Tl;dr, Stackers—gimme your best secure Bitcoin setups advice.
Hi everyone,
With time in Bitcoin you acquire many different wallets, hardware equipment, and mixes of hot and cold (online and offline) wallets.
It quickly spirals out of control, even for the best of us.
So this beautiful Sunday—with partner out of town and nothing urgent on my desk—I got around to checking some of my setups and their backups. I have relied on many different methods over the years (online, offline, multisig with geographically distributed backups, single-sig with memorized backup phrases etc, etc) and as freakin' always they all come with trade-offs. ("There are no solutions, only trade-offs")
My best advice is to ask yourself the primary question: What is my setup trying to achieve?
Secondary, how much spending needs do I have on a regular basis? If you work a stable fiat job and just send to cold storage regularly, you might not need very fancy setups—a single hardware wallet with steel backups in one or two locations might be enough. Or for big enough stacks, perhaps multisigs that you can't even access yourself. (Get drunk and wanna impulse-buy something irresponsibly?!)
Anything more complicated, and I'm not quite sure what's a good setup. Like I mentioned in the Seth for Privacy AMA last month (#779121), there's a half-dozen wallets on my phone, all of which requiring some sort of backup in case I drop it in the ocean—or custodial setups that come with their own sorts of risks. A good number of hardware wallets have passed through my hands, some in use, some new, some leftover from previous setups.
You are your worst enemy
The most obvious risk a general pleb faces isn't a $5-(well, $10 now... inflation) wrench attack, or a natural disaster washing away your house or attic our garage... but your own goddamn self. You'll forget your passphrase, forget what the PIN is, forget where you stored your backup, lose the hardware wallet itself ("Honey, did you throw away a small, plastic calculator-looking thing when you cleaned out the basement?!")
For most of us, living in safe, stable environments/countries/cities/villages, it's not the external threat to our stack that matters but our internal error-prone selves.
Two great resources I've found comes to us from Unchained Capital ("Best Practices for Securing the Keys to your Unchained Vault") and Jameson Lopp ("How to Back Up a Seed Phrase").
On the last one, a real @realBitcoinDog quote from 2+ years ago is = "TLDR: you suck at security, so pay for casa (or unchained capital)."
Well, he might very well be right. Here's my major problem from when I used multisigs:
Problem? There are only so many good locations I have access to (home, family members' homes, office etc). I looked at having a safe deposit box at my local bank branch a few months ago—but they'd charge about $100 a year (plus one-offs fees for each visit), and I quickly get greedy: That's a 100k sats right now... and probably more in a few years. eeeehh, gimme the extra sats!
The 3 Levels of Accessibility
Practically speaking, I'm going to need 3 things:
- Lightning wallet balance for easy spending/receiving
- on-chained balance on a phone or easy-to-travel-with hardware wallet (say a nice BitBox that sticks into any odd device)
- hardware stash I don't touch (except for emergencies or big purchases)
If the lightning wallet has backups (say, Phoenix) but also a custodial one for cheaps (WoS, Blink etc) that's one backup; plus another one for the on-chained wallet on your phone; plus the one or two for the main savings.
So at a slim minimum you need 3-4 backups, all of which come with seeds (and if passphrases, too, then you're at 8 objects/information to safeguard; with PINs for some hardware wallet that's another couple of pieces of information to remember/keep safe).
OK, cool.
Here are some problems I found myself in earlier this year:
- having to pay an above-liquidity amount on-chained when I had access to was lightning.
- needing to pay from a hardware wallet I had at a different physical location (different country).
- all-eggs-in-one-basket, with both hardware wallets and back-ups distributed in one location only (what if there's a fire?!)
- forgetting the passphrase to a hot wallet with a few million sats in it (that I fortunately could still spend from), and after trying every goddamn variation of the passphrase I knew was correct, simply giving up and spending it to another hardware wallet.
- inheritance: wth happens if I die?! Some people know some of the setup, but nobody knows all of them—and most certainly not the PINs or passphrases.
Checking things today, I found that I had duplicated the seedphrase from one of my major stashes in far too many places—some even written down on paper and carelessly left laying around. I also couldn't remember where my Phoenix wallet backup was, so had to make a new one. (I'm sure in a future check I'll find them scattered around various places and be annoyed at my own riskiness...).
TL;DR:
Bitcoin safekeeping is tricky, and you need an appropriate balance between immediate liquidity needs (lightning + on-chained) and a safeguarded stash. Truly safeguarding your bitcoin is HARD-AS-FUCK. Totally get it that people outsource setups to Casa or Unchained.
Gimme all your best tricks or solutions.
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Any particular advice you found useful?
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Are we gonna end of having password managers for our various low-importance bitcoin storages?!
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How do you think about the trade-off between immediate spending needs and long-term storage?
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How do you save for your kids/partners or other dependents? (Separate out, i.e. even more wallets, or just merge with your own stash?)
