware wallet. Due to their ease of use and security, we recommend a hardware wallet for cold storage.
To save / backup your Ledger or Trezor device, simply write down the 24-word phrase on the card they provide and keep it very, very safe. Never put this key on an online device or type it into MyCrypto.com.
Backing Up Your Hardware Wallet
When you have a hardware wallet, you use that device to access your funds on a day-to-day basis. 99% of the time, you will never lose this device, have the device stolen, drop it in a toilet, burn it in a fire, or anything else.
But ...
If any of the above happens, you will want to be able to access your funds without your hardware wallet. For that reason, you need to have a backup. The backup of your hardware wallet are those 24 words (standard on both the Ledger Nano S and Trezor). If you have those words, you can access your funds at any time. Your backup is only worthwhile if it doesn't also get destroyed with your hardware wallet.
For example, if you tape the 24 words to your hardware wallet and accidentally drop it off the side of a cliff, both the device AND the words will be lost. Your backup is worthless and you have no access to your funds.
- In order to prevent theft, it's probably not a good idea to carry it on you on a day-to-day basis.
- In order to mitigate damage caused by a large-scale disaster (fire, flood, tornado), it's best to not keep the device and words together, say in your desk drawer.
- In order to reduce the likelihood of the 24 words being stolen, they shouldn't ever be stored on an electronic device, such as a computer or phone—including taking photos of it. Nor should the device or backup phrase be kept in an area where they're at an increased risk of being stolen.
- In order to prevent loss, both should be kept somewhere safe and separate, where neither will be accidentally be thrown away or lost.
Where you keep your backup is up to you. Trusted family members (preferably those who don't know what crypto is), work, storage unit, safety deposit box, buried in your friend's backyard—it's all going to depend on your situation. If you're leaving it with someone else, ensure that they understand it's very valuable to you but only to you. If your uncle or friend decides to grow up to be a crackhead, you don't want them knowing they have access to all your money. You can say it's the password backup to your online diary, misc. documents for work that you would be killed for if you lost, old memories that you don't want your new significant other finding, whatever. I originally told my parents they were old records for clients that I didn't trust myself not to lose while moving.
While you think about this, it's also not a bad time to think about other things that should probably be backed up externally. What happens if you were to get hit by a truck tomorrow? What happens if your house burns down randomly? Are there accounts, records, passwords, keys, information, documentation, etc. that you and only you have? Maybe we're just weird but I know I'm not the only one in this space that has an "if I die...." document. Because of how complicated crypto is, I have contact info for a few very trusted friends to call if I die who I trust will help my family sort out the crypto side of things. It also includes client documents and contact information because the reality is that clients don't save their sh*t (even though the zip is called "Dont_Lose_This-Important_Docs_for_2017_Website.zip").
You can also opt for a fire-proof bag if you don't have any external place to keep the backup or don't feel like you are a high-risk target at this time (e.g., you don't have millions of dollars worth of crypto, don't have tweakers for neighbors, don't live in a place where there are common hurricanes or fires, etc.). The upside to these over traditional fireproof/waterproof safes is that they are cheaper and easier to conceal someplace random, which reduces the risk of robbery. Safes are known to house valuables. A friend recently had her house broken into and they took the entire safe because she never bolted it down. The only thing in there was some old photos of her great-grandparents and her birth certificate. That sucks.
Analyze your personal risk and your situation. Would your life be over if the funds on that device were to be lost? How upset would you be? How much money do you have stored on it? What would be the impact of losing access to that device (including emotional damage / stress)? This is the amount of money you should spend securing it. We were recently talking and arrived at the conclusion that 100% of people who have over 1-weeks' worth of pay in crypto should have a hardware wallet. Considering that a fire-proof bag is < $20, it's pretty much a no-brainer if you are in this space.
Hope this helps!
FAQs
Back-Up Hardware Wallet
Do you need a backup hardware wallet? ›
You may lose access to your cryptocurrencies if you lose your hardware wallet and have not correctly backed up your device. Water, fire, or wear and tear can all cause damage to the device. However, if you have a backup of your recovery phrase, you can regain access using a new device.
Should I back up my wallet? ›
A wallet is permanent, and it's not like a login account to a traditional website like Facebook or Google. If you don't back up your wallet, then there is no way to recover it. Your keys = Your coins, but that also mean that you need to back it up safely.
