TL;DR

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.

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.