Updated: May 24
Keep it offline (not on your phone/laptop)
Write the seed phrase down & store it in a safe place
Understand the responsibility of becoming your own bank
The security and safety of your Bitcoin or Crypto are very important. It really doesn't matter if you invest £10 or £10,000.
Here’s a thought exercise: If you go to the shop and buy a shirt and decide to leave it at a friend's house. Do you actually own it? You may have purchased the shirt with your own money and your friend may have been with you while you did it. But, if you don’t have access to it at a moment's notice, it's hard to call it completely yours.
The same can be said with your Crypto. For instance, when you purchase Bitcoin on an exchange such as Coinbase, Kraken, or Gemini, you are actually giving them custody (ownership) of your crypto.
Yes, it will say on your account you own e.g. 0.01 BTC but just like leaving your shirt at a friend's house, it’s never 100% yours until you have it. So, how can you prove you actually own it?
In the example of the shirt, you can own it by keeping it with you or wearing it. Ownership, therefore, becomes tangible. That’s not the case for Crypto and in fact is a leading cause of FUD (Fear, Uncertainty, and Doubt). Fortunately, you don’t need something to be tangible in order to actually own it. That is the beauty of a digital asset.
Whatever you do, don’t store your seed phrase online.
The safest way to store your Crypto is away from an exchange. Instead, you can move your Crypto to a wallet in cold storage. Cold storage refers to anything offline i.e. keeping your vital information off the internet.
It sounds daunting but in actual fact, the process is rather simple and it ensures that your Crypto cannot be hacked and stolen. There are lots of different cold storage wallets to choose from but the most popular ones are Ledger and Trezor.
Firstly, when you set up your cold storage wallet, you will be given a set of words called your recovery seed phrase. You should make a record of this as it becomes the essential step for taking control of the private keys.
Whoever owns it, has the private keys. Therefore, in the example of the shirt, your friend had the private key to your shirt.
The seed phrase itself is a randomly generated set of words, usually 12 or 24, and becomes the password to your funds (should you lose access to your wallet in any way). The words, along with their randomness, are important for a deep layer of security.
The great thing about cold storage is that the seed phrase is not required for normal access to the wallet, which could be on an App on your phone or a computer.
The App for your cold storage wallet, for example, Ledger, will show you what Crypto you have. Unlike a hot storage wallet on your phone, a hacker would fail in an attempt to steal your Crypto. This is because they need the all-important seed phrase.
Once again, this demonstrates the significance of storing your seed phrase in a safe and reliable place. Where and how exactly?
Paper bad, Steel good
The lengths to which you go to store your seed phrase will ultimately determine how secure they are.
Naturally, the more money you invest the more it makes sense to up the intensity of your security. If you own a small amount of Crypto, then storing your seed phrase on paper should be okay. That is so long as you understand the associated risks.
Paper is cheap for a reason. It’s flimsy and susceptible to water damage, and in the event of a spillage, your Crypto will be as good as gone.
If you decide to write your seed phrase down on paper, ensure you have multiple copies and store it away in a place that is as non-destructive as possible. It may sound dramatic, but you don’t want to be making life difficult for yourself.
If you own more Bitcoin or just want to up the stakes of your security, consider looking at the fire and corrosion-resistant sheets. That way, you can store your seed phrase and sleep comfortably knowing that even a fire will fail at stealing your precious words.
Perhaps, in a fire, you won’t sleep comfortably but you get the gist of where we’re going. Finally, the sheets come with instructions on how to emboss the letters onto the thin plate.
You’ve created bulletproof protection - fantastic! But now you have the dilemma of storage. After all, it's all well having your seed phrase protected against the elements, but if it's not stored correctly, you are running the risk of a burglary or misplacement.
Ultimately, only you can decide where the place best to store it is, and it will depend on your living situation. Try and find a location that is discreet and secure, can easily be accessed when required and should be shared with as few people as necessary.