Cryptocurrency investments are becoming popular worldwide as countries aim to go cashless. The next few decades will fundamentally change, as it may be possible for the whole world to switch to digital money completely. Many citizens already pay mostly with their cards, smartphones, or even smartwatches, as cash is less practical in our fast-paced world.
Cryptocurrency will play an essential part in the cashless future, especially since transferring funds between parties is faster and easier with crypto. Decentralized digital assets also remove the need for third parties, and people can use them to generate returns through consistent investment.
Bitcoin is getting closer to worldwide adoption as the cryptocurrency’s store-of-value nature contributes to its expansion of value. Most people know how to purchase Bitcoin for investments, trading, or daily expenses.
However, few know how easy it is to lose bitcoins. If you lose access to your digital wallet or forget your private key, your chances of recovery are slim. Luckily, there are ways to back up your wallet and safeguard your crypto.
Why Do You Need A Wallet Backup?
Crypto wallets allow users to send, receive, and spend their assets freely, but they don’t actually store them. Cryptocurrencies exist on the blockchain, and you can access them through a private key that proves ownership.
But since private keys are complex strings of characters, remembering them is impossible, so crypto wallets leverage recovery phrases, a set of random words the wallet generates to allow you to back up your assets.
However, as efficient as they are, recovery phrases are vulnerable. You might mistakenly expose them to someone or lose them. If you restore the wallet, you need to input words from the recovery phase manually, so there is a chance of making a mistake.
What Is Crypto Wallet Backup?
You can manually back up your data in the crypto wallet to ensure no data is lost. Make sure you store information on encrypted external drivers or paper copies for maximum protection. Of course, you could also look into automated cloud backup.
These solutions are easier to access since they allow you to create a special password to decrypt the files holding your recovery phrase. The encryption features and cloud services are best for those who prefer self-custody wallets.
There are many other ways to backup your crypto assets, including:
- The sliding backup design with stainless steel devices;
- The DIY engraving method;
- The etching design on stainless steel;
A seed phrase backup should be affordable but also consider its erasing ability and tamper-evidence features. The device should resist impact, high temperatures, and water.
What Are The Right Recovery Methods?
If you lose access to the seed phrase, it may be impossible to retrieve your assets. However, you can prevent that in a few ways, such as devising a complex lock code that will give you access to the wallet.
Social recovery techniques are possible if you have trusted friends or family members who can store parts of your seed phrase. You could also opt for an additional device with your seed phrase and other authentication data.
If you use a custodial wallet that handles your funds and private keys, you’ll benefit from extra security to regain access. On the other hand, multi-signature wallets will authorize you only after receiving approval from multiple key holders.
Can You Recover Your Wallet Without A Seed Phrase?
If you still can’t find your recovery phase, you may try contacting the wallet’s provider’s customer support. Usually, there’s more luck with online wallets than hardware ones, but don’t get your hopes up.
Before that, check for backups ―cloud storage, external hard drives, or nodes that provide any valuable wallet information. File recovery tools can also help in some cases, but only if you’ve formatted previous devices. Some professional recovery services can assist you in recovering the seed, but they usually come at a high cost and do not guarantee success.
What’s The Safest Crypto Wallet?
Besides safeguarding the wallet’s seed phrase, choosing a reliable wallet is the second-best way to ensure asset security. Crypto wallets can be digital or hardware-based, and users can choose one based on their preferences.
Digital wallets include online solutions like apps or software, and they store the private key online. While this feature streamlines quick transactions, it exposes your wallet to hacking risks. You must enable two-factor authentication for an extra security layer, and you must always be wary of how you store the recovery phrase.
Hardware wallets, on the other hand, are physical, so you can store your seed phrase on a USB-like device or paper. Hence, hardware wallets are safer since they’re not connected to the internet but might be prone to damage.
How To Recognize Common Security Risks For Your Wallet
Even if you choose a secure wallet and employ all practices to safeguard assets, the chances of becoming a hacker’s target are still present. So, you must be wary of typical attacks:
- Malware attacks enter devices with ransomware or Trojans, accessing information easily. Preventing them involves regularly updating devices and having an effective antivirus software;
- Phishing attacks can happen in the crypto ecosystem, as individuals can impersonate legitimate entities and trick users into offering access to their seed phrases;
- Wallet security breaches are common in digital wallets since they’re vulnerable to security issues;
- Exchange attacks happen in cryptocurrency exchanges, especially non-reputable ones, where all users’ funds have been drained from centralized databases;
While no strategy can 100% protect your wallet from cybersecurity attacks, you can minimize the chances of becoming a target by choosing a reliable crypto wallet and safeguarding it.
Final Thoughts
As the world becomes cashless, citizens rely on digital payment services like credit cards and apps. However, cryptocurrency payments are also on the rise, so users need digital wallets to store the key that allows them to access funds. Private keys and sed phrases are vital for securing one’s cryptocurrency, but people must secure them to avoid losing access.
