Storage: hardware wallets and backups
Lesson 7 of 39 in the course “Crypto”. Free, with animations and a quiz.
Split your money
Do not keep everything in one place. On an exchange or in a hot wallet (an app connected to the internet), leave only what you need for frequent moves. Keep the main part in a cold wallet, where the keys are offline. The guide in the picture: 10% in use, 90% in cold storage. It is a rule of thumb, not a law, so adjust the split to your needs.
A hardware wallet
A hardware wallet is a small device that keeps the key inside and signs transfers on its own. Your computer only gets the finished signature, the key never leaves the device. That way the keys stay only with you, as in the picture. Buy the device only from the maker: one from a reseller may be tampered with, with a seed phrase someone already knows.
Backup and inheritance
A backup, meaning a spare copy of your seed phrase, covers you if you lose the device: a new wallet restores from the 12 or 24 words in the picture. Keep two copies in different places, on paper or metal, offline. And think ahead about how someone close could get access if something happens to you, without showing anyone the phrase now.
Check yourself
- Where does it make sense to keep most of your savings?
Correct answer: In a cold wallet, keys offline. A cold wallet is not online, so it cannot be hacked remotely. A hot wallet or exchange is handier but riskier. - Where should you buy a hardware wallet?
Correct answer: Directly from the manufacturer. A device from a middleman may be tampered with, or its seed phrase may be known already. From the maker it arrives clean. - How many copies of the seed phrase make sense?
Correct answer: Two or more in different places. With one copy, a fire or loss can lock you out forever. Offline copies in different places protect you.
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