Hardware wallets and seed phrases: the basics of keeping crypto secure
If you hold cryptocurrency, the question of who controls the keys comes first. On an exchange, the platform holds them for you. With a self-custody wallet, you hold them, which brings independence and also full responsibility. This guide explains the basics of hardware wallets and recovery seeds. It does not suggest buying or selling anything.
What a hardware wallet is
A hardware wallet is a small dedicated device that creates and keeps your private keys away from your everyday computer or phone. When you send crypto, you confirm the transaction on the device itself. Malware on your computer may still be able to show you misleading information, so read what the device screen displays, not just what the app shows. Trezor is one of the manufacturers in this category; others exist, so compare how each one works and what it supports.
The recovery seed is the real key
During setup, the device generates a recovery seed, a list of words that represents the random number from which your keys and addresses are derived. The device is replaceable. The seed is not. Anyone who has the seed can take your funds, and if you lose both the device and the seed, nobody can recover your wallet for you, including the manufacturer.
Storing the seed
- Write it on paper or on a purpose-made backup card, legibly, at setup time.
- Consider a metal backup if you worry about fire or water damage.
- Think about more than one copy in separate, secure places, such as a home safe or a bank box. If you use a bank box, check the bank's access rules.
- Never store it digitally: no photos, screenshots, notes apps, emails or cloud folders.
- Check your copies from time to time for wear or damage.
- Plan for the unexpected. If something happened to you, could a trusted person find and use the backup? Discuss options with a professional if the amounts are significant.
Common ways people lose money
- Fake support. A genuine manufacturer will not ask for your seed. Anyone who does is attempting theft, however convincing the message looks.
- Typing the seed into a website or app. Only enter it on the device when it asks during a genuine recovery.
- Fake or tampered devices. Buy from the manufacturer or an authorised reseller, check the packaging, and never use a device that arrives with a pre-written seed.
- Phishing links. Type the official address yourself or use a bookmark you made, and be wary of sponsored search results.
- Rushing. Scammers create urgency. A pause costs nothing.
Good habits
- Test your backup with a very small amount before relying on it.
- Keep device firmware and the companion software up to date, downloaded from the official source.
- Verify the receiving address on the device screen before confirming.
- Consider a passphrase or multi-part backup features only after you understand them well, since mistakes there can lock you out permanently.
Is self-custody for you?
It depends on your comfort with taking responsibility for backups and security. For some people a regulated exchange is simpler; for others self-custody fits better. Neither removes the underlying price volatility of crypto assets.
Note: this content is informational and is not financial advice. All investment and crypto activity carries risk of loss, including the loss of everything you put in.
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