Ensuring the safety of your crypto is crucial, especially when it comes to recovering it in the case of losing your crypto wallet.
A key aspect of protecting your crypto is understanding what is a cold wallet backup and if you should create one.
In this post, we will explore how cold wallets can be backed up, along with the pros, cons, and best practices for safely setting up the recovery of your cold wallet.
Why a Backup Matters for Cold Wallets
A cold wallet is an offline storage device for your crypto. It can be a hardware wallet or even a physical paper wallet.
It’s called cold because it’s disconnected from the internet, making it safer than hot wallets, which are always online. For this reason, hot wallets are much more vulnerable to hacking and phishing scams.
What a cold wallet offers is high security from cyber threats, but most are not immune to physical damage, theft, or loss.
As crypto transactions are irreversible, having a cold wallet backup is vital!
Can Cold Wallets Be Backed Up?
Backing up a cold wallet means that you create a safe copy of your wallet’s private keys and/or recovery seed phrase.
The key or seed phrase gives you access to your crypto. By backing it up, you can recover your crypto funds if your physical wallet is lost, stolen, or damaged.
Typically, the best hardware wallets come with recovery seed phrases, which are between 12-24 words. It is created during the initial set-up of your hardware wallet.
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Are Cold Wallet Backups Recommended?
When it comes to backing up a cold wallet, the consensus from experts is that you should create a backup wallet.
Did You Know?
Almost 20% of the total supply of Bitcoin will likely never be recovered due to lost private keys.
Therefore, most crypto security experts strongly suggest backing up your cold wallet.
The reason is simple: it increases the chances of recovering your funds if something happens to your physical wallet.
On the other hand, some experts caution that backups can introduce new risks. For example, a poorly secured backup, like on paper or within an email or online cloud server is cause for concern.
So, what’s the final thought?
Use a metal crypto wallet for seed phrase recovery, like Material DIY, that is waterproof, fireproof, and strong enough to last the test of time!
How to Backup Your Cold Wallet
Backing up your cold wallet properly is a crucial step for protecting your crypto assets.
Here’s a step-by-step guide to help you create a secure backup and avoid common mistakes.
1️⃣Generate Your Seed Phrase
When you first set up your cold wallet, the device will generate a recovery seed phrase. It can be 12 to 24 words. This phrase is like the “master key” to your crypto wallet.
An example can be “cup eat dog phone nail sit screen red Christmas seven light pen”
2️⃣Write Down Your Seed Phrase
Once the phrase is created, you have a few options for “writing it down” or storing it. You can use physical paper, or engrave it onto a durable medium metal crypto wallet.
3️⃣Store the Backup in a Private Location
Keep your seed phrase recovery in a safe that nobody knows about. Do not share its location or code with anyone.
Avoiding Common Mistakes
- Do not take a digital photo or screenshot of your seed phrase, since these can be hacked online.
- Do not store it in other digital formats, such as email, cloud servers, or physical devices that can connect to a computer. One of the biggest mistakes users make is saving their seed phrase in cloud storage, email, or personal devices connected to the internet.
- Do not share your recovery phrase with anyone.
- Do not keep your hardware wallet and seed phrase wallet in the same place.
Best Practices for Recovering a Cold Wallet After Loss
Before diving into how to recover your crypto, let’s discuss the difference between cold storage vs. hardware wallets.
Although people generally consider hardware wallets safer and more secure than hot wallets, not all hardware wallets are cold wallets.
Most hardware wallets contain electronic components, meaning they have a screen that transmits information to and from an app or requires a connection to a computer.
With true cold storage wallets, you avoid concerns about technical failures or malware, as they never need to connect to another device.
Basic Steps to Recover Crypto
Imagine this scenario: Your crypto wallet is stolen, and you can’t access your digital assets. Luckily, you were smart enough to create a recovery seed phrase for your wallet.
Here’s what to do next:
➡️First, get yourself a new crypto cold wallet that supports recovery.
➡️Then, select the “Restore” or “Recover” Option during set-up.
➡️Make sure to restore from a seed phrase and not create a new wallet.
➡️Carefully enter your seed phrase. Do not make any spelling mistakes!
➡️Complete the setup by following the prompts indicated by your new wallet.
➡️Finally, verify your funds to ensure that your crypto is recovered.
Common Backup Solutions
Metal Backups: Steel plates, like Material DIY, are popular because they are extremely durable. Being resistant to fire, water, and physical damage, they are long-lasting solutions for securely storing your recovery phrase.
Paper Backup: While easy to set up, paper backups come with risks due to damage. They’re very vulnerable if not stored in a secure, protected environment. And the degree of human error is higher.
Digital Backups: Creating encrypted digital backups on offline devices (air-gapped) can be a convenient option, but you must keep them disconnected from the internet to avoid hacking risks.
Step-by-Step Guide: How to Backup Your Cold Wallet With Material DIY
- Generate your seed phrase: When setting up your cold wallet, you’ll be given a 12- or 24-word seed phrase. This phrase is crucial for accessing your crypto in case the wallet is lost or damaged.
- Prepare your Material DIY backup: Engrave your seed phrase onto the stainless steel plate. You have the option of engraving up to 24 words.
- Store your cold wallet backup in a secure location.
Should You Rely on a Backup? Risks and Alternatives to Consider
Between having or not having a backup solution, you should always have one.
There is nothing worse than losing your crypto forever because you were too lazy or didn’t think it was important to back up your crypto wallet.
Owning a recovery wallet comes with similar risks to holding crypto—you can lose it, it can be stolen, or it can get damaged.
But, by utilizing the best options available, such as Material DIY, you can aid in protecting your digital investments for a lifetime.
FAQs
Can I back up a cold wallet?
- Yes, you can back up your cold wallet by securely storing your seed phrase on a metal-based backup like Material DIY.
What’s the safest way to store my backup?
- The safest method is to use a metal crypto wallet for seed phrase recovery. These are typically damage-proof and made to last.
What should I do if I lose my cold wallet?
- If you’ve backed up your seed phrase, simply buy a new wallet and restore your crypto by entering the seed phrase during setup.
Are paper backups safe?
- While they are easy to create, paper backups are vulnerable to fire, and water, and will eventually degrade over time.
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