Bitcoin Backups: The Minimal Secure Setup

The minimal secure Bitcoin backup has five parts: a hardware wallet, the seed phrase on metal in a second place, an optional passphrase with its own backup, an emergency letter for your heirs and a recovery test you have passed. For most holdings you need nothing more. Less is not enough, because every missing part leaves exactly one emergency open: fire, theft, loss of the device or your death.

Four emergencies, one setup

A backup should keep your bitcoin safe in four situations:

1. Fire or water. Your home and everything in it is destroyed.
2. Theft. Someone takes your device or finds your papers.
3. Loss of the device. The hardware wallet is broken, lost, or the manufacturer no longer exists.
4. Your death or a serious accident. Someone else has to reach the bitcoin without being able to ask you.

Most setups solve two or three of these cases. The minimal secure setup solves all four with as few parts as possible.

If you don't yet know how exchange, app, hardware wallet and multisig differ in principle, read the complete custody guide first. This article starts where you have decided on your own hardware wallet.

The five parts of the minimal setup

1. A hardware wallet

The hardware wallet keeps your keys offline and signs payments without the key ever leaving the device. It is protected by a PIN that locks or wipes the device after several failed attempts. A thief can do nothing with the device alone.

The device is replaceable; your bitcoin depend on the seed phrase. Which device suits you is shown in the hardware wallet comparison.

2. The seed phrase on metal, in a second place

The 12 or 24 words are full access to your wallet. With them you restore everything on any compatible device. Two rules turn them into a secure backup:

• Metal instead of paper. Stainless steel survives the temperatures of a house fire and water. Paper does not.
• A second place. Not in the same drawer, not in the same safe as the device. Anyone who finds both together only needs the PIN, and that can be extracted under pressure.

Which material and which design withstands what is covered in detail in the article How to store your seed phrase safely.

3. Optional: a passphrase

A passphrase is an extra word you choose yourself. Together with the seed it opens a separate wallet. If a thief finds only the seed phrase, he sees an empty or small wallet. In return you now have two things to back up, and a forgotten passphrase costs everything. When it is worth it and how to choose one is explained in the article The Bitcoin passphrase.

4. An emergency letter for your heirs

Without instructions, a metal plate with 24 words is a puzzle for your family. The emergency letter says in plain words: there are bitcoin, there is a hardware wallet, the words are at place X, a passphrase is at place Y, and this person can help with the recovery. The words themselves are not in it.

5. A recovery test you have passed

Only the test shows that your backup really opens your wallet. A miscopied word, a swapped order, a passphrase typed differently: otherwise you only notice all of this when the device is already gone.

What each part covers

The table shows which emergency depends on which part. If a row is missing, a case stays open.

The recommended setup per holding size

Not every holding needs the same effort. The question is: how hard would the loss hit you? One of three levels follows from that. The limits are guidelines, not fixed rules.

Level 1 is the minimum for anyone who holds bitcoin themselves. The seed is at home, but not with the device. A fire destroys the device, the metal survives. A burglar who finds the device fails at the PIN.

Level 2 closes the gap of level 1: anyone who finds both at home or puts you under pressure at home can't get to the seed, because it isn't in the house. The passphrase is an option here for anyone who stores the seed in a place others can enter.

Level 3 is the point where a single mistake becomes too expensive. Here the step to a multisig wallet, in which you may lose one of three keys, is usually worth it. That is more effort and no longer "minimal", but appropriate for these amounts.

Convert what your holdings are worth in euros and francs here:

The recovery test

The test is the step most people skip, and the most important one. Do it before the large amount is on the wallet.

1. Write down two check values. The first receive address of your wallet and, if your device or software shows it, the master fingerprint (eight characters). Neither reveals anything about your keys.
2. Send a small amount to that address.
3. Reset the device. Afterwards it is empty.
4. Restore the wallet using only your metal backup, not the card you used during setup. With the passphrase, if you have one.
5. Compare. Same first address, same fingerprint, small amount visible: the backup is correct. Only now do you transfer the rest.

Some devices have a check function that compares your words without deleting anything. That is a good intermediate check, for example after a move. It doesn't fully replace the full test, because it doesn't show that your passphrase and your address type are right.

The emergency letter: short and without the words

The letter has to work without you, even for someone who has never dealt with bitcoin. What goes into it:

• that there are bitcoin, roughly how many, and that they are not at a bank
• which hardware wallet and which software you use
• where the metal backup is, and whether there is a passphrase and where it is
• the address type, for example "Native SegWit", and the master fingerprint
• a person you trust who can help with the recovery
• the sentence: "Never enter the words into a website and never tell them to anyone on the phone."

What does not go into it: the words and the passphrase. The letter may fall into the wrong hands without anything happening. How to keep letter, will and keys cleanly apart, how heirs proceed and what to consider for tax is shown in the article How to pass on bitcoin.

The checklist

The most common mistakes

Seed and device in the same safe. The most common setup and the most dangerous. Anyone who opens the safe, or forces you to open it, has everything.

Never tested. One word miscopied, words 13 and 14 swapped. It only shows when the device breaks, and then it is too late.

Passphrase only in your head. After five years, an accident or in old age it is gone. And it certainly dies with you.

A photo or cloud copy "just to be safe". Then your key sits on a device connected to the internet and with every service that backs up your photos.

A manufacturer-specific backup format without a note. Some devices offer Shamir backups under SLIP-39. They are not interchangeable with normal BIP39 words and can only be restored with devices that support SLIP-39. That has to be in the letter.

Address type not written down. Heirs restore with the right words and still see zero, because the software expects a different address type. One line in the letter prevents this.

Outdated letter. New wallet, new device, safe deposit box cancelled, but the letter still describes the old setup. Every change to the setup is also a change to the letter.

Too many parts. Three plates, two passphrases, a split seed in five places: the more complicated it is, the more likely the recovery fails because of you or your heirs. And a seed is never simply split in halves. If you want more security, use multisig instead of home-made solutions.