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Contents
Basics of Crypto Security
Risks of backing up your seed phrase on paper.
Paper is inherently vulnerable as a medium for long-term storage of any information - but the risks can be somewhat reduced if you counteract its weaknesses.
August 31 2024
Cryptocurrencies are fueling a fundamental financial shift by allowing individuals to use cryptography to secure their own digital assets. Surprisingly, given the criticality of keeping safe backup copies of the encryption keys that control access to these digital assets, most cryptocurrency holders rely on paper as their chosen medium to back up their cryptocurrency access keys.
TL;DR (concentrated takeaways)
Paper backups of seed phrases are subject to a large array of threats, including loss, theft, and destruction.
Relying on paper backups is the leading cause of lost crypto assets.
Even safe deposit boxes may not fully protect paper backups.
Certain precautions, such as added physical protection, and having an equally-secure copy in a different location, can make paper backups less vulnerable.
Paper is a popular default backup medium because it is convenient for both consumers and wallet manufacturers. The use of paper to back up the all-important "seed phrase," or "private key," was for some years the assumed de facto backup mechanism described by cryptocurrency wallet manufacturers. In a survey of the 20 top wallets, 18 of them offered only one mechanism to back up the seed phrase: to write it down on a piece of paper and store it securely. The other 2 wallets surveyed also provided a paper backup option, and added the ability to generate an encrypted digital copy to be kept in a location such as a USB device, off-network laptop, or in the Cloud.
If you must write down your seed phrase or private key on paper, please do it temporarily, then use one of these methods to create a reliable backup, and then destroy the temporary paper backup. This article explains why these steps are necessary to preserve your investment.
The weakest link in crypto.
Storing your valuable backup key or seed phrase on a piece of paper carries unique risks for the crypto owner. Paper is delicate, and its threats include:
- Gradual deterioration of legibility over time
- Catastrophic destruction due to natural disasters like floods or fire
- Accidental destruction by insects, animals, or people
Additional threats that are common to nearly all forms of backup include:
- Loss or misplacement
- Theft
- Lack of awareness of backup location to family or heirs
The list of threats can go on and on. While designed with good intentions to protect crypto owners' assets from loss, paper backups actually have become the leading cause of lost crypto assets. Having a paper backup creates a false sense of security, because when an unplanned event causes a loss of the user's main wallet, they realize they do not remember or cannot access the paper backup they thought they had. As the number of cryptocurrency owners grows, this problem, with its devastating losses and resulting customer dissatisfaction with securing cryptocurrency assets, is also growing — with users often directing blame at wallet vendors.
Risks of using Paper backups.
Paper backups and wallets are often kept in the same location and are therefore subject to the same risks as the owner's main wallet: fire, natural disasters, burglary, etc. | |
Casual owners are likely to forget the "secret storage location" of their piece of paper after few years. | |
In the case of an owner's accidental death, there is no way for their inheritors to recover the assets, which in the case of cryptocurrency keys makes those assets permanently inaccessible. | |
By nature, paper is not a long-term storage medium, and can easily become unreadable after years through natural wear and tear. | |
Casual users are confused about the role and function of paper backups and often blame the wallet vendor for any incidents regarding wallet backup and recovery. That creates a significant load of unresolvable cases for customer service and increases customer dissatisfaction with the wallet brand. | |
Further, in financially-unstable countries where cryptocurrency ownership is crucial, access to bank safe deposit boxes (a common storage location for paper backups) is often restricted during any bank crisis, exactly when users might need immediate access to their crypto-assets. | |
Inheritance.
Beyond restoring cryptocurrency access that may have been lost in a damaged wallet, one of the times when a seed phrase backup is most desperately needed is in the event of inherited crypto assets. Sadly, there have been many instances when the inheritor has been unable to access assets after the owner has passed away, because no one knows about any paper backup copy.
What can be done to reduce risk to Paper Backups?
If a cryptocurrency owner chooses to store their backup seed phrase on paper, they should at a minimum take care to:
- Ensure that when they wrote the seed phrase down, their writing was not captured on camera, and any underlying pages in a pad were not imprinted from writing pressure.
- Carefully destroy (for example, by burning) any temporary or interim copies that they may have created while producing a permanent paper copy.
- Carefully ensure that no electronic copies remain on computers or printers that were used in generating the seed phrase, key, or QR code representation on paper. (This may require expert assistance.)
