In this post I will write what is the best protection for crypto assets. Cryptocurrencies are very popular today, especially top crypto coins such as BitCoin, Ethereum, Litecoin, Zcash, Dogecoin, Tezos, Ripple and some others. It is hard to predict price in future but many people (including me) think that price will go much up. Investing in crypto assets people wants to secure future but at the same time using crypto payments is much better option in compare with any other methods. You probably heard for many cases where offline and online banks blocked and frozen accounts without any clear explanation. Also monthly fees are not so low and when you want to send money outside of your country fees will be big and it is very complicated to do it. With crypto you are your own bank, you have full control but also responsibility – transactions are non-reversible what means if you made any mistake your crypto will be forever lost. To avoid this I will give you important security tips in this post including how to protect crypto assets with hardware wallet advanced security – 25 word seed.
How to start with crypto and use it on safe way?
In this section I will write some basic things about crypto. If you already use a hardware wallet feel free to go on next section where I will describe how to set up the best protection for crypto assets with 25 word seed.
How to start with crypto I already described in my post here. I started with crypto because I had earning on one mini jobs site and I found way how to convert earning into BitCoin and than later made cashout on local ATM. First transaction I made via Blockchain online wallet secured via two factor authentication. This method I recommend only for smaller amounts. You can also use online wallets integrated in crypto exhange sites such as Coinbase. If you are beginner I suggest to read post How to start with crypto – link to post is already mentioned in this section. And remember for every online account use two factor authentication to avoid scammers (including email accounts). These security tips I described in Crypto security tips post here. This is a good start to introduce crypto and use it on safe way as beginner. I have never had any security issues but the best way is to use crypto with hardware wallet. In the next section I will describe how to protect your crypto assets with hardware wallet on right way.
First step is to buy a hardware wallet. This is the best way to secure your crypto assets because every single transaction needs to be confirmed with physical buttons on your hardware wallet and it is a reason why hardware wallet is the best way to store crypto. Security pin and seed (24-word recovery phrase) never leave your hardware wallet. It is important to write down your recovery phrase and keep it on secret place. Who have access to your recovery phrase (seed) – will have access to your crypto assets. I recommend to buy a hardware wallet at the official Ledger web shop. Where to buy it and how to set up and start use a hardware wallet (in my case Ledger Nano S) I described inside my post How to use a hardware wallet here.
Secure crypto assets with hardware wallet
(24 Vs 25 word seed)
Usually people use a 24-word recovery phrase (seed). This is a very good protection because there are so many combinations, number is so big that you can not imagine and it is almost impossible to guess 24 words in a specific order (2048^24). In compare mobile wallets usually use 12-word recovery phrase which is still a very large number of combinations – 2048^12. (never had any issues with mobile wallets)
There is always some very small chance that someone will guess your recovery phrase (in theory, by accident). With mobile wallets protected with 12-word recovery phrase chance is a much bigger (still very small chance) but problem could be also some security issues – security holes in apps. For smaller accounts I still use crypto wallets on my mobile phone and never had any problems but for bigger amounts strongly recommend to use a hardware wallet.
Now because there is a very little chance that someone will guess your 24-word recovery phrase (full BIP39 english wordlist you can read here) I recommend to upgrade seed to 25-word recovery phrase. There is no 100 % protection but this is very close and in my opinion it is impossible to avoid this protection. That means to have access to your crypto someone needs to have access to your 24-word recovery phrase + additional custom entered secret passphrase. For secret passphrase I recommend to use combination letters, numbers and special characters.
Warning: If you ever lose your secret passphrase – crypto assets protected with 25-word recovery phrase will be lost forever. More information you can also read on the official Ledger website here.
How to set up 25-word recovery phrase?
When you buy a hardware wallet first step is to write down your recovery phrase (seed). Strongly recommend to use 24-word option for security phrase (you can also use 12 or 18-word recovery phrase)
To upgrade security level you need to add a secret passphrase and create additional accounts inside Ledger Live application. You can add many accounts and many secret passphrases. How it works? First you need to set up a temporary passphrase. After that you need to add new accounts. Every account that you add will be protected with 25-word recovery phrase: your 24-word recovery phrase + secret passphrase (temporary passphrase). Temporary means that you are inside new crypto wallet with new set of accounts and you dont have access to old accounts until you reconnect your hardware wallet. When you reconnect hardware wallet (disconnect and connect again) you will have access to your old accounts protected with 24-word recovery phrase. To have access to accounts protected with 25-word recovery phrase you need to restore the hardware wallet with 24-word recovery phrase + secret passphrase.I suggest to write down addresses where you want to deposit or remove crypto assets while your hardware wallet working in secret passphrase mode. I will give you one example later after tutorial to see how it works – I will move 3000 dogecoins to another account protected with new secret passphrase. Be sure that your device runs the latest firmware before you start and read more information on the official Ledger website mentioned above.
