Crypto Wallet Backups: Are You Truly Ready for Self-Custody?

What Is Self-Custody?  

Not everyone prefers to store their crypto through a self-custody wallet, and it might not always make sense.

Generally speaking, there are two ways to store your cryptocurrencies: custodial and non-custodial.

When you choose the first, you use an intermediary, such as a crypto exchange or a broker app. Using these services is easy – you just need to set up an account and go through a KYC process, which involves providing some basic personal information.

What if you don’t want to share personal info or you have trust issues with crypto exchanges?

Here’s where self-custody comes in.

Choosing this option means you’ll need a crypto wallet. There are two main types of wallets: software wallets or hot wallets (like MetaMask or Trust Wallet) that work online, and hardware wallets or cold wallets (like Trezor or Ledger) that are special devices working offline.

Trezor Safe 5 hardware wallet connected to a laptop. Source: trezor.io 

Alt text: Trezor Safe 5 hardware wallet connected to a laptop- The Coinomist 

What’s the Difference Between Exchange and Self-Custody Wallets? 

When you choose a custodial wallet, you don’t need to know the details of how everything works. You likely check the exchange's history, user reviews, and overall convenience before deciding whether to trust it with your assets. You just know that you can log in to your account, view your wallet, and make trades.

Exchanges typically recommend security measures like Two-Factor Authentication (2FA) to protect your funds.

But how the wallet works on a technical level may not concern you.

Things to Know About Self-Custody Wallets

If you want to know more or opt for self-custody, you need to understand two key elements of a crypto wallet: public and private keys. Public keys are your public wallet address, visible in blockchain transactions.

Private keys are the part that needs to be a secret. They’re used for signing transactions and proving wallet ownership.

In a few words, a private key generates a signature that the network verifies to confirm the transaction is legitimate. 

For example, a private key may look like this:

5J3mBbAH58CpQm7DGivA8HZXP2KR8D6cFYRWHyNnzYRAUdyWcRz

Don’t worry, this is not someone else’s private key. This is a random example and not associated with any wallet.

Without the private key, you can’t access or manage your assets.

Therefore, if someone else knows your private keys, they can take control of your assets.

The process of digital signing and verification using public and private key cryptography. Source: “Blockchain for Cybersecurity in Cyber-Physical Systems”

Alt text: a sender signing a document with their private key, and a receiver verifying it with the sender's public key – The Coinomist 

Custodial wallets store these keys on behalf of users, who might not even be aware of what a private key is.

It’s a different story with self-custody. Here’s what you need to know about this type of crypto storage:

• Full control over your assets: You manage your own private keys, meaning you need to take care of them and understand the basics of how they work.

• No third parties involved: Unlike custodial wallets, there’s no exchange or financial institution holding your assets for you.

• Higher security: With self-custody, only you can access your funds. If you use a hardware wallet, they stay offline, protecting them from online threats.

• Backup responsibility: You must securely back up your private keys and have a recovery plan in place.

• More privacy: Self-custody allows you to manage your crypto without revealing personal information or relying on a third party.

How to Back Up Your Private Keys 

You may have heard stories of people losing crypto assets after they couldn't access their wallets anymore. One of the main reasons this happens is because they didn’t properly back up their private keys. 

Protecting your private keys starts with something called a seed phrase.

A seed phrase is a series of words (usually 12 or 24) that acts as a backup for your private keys. It’s the key to restoring access to your wallet if something goes wrong –  whether you lose your device, forget your password, or if your device breaks or gets damaged. 

We’ll ​​break down several options for backing up your data: 

1. Write down your seed phrase on paper

So, this is simple. You take a piece of paper and copy the seed words on it. Then you make sure that everything is written in the correct order and that there are no spelling mistakes and put the paper in a safe or somewhere secure. The important thing here is to remember the location of the paper. For this purpose, you may want to make 2 or more copies.

An example from the Exodus hardware wallet displaying a 12-word seed phrase for recovery. Source: Exodus Movement

Alt text: Exodus hardware wallet displaying a 12-word seed phrase, with the words listed in numerical order – The Coinomist 

2. Make a digital copy 

You might have thought about the easiest option: taking a photo of your screen or making a screenshot. Better not do that, though. Sure, it's quick and convenient, but it's also risky. What if your device gets hacked, or someone gets into your account? Now, all that info is out in the wild, and that's not ideal. Even if you're keeping it on your own device or on notes, for example, there's always the chance of losing access or getting hit with malware that compromises your data.

3. Split the seed phrase and store it digitally

A better option than a screenshot but still not ideal. You can split the seed phrase and send it to yourself or trusted people through secure messengers that use encryption. It's still not 100% foolproof. Someone could gain access to your messages or even your account.

4. Just remember it if you have a phenomenal memory 

It might sound tempting, but keeping your seed phrase in your head is risky. You could forget it, mix up the words, or even accidentally reveal it to someone else – who knows, maybe they'll hypnotize you. Stress or distractions could also cause a lapse in memory. It’s better not to rely on your memory alone for something as crucial as your crypto assets.

5. Use metal backups 

If you’re looking for something more durable than paper or digital backups, metal backups are solid and practical. They’re also more secure than handwritten paper. Privacy Pros’ Billfodl is one of the most popular metal backups. To protect your recovery phrase with it, simply insert tiles with letters into the wallet’s rows.

Why Metal Backups Are a Smart Choice

So, if you're looking for something that can actually stand up to tough conditions and last for the long run, metal backups are the way to go. Paper and digital storage? They can easily get ruined by fire, water damage, or even hacks. But metal? Totally different story.

Steel backups give you a way stronger level of security. They can survive fire, disasters, hacks, and pretty much anything life throws at you.

Billfodl's steel wallet – backup solution for crypto wallets. Source: privacypros.io

Alt text: Billfodl steel wallet surrounded by flames – The Coinomist 

Before you get a metal backup, though, check if it’s compatible with your wallet. Billfodl, for example, works with pretty much all the big wallets out there, whether it’s a software wallet or hardware wallet that uses the BIP 39 seed phrase standard. We're talking Trezor, Ledger, MetaMask, Exodus, Trust Wallet, Atomic Wallet… the list goes on.

On the Privacy Pro website, you can see how this works and get a discount on your first purchase.

Bottom line: take care of your wallet security, no matter how you do it. A solid backup could make all the difference when you need it most.