Why losing your Hardware Wallet’s Restore Key need not be a disaster.

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Why losing your Hardware Wallet’s Restore Key need not be a disaster.

If you own a Cryptocurrency Hardware Wallet then you know that your Restore Key is the ‘Secret’ list of 12 or 24 words that are used to Backup your Wallet’s Private Keys.

If you ever lose the Wallet or it stops working you simply buy a new one, enter each of the words in your Restore Key into the new Wallet and you can then use the new Wallet to control exactly the same set of Crypto Assets as your previous Wallet.

But what if someone finds your Restore Key?

Should someone find your Restore key AND understand how to use it then that person could use your Key to steal all of your Cryptos. They simply need to use a Hardware Wallet from the same manufacturer as you and enter your Restore Key into it. At which point they can now transfer your Cryptos to Wallet Addressses that they control and you cannot access.

 

As you well know, should this happen you will probably not get those assets back.

There is a simple solution, use a 'Passphrase'.

 

A Passphrase is a new Word, sequence of Words or a Sentence that you think up and enter into your Hardware Wallet. When you enter a new Passphase in your Wallet you create a new, hidden and secret set of Wallet Addresses (Accounts) on that Hardware Wallet. 

 

You can now use those Hidden Accounts to store your Cryptocurrency instead of the default accounts that you were using. If anyone ever finds your Restore Key and tries to steal your Crypto assets then they can only access the default wallet accounts, which you deliberately leave empty.

 

For someone to access the hidden, secret Wallet Accounts where you store your Cryptos then they would need to have both the Restore Key and your Passphrase. As such you do not want to write that information down in the same place, oh and use a Passphrase you won’t forget.

 

When you log into your Hardware Wallet you will use a different PIN code for the hidden Wallet Accounts and the default Wallet Accounts.  You can have as many Passphrases and sets of hidden Wallet Accounts as you wish.

 

So what do you do now?

The links to information for the Ledger and Trezor Wallets are below, if you use a different Wallet then you can go to the Manufacturer’s Website to look for the necessary instructions.

 

Setup of a Passphrase is quick.This setup process recently took me less than two minutes on the Ledger Nano X and the process is not complicated.  

 

The final thing you should do is now put your Restore Keys into a tamper proof container such as a signed, sealed envelope so you can quickly tell if someone has had access to them. 

 

 If you ever see that envelope has been tampered with then you know that your Restore Key has been compromised. You can then take steps to move your cryptos to new addresses whilst you reconfigure your Hardware Device with new Private Keys and a new Restore Key (we’ll look at that in another Blog Post sometime).

 

Hardware Manufacturer Links.

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