Whether you are new to the world of crypto and wondering how to secure your wallet, or have already had a painful experience because you did not take adequate security measures: We will show you how to choose strong passwords and how to create backups in this article.
It is both vital if you want to store cryptocurrencies yourself and fulfills an important protective function against losing your money, coins or tokens.
“It is very important to us at ReWallet that crypto users are as safe as possible. It may seem paradoxical at first glance that we would make recommendations that will prevent you from ever needing our services. In any case, from our point of view, the best protection is knowing how to use the technology.” - ReWallet
Secure Passwords – a Brief Side Note
Passwords should have a high level of complexity if possible. However, most people are too convinient to create a new password for every account or wallet. One reason for this is the fact that truly strong passwords are very difficult to remember.
Admittedly, there is the possibility to rely on mnemonic devices and, for example, modify a sentence in such a way that you can better memorize the password. Here is an example:
“Peter went with his goats to Heidi on the mountain pasture.”
This password has 33 characters and all you would have to remember is the phrase, the structure and the number 56. However, you can create passwords which are much more complex than in this example, thus making them much more secure. Another challenge is the question of where and how to store the password. If you lose or forget it you might no longer have access to your cryptos.
The solution to both problems is a password manager. There certainly are differences in quality in the software that is available for purchase versus free of charge. For many end-users, these differences are ultimately just subtleties. It is much more important to use any password manager, as the software generates random passwords with much higher complexity. Moreover one can then assign a complex password individually for each user account, for each e-mail address and also for each wallet.
As a result, the manager increases a user’s security in three areas:
Protection against loss of passwords through secure storage
Randomly generated passwords that are both longer and more complex
No reuse of passwords as each account gets a unique password
Once you have chosen and set up a password manager you only need to remember and write down one password, namely, the one to encrypt the manager and to be able to open it again.
In addition, depending on the software chosen, you might be required to set up 2-factor authentication for access or keep a backup of the container file. In the first case, 2FA is used because the container is stored in the cloud and in the second case there is a local copy saved by the user. And it is precisely this circumstance that leads us to our second topic.
Redundant Backups Are the Best
A backup is a copy of any data set and should always be kept redundant. Redundant in this case means that there should always be more than one backup copy. Each copy should be stored on a separate disk and to top it off, these disks should not be stored in the same location.
By the way, the files you actually use do not count as a copy. Therefore, a backup is at least a 1-plus-2 solution but can also include more than two additional copies.
The reason for this strict way of thinking and behaving is to protect yourself against data loss. When you consider that in some cases a wallet can have significant financial value, it quickly becomes clear why you should not be stingy with backups.
Which devices you use, on the other hand, is not so important. Admittedly, data media also have different durability and resistance, but for home use various solutions are suitable:
External hard drives
CDs, DVDs, or Blueray discs
As already mentioned, backup copies should be stored in different places. This way you still have access even in the case of a disaster such as a burst pipe, a fire or similar events that can result in a loss of the data.
What Data Should Be Backed Up?
Basically, you should back up all data that is either worth a lot of money or has a high personal value. The latter category includes family and vacation photos, for example, which are often not backed up sufficiently and sorely missed if they are lost.
In terms of cryptocurrencies, it is the wallet files that should definitely be backed up. In the case of the reference software Bitcoin Core, the name of this file is “wallet.dat” and it is usually not stored in the same directory as the installation of the actual software. In case of a different cryptocurrency or wallet software, the name or designation of the key file may differ.
In addition to the file there is also the possibility to store so-called private keys, master keys or seeds. While you can copy the wallet file to the corresponding directory of any computer to recover the wallet, the recovery with the other methods is a bit more complex.
For the less experienced users it is recommended to back up the entire wallet file instead of trying to export the corresponding keys. However, if you have a seed phrase for your wallet then the situation is different. If possible, the seed should only be recorded in writing and not stored unencrypted on a data carrier. With this in mind, you can make your backups with pen and paper and distribute them to various locations. You should also be careful when choosing these “storage locations” because everyone who has the seed will also automatically get access to the coins.
We generally advise you not to use the same password for different services. If someone manages to steal your password from one service they will also gain access to the other services that are protected by it. A large number of complex passwords, similar to the example above, will protect you best.
Password managers are useful in many ways because they make it easier to store complex and hard-to-remember passwords. However, the benefits of a password manager do not come without risks. It is critical to use trustworthy software. It should also be noted that the environment in which the password manager is operated can be threatened by malware, so the security of the system as a whole becomes even more important. Finally, the master password should also meet the highest security requirements as this is the all-purpose key to all your passwords.
There is no right or wrong answer to this question. It depends on many factors, such as the level of security you want, how long you expect to use it, the data it contains and whether it should be physical or digital. If you want to know more about the right medium for your backup, you can find more reading material on the subject of backups in this article.
If you find yourself in this predicament, there are ways to recover your data in some cases. With USB sticks and HDDs or older hard drives, the probability of success is often higher than with modern storage media. If the backup is in the cloud, most providers have a recycle bin that holds back deleted files for a certain time. If you are unsure about how to recover your wallet you should engage with crypto recovery service professionals to ensure access to your wallet is not lost.
Co-founder and CTO Bruno is a crypto native. Long before the public hype around Bitcoin, Ethereum & Co, Bruno was already active in the crypto field. The idea for ReWallet came to him a few years ago when he lost access to his own wallet.