What are the cons of hardware wallets? ›
Some disadvantages of hardware wallets include:
- Cost – hardware wallets are the most expensive.
- Potentially difficult for beginners.
- Less convenient for day-to-day transactions.
Most hot wallets have an option such as “export private keys,” which will let you create a file with all of your attached bitcoin addresses and keys. You can then move this file to your new computer with a USB drive, choose to import an existing wallet from a file and then select the wallet backup file you moved over.
Can a hardware wallet be backed up? ›
Most hardware wallets can even work with multiple blockchains simultaneously. This allows a user to manage many different types of coins from many different exchanges on a single device. All of the data stored in a hardware wallet can be easily backed up with a single recovery phrase or PIN code.
Are hardware wallets 100% safe? ›
A hardware wallet is a safe physical device that stores cryptocurrency offline. It keeps private keys offline, preventing hacking. The wallet is small, similar to a USB, and connects to devices for transactions using a PIN code.
What percent of wallets get returned? ›
Switzerland led the study with a 79 percent return rate for wallets with cash. The United States fell in the middle with a 57 percent return rate, while China had the lowest return rate of all the countries studied, at just 22 percent.
What percent of people return wallets? ›
In Switzerland, for instance, 74 percent of moneyless wallets were returned compared to 79 percent of wallets with money, according to the Associated Press. In China, those rates were seven percent versus 22 percent, and in the United States the figures were 39 percent versus 57 percent.
Where should you keep your wallet? ›
No matter where you're going, carrying your wallet in your front pocket is the best way to help deter pickpockets and prevent back pain while still keeping your wallet close by and easily accessible.
They are not a silver bullet, and there are several realistic ways in which a hardware wallet can fail to protect your Bitcoin. These risks need to be carefully considered when deciding how much trust to place in a hardware wallet, and which hardware wallet to buy.
How reliable are hardware wallets? ›
Hardware wallets are designed to be highly secure, with multiple layers of encryption and protection against hacking and malware. They are also resistant to physical damage and can be easily backed up or recovered if lost or stolen.
Why have two hardware wallets? ›
Diversifying your cryptocurrency holdings across multiple wallets is a recommended best practice. When you divide your cryptocurrency among several wallets, you reduce the risk of losing your entire investment if one wallet is compromised.
Does my crypto still grow in a hardware wallet? ›
Does the amount of cryptocurrency change while in your wallet? While the value of your assets will change even when stored in your crypto wallet, the number of cryptocurrencies you own will not change. The only time the amount of crypto you hold will change is if you buy or sell more of it.
Do you lose your crypto if you lose your hardware wallet? ›
What happens if my hardware wallet breaks? Will I lose access to my crypto? Thanks to how the blockchain works, losing your hardware wallet or accidentally putting it through the washing machine won't affect your holdings. As long as you still have your seed phrase your wallet can be recovered.
Should you back up a crypto wallet? ›
Successfully backing up a crypto wallet will help prevent you from ever losing access to your cryptocurrencies and other digital assets. For example, if your crypto wallet is lost or damaged you will still be able to recover your funds if you have backed it up properly.
Is one hardware wallet enough? ›
It is generally recommended to have multiple cryptocurrency wallets for added security and flexibility. Keeping all of your cryptocurrencies in a single hardware wallet may increase the risk of losing all of your funds if the wallet is lost or stolen.
Do I need two hardware wallets? ›
Diversifying your cryptocurrency holdings across multiple wallets is a recommended best practice. When you divide your cryptocurrency among several wallets, you reduce the risk of losing your entire investment if one wallet is compromised.
What happens if hardware wallet dies? ›
If you lose access to your Bitcoin stored in a hardware wallet like Ledger Nano S or Trezor, there may still be hope for recovery. These wallets use a system of seed phrases, also known as recovery phrases or backup phrases, to restore access to your Bitcoin in case your hardware wallet is lost, stolen, or damaged.
What happens if your hardware wallet is destroyed? ›
As frustrating as it may be, hardware wallets don't last forever, and despite your best efforts to keep them in a safe place, replacing a device may be necessary at some point. Similar to a forgotten PIN, a broken hardware wallet requires restoring your existing seed phrase to another compatible device.