On your hardware wallet (in my case Ledger Nano S) go to: Settings – Security – Passphrase. Then you will see Advanced feature notification and choose Set up passphrase. With new firmware to choose option you need to press both buttons when you see option on display. After that you will see on display Set temporary and you need 2 times to choose this option: 2 times to press both buttons and you will be ready to enter secret (temporary) passphrase. To select between letters and special characters you need to choose right symbol and press both buttons and scroll to right to left (with right or left button) and confirm every letter, number or special character by pressing both buttons. After you finish and write down your secret passphrase you need to choose checkmark symbol and confirm with PIN code. Now you are ready to Step 2.
Now you are in mode with secret passphrase until you disconnect your hardware wallet. That means every new account that you create will have 25-word recovery phrase and you will lose access when you disconnect hardware wallet. To have access again you need to restore hardware wallet with 25-word recovery phrase. In practice that means you will have one set of accounts with 24-word recovery phrase + other set of accounts with upgraded security with 25-word recovery phrase. You can create many sets of accounts and many secret passphrases.
Go to Accounts and press Add account button inside your Ledger Live application. Of course you need to follow instruction from Ledger Live application and confirm every new account on hardware wallet.
I have created a new account for Doge. New account name is Dogecoin S1. Then I have copied Doge address – because I am now in secret passphrase mode and I dont have an access to my main wallet I need to copy Dogecoin address from my new account, reconnect Ledger Nano S hardware wallet to have access to my main wallet. Then from my main wallet I will send 3000 Doge to my secret wallet protected with secret passphrase. Balance will not change – only distribution between accounts will be changed.
My advice is – send crypto assets to wallet with secret passphrase for store, assets that you will not touch long time. For assets that you want to use: spend or trade keep it on main wallet with 24-word recovery phrase. Hardware wallet with 24-word recovery phrase seed is a very strong protection but for every case I like to have my crypto assets distributed on several crypto wallets (accounts). 25-word recovery phrase seed is for advanced users, you need to be very careful about this setup. Future with crypotcurrencies is coming and I dont like security with some predefined words. I know that is a really small chance to guess these words in a specific order, adding one more custom passphrase is a great feature to be almost 100 % secure and sleep well.
Do not forget that you still need to be careful with hardware wallet:
- only buy at the official store
- keep recovery phrase on safe place
- when you write down recovery phrase be sure to avoid laptop or mobile phone camera
- do not give your hardware wallet anyone to touch it
- keep hardware wallet on safe place
- do not tell anyone that you have big amount in crypto
Hardware wallet alternative solutions
Hardware wallet is the best protection and solution for crypto use but in some cases is good to have some alternative crypto wallets. For example when you want to exchange some crypto amounts on crypto ATMs, buy something with cryptocurrencies, exchange some coins with friends etc. I recommend to avoid crypto wallets on PC or laptop because there are many viruses. Especially please dont use some browser extensions – this is a big help for scammers to steal your crypto assets . Even if you lose some small amount – it is not good. I use a few wallets on my mobile phone and never had any issues.
The best protection after hardware wallet is to use BitPay wallet on several devices – it is called multi signature wallet (multi sig). More information you can read here. In short: to send crypto assets you need to confirm on several devices (2 or 3 for example). On this way even if you dont use a hardware wallet you have big security. Every wallet is protected with different 12-word security phrase. For example you have mobile phone, tablet and laptop: install BitPay wallet on all 3 devices and you can choose that transaction needs to be confirmed on all 3 devices or on 2 of 3 (you need to create a new key with option Shared Wallet – requires multiple devices). Be sure to write down every recovery phrase in case that you lose some device or maybe get broken. In general wallets – apps in mobile phones are much better secured in compare with that ones in PC or laptop operating systems. For smaller amounts I also use: CoinPayments, Yoroi, TronWallet, Electroneum. CoinPayments is very interesting wallet because a few hundred coins are supported and many websites use this payment processor for purchases and cashouts. More about CoinPayments you can read inside my post here. Great thing that you can use it on mobile phone too and in case that you use it on PC or laptop there is a two factor authentication security feature.
Hope that these information is useful for you. My first recommend is to use a hardware wallet, in my case Ledger Nano S but decision is on you. In case that you use non-hardware wallets be very careful and check more information before you start use it. For any doubts, questions or suggestions feel free to ask me via post comments.