If you’ve got a digital wallet, you need to take appropriate measures to safeguard this. To control this digital wallet and essentially open up your funds, you’ll need a mnemonic passphrase, often between 12 and 24 words, to make sure you have access to your digital assets when you may need them – for resale, for spending, or for profit-taking.
“Whether you’re just starting to invest in crypto currencies or have built up a portfolio of significant value in digital assets, it’s essential that you enlist adequate security measures to protect the storage of your data. This includes having a backup in case the worse should happen.”
Clay Epstein, Chief Information Security Officer at Fabriik
Here’s three key tips for safeguarding your passphrase and wallet:
1. Put it on paper
One of the most fundamental ways to secure your digital wallet’s mnemonic phrase is to write it down on paper. You want to keep this paper safe, of course. You may want to create backups. Ideally, you’ll know where every paper is at all times.
The main idea here is that writing your mnemonic phrase on paper is much safer than storing it digitally. Because your digital wallet is digital, and many of your digital data sets are exposed to the internet, it’s possible that hackers could scrape your phrase off your computer and use it to steal your digital assets. That’s not going to happen with paper.
It may seem pretty antiquated, but having a paper repository for your key phrase, echoes the types of cryptography that have been in use for centuries. For example, the same principles seafaring pirates and others used for one-time ciphers (codes), based on passages from a book hundreds of years ago, are used now in multifactor authentication with smartphones.
The idea is that the two pieces of information that fit together to unlock your assets are in two very different places. Thieves might have access to one of them – but they’re extremely unlikely to have access to both. Banks rely on this to keep your online banking data safe, and you should do it with your digital wallet too.
That, combined with the power of modern cryptography to resist brute-force attacks attempting to decrypt your passphrase, keep your digital currencies pretty soundly protected – unless you lose either your passphrase or your digital wallet.
2. Make a will
It may seem overly formal, but if you intend to keep these assets for a while and they are of significant value, you want to make them accessible in case something happens to you, the same way you do with traditional assets. So think about adding your mnemonic phrase to other parts of your will, like a list of executors, and writing in an explanation of how the digital wallet gets treated.
3. Secure your wallet location
Many people use external flash drives for their digital wallets to keep the wallet itself off of the internet and unconnected to exchanges. That’s okay, but don’t lose the flash drive! Store your flash drive and paper with passphrase on it in a safe deposit box at a bank, so that everything you need is in one secure place, away from your home.
Just because your digital assets are in the form of intangible data, that doesn’t mean you can’t use a safe. Locking up the flash drive will keep tech-savvy crypto thieves from holding it hostage, and knowing how to protect your digital assets will leave you a step ahead as digital currencies and other valuables continue to play a bigger role in our financial lives.
Money Button, by Fabriik, is the leading wallet provider in the Bitcoin SV ecosystem. It offers a simple way to make or accept payments over the internet. Payments cost less than one cent and are nearly instant.