- Understand the expected durability of the pen, pencil, or printer ink chosen. (Pencil is often recommended.)
- Laminate the paper copy with waterproof, fade-proof, high-quality plastic.
- Ensure physical safety of the backup paper in a vault. Consider keeping a second copy in a separate, equally-secure vault.
- Let at least one other trusted person know about its existence.
Even if the protections above are followed, paper backups have limited reliability.
A better way.
Some crypto owners will not understand why they can't simply rely on the convenience of recoverable passwords like those used in traditional banking services. In the near future, as more types of transactions occur on blockchain networks, the security levels that we expect for today's cryptocurrency storage will also apply to fully-digital house keys, car keys, real estate titles, and a variety of personal property and documents that are currently secured by cryptographic keys. A better solution is needed to bring security and backup options to consumers at the forefront of this digital economy.
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Basics of Crypto Security
Risks of backing up your seed phrase on paper.
Paper is inherently vulnerable as a medium for long-term storage of any information - but the risks can be somewhat reduced if you counteract its weaknesses.
August 31 2024
Vault12
Vault12 is the pioneer in crypto inheritance and backup. The company was founded in 2015 to provide a way to enable everyday crypto customers to add a legacy contact to their cry[to wallets. The Vault12 Guard solution is blockchain-independent, runs on any mobile device with biometric security, and is available in Apple and Google app stores.
You will lose your Bitcoin and other crypto when you die...
...unless you set up Crypto Inheritance Management today.
It's simple—if you don't worry about it, nobody else will—not your software or hardware wallet vendors, not your exchanges, not your wealth managers. So you have to think about how to protect the generational wealth you have created and reduce the risks around passing that wealth on to your family and heirs. What are the challenges with crypto inheritance?
- Crypto Wallets are difficult to use and do not offer crypto inheritance management. In fact, most of them tell you to write down your seed phrase on a piece of paper which is practically useless.
- Some people back up their wallet seed phrases or private keys on paper, local devices like hardware wallets or USBs, or in the cloud - all of these options have severe drawbacks from hacking, to accidental loss, to loss of cloud services. No one wants that to happen to their crypto generational wealth.
- Software wallets operate on specific blockchains, yet your crypto assets span multiple blockchains, for inheritance to work, you must be able to manage inheritance across every blockchain - now and forever.
Crypto Inheritance Management: Get ready today
Vault12 is the pioneer in Crypto Inheritance Management that delivers an easy-to-use and secure method for assigning a legacy contact to your crypto wallets. This enables you to pass on your wallet seed phrases and private keys — including Bitcoin (BTC), Ethereum (ETH) — to future generations. Designed for everyday people, and strong enough for Crypto OGs.
This innovative, decentralized system uses a hybrid approach of software fused with the secure element of phone devices (The Secure Enclave for iOS devices, and Strongbox for Google devices). Vault12 Guard enables users to appoint a person or mobile device as a Guardian. The designated Guardian is entrusted to protect the user's comprehensive collection of wallet seed phrases and private keys, safely stored within a decentralized digital Vault. No information is stored on cloud servers, or Vault12 servers and nothing is stored on local devices making it less of a target.
The Decentralized approach reduces points of failure and removes the necessity for regularly revising wallet inventories or modifying instructions for your lawyers, often leading to privacy breaches. It is the best way to preserve crypto generational wealth.
Take the first step and back up your crypto wallets.
Designed to be used alongside traditional hardware and software crypto wallets, Vault12 Guard helps cryptocurrency owners back up their wallet seed phrases and private keys (assets) without storing anything in the cloud or any single location. This increases protection and decreases the risks of loss. Making sure you have an up to date back up is the first step in crypto inheritance management.
The Vault12 Guard app enables secure decentralized backups and provides inheritance for all your seed phrases and private keys across any blockchain, including Bitcoin, Ethereum, ERC-20, and other crypto wallets.
Note: For anyone unfamiliar with cryptocurrencies, Vault12 refers to wallet seed phrases and private keys as assets, crypto assets, and digital assets. The Vault12 Guard app includes a software wallet that works alongside your digital Vault. The primary purpose of this is to guard your Bitcoin (BTC) or Ethereum (ETH) wallet seed phrases, private keys, and other essential data, now and for future generations.
Add a legacy contact for your crypto.