SovereignLife on Nostr: Some thoughts on hardware wallet security. One of the things that's confusing for ...

Some thoughts on hardware wallet security.

One of the things that's confusing for anyone new to this space (or even not so new) is to determine "best practices" when it comes wallet security.

Everyone knows the phrase "not your keys, not your coins", but even when you have the keys there is still another "rabbit hole" for you to explore - that is, what is the best way to manage such keys.

Over the last couple of years I have given a lot of thought to this, primarily based on my own long term experience and an awareness of my own human fallibility.

The basic premise is that if you secure your 12 or 24 word seed/recovery words then all is well - whether it be a hot or cold wallet.

The next step is to understand the security advantage of using cold wallets - i.e. independent hardware devices.

Once you have successfully deployed the above, the search for enhanced security is not over. You will now be presented with such options as "single signature" vs "multi-signature" setups - adding more confusion to the mix.

There's also multi-signature collaborative custody to consider, via third parties.

Over time I have learned that everyone is different and each of us has certain personal considerations to take into account.

Having explored and played around with multisig set ups I found myself feeling less secure, due to the complicated information you had to maintain in addition to securing the private key.

When I considered collaborative multsig third party custody I found myself worrying about the nature of trust in such a relationship and didn't feel comfortable dealing with "joint custody".

So what is the best practice? Well, it depends entirely on you and what you are comfortable with. It's a given that you need control over your private key, but beyond that you need to choose enhanced security that does what you want - without unnecessary additional complexity.

Too much complexity, in my opinion, is also a security risk as you may get "lost" in all the details and screw things up.

Anyway, a couple of months back I implemented what I believe to be "all the security" I personally need and what I can manage without stress.

What I do may not necessarily appeal to you, then again it might, so I'll share it here.

I have three hardware wallets. Two are used to hold long term holdings and the other is used for medium term. I also have a couple of hot wallets for easy access on smaller amounts.

When I first got into bitcoin in 2011, there was only one wallet option - Bitcoin QT, which is now known as Bitcoin Core. A couple of years later Electrum was released, which I immediately moved to, to avoid all the blockchain download and syncronisation issues that came with QT.

Later still, with the arrival of hardware wallets, I purchased the very first edition of Trezor - which at the time could only be paid for in bitcoin, 1 BTC to be precise, which based on today's bitcoin price was an extremely expensive buy!

More recently I purchased the BitBox02 and later Blockstream's Jade.

All this time I have relied on the simplest methods of securing my keys, which I consider to be reliable. This consists of recording my seed/recovery words in such a way as to be virtually impossible for anyone else to find. However, there is always the risk of such being discovered, however small.

Then at the beginning of this year I read about the use of additional passphrases to create a hidden wallet - an additional and optional function which was added to both Trezor and BitBox02.

I spent a good three months studying this option and pondering over its implications before deciding to implement it.

Essentially, it works like this. You can create an additional layer of security by the use of a "secret" phrase (which you commit to memory), which is required at login to your wallet.

What this means is even if someone found your private key (stored as best as you can), they still cannot access your funds.

The process is simple enough. I plug in my Trezor or Bitbox02, enter my PIN and am then given the option to open either the default wallet or my hidden wallet. When I choose "hidden wallet" I'm prompted to enter my secret passphrase. This can be anything, from one word to a phrase - even a sentence.

When I first learned about this option, the first thing that concerned me was "what if I forget this secret phrase?". Writing it down would undermine the whole point, so it wasn't until I came up with a viable and memorable secret passphrase that I felt comfortable implementing the strategy.

When choosing such a word/phrase you have to seriously ask yourself if you could possibly forget it - and that's the difficult part.

For me, the search for the perfect phrase was to look back at my life and think of things that have been very important to me, things I will never forget, no matter what. It could be a childhood experience, it could be a traumatic event, or a once-in-a-lifetime happening. If you can find a word or phrase that's linked to that, or defines it in some way, you will find you have the confidence in your own memory and will be able remember it.

Since implementing this strategy I have felt an increased peace of mind. I have also accessed my wallets numerous times and realise how simple it is, and also a sense of how I will never forget my secret phrase.

So, given the choice between multisig and an additional secret phrase, I personally find the latter simpler and it sits better with me. I always stressed about the setup complexities required for multsig and now feel I have the optimum security that fits my personal profile.

My advice is not to be swayed by other people's advice, but to spend the time understanding your own needs and finding a solution that provides both optimum security AND peace of mind - for YOU.