{"id":82981,"date":"2018-05-10T09:46:01","date_gmt":"2018-05-10T16:46:01","guid":{"rendered":"https:\/\/www.backblaze.com\/blog\/?p=82981"},"modified":"2021-08-09T11:24:36","modified_gmt":"2021-08-09T18:24:36","slug":"backing-up-your-cryptocurrency","status":"publish","type":"post","link":"https:\/\/www.backblaze.com\/blog\/backing-up-your-cryptocurrency\/","title":{"rendered":"Securing Your Cryptocurrency"},"content":{"rendered":"

\"Securing<\/a><\/p>\n

In our blog post on Tuesday, Cryptocurrency Security Challenges<\/a>, we wrote about the two primary challenges faced by anyone interested in safely and profitably participating in the cryptocurrency economy: 1) make sure you\u2019re dealing with reputable and ethical companies and services, and 2) keep your cryptocurrency holdings safe and secure.<\/p>\n

In this post, we\u2019re going to focus on how to make sure you don\u2019t lose any of your cryptocurrency holdings through accident, theft, or carelessness. You do that by backing up the keys needed to sell or trade your currencies.<\/p>\n

$34 Billion in Lost Value<\/h3>\n

Of the 16.4 million Bitcoin said to be in circulation in the middle of 2017, close to 3.8 million, may have been lost because their owners no longer are able to claim their holdings. Based on today\u2019s valuation, that could total as much as $34 billion dollars in lost value. And that\u2019s just Bitcoin. There are now over 1,500 different cryptocurrencies, and we don’t know how many of those have been misplaced or lost.<\/p>\n

Now that some cryptocurrencies have reached (at least for now) staggering heights in value, it\u2019s likely that owners will be more careful in keeping track of the keys needed to use their cryptocurrencies. For the ones already lost, however, the owners have been separated from their currencies just as surely as if they had thrown Benjamin\u00a0Franklins and Grover\u00a0Clevelands over the railing of a ship.<\/p>\n

The Basics of Securing Your Cryptocurrencies<\/h2>\n

In our previous post, we reviewed how cryptocurrency keys work, and the common ways owners can keep track of them. A cryptocurrency owner needs two keys to use their currencies: a public key that can be shared with others is used to receive currency, and a private key that must be kept secure is used to spend or trade currency.<\/p>\n

Many wallets and applications allow the user to require extra security to access them, such as a password, or iris, face, or thumb print scan. If one of these options is available in your wallets, take advantage of it. Beyond that, it\u2019s essential to back up your wallet, either using the backup feature built into some applications and wallets, or manually backing up the data used by the wallet. When backing up, it\u2019s a good idea to back up the entire wallet, as some wallets require additional private data to operate that might not be apparent.<\/p>\n

No matter which backup method you use, it is important to back up often and have multiple backups, preferable in different locations. As with any valuable data, a 3-2-1 backup strategy<\/a> is good to follow, which ensures that you\u2019ll have a good backup copy if anything goes wrong with one or more copies of your data.<\/p>\n

One more caveat, don’t reuse passwords. This applies to all of your accounts, but is especially important for something as critical as your finances. Don’t ever use the same password for more than one account. If security is breached on one of your accounts, someone could connect your name or ID with other accounts, and will attempt to use the password there, as well. Consider using a password manager such as LastPass<\/a> or 1Password<\/a>, which make creating and using complex and unique passwords easy no matter where you’re trying to sign in.<\/p>\n

Approaches to Backing Up Your Cryptocurrency Keys<\/h2>\n

There are numerous ways to be sure your keys are backed up. Let\u2019s take them one by one.<\/p>\n

1. Automatic Backups Using a Backup Program.<\/h3>\n

If you\u2019re using a wallet program on your computer, for example, Bitcoin Core<\/a>, it will store your keys, along with other information, in a file. For Bitcoin Core, that file is wallet.dat. Other currencies will use the same or a different file name and some give you the option to select a name for the wallet file.<\/p>\n

To back up the wallet.dat or other wallet file, you might need to tell your backup program to explicitly back up that file. Users of Backblaze Backup<\/a> don’t have to worry about configuring this, since by default, Backblaze Backup will back up all data files. You should determine where your particular cryptocurrency, wallet, or application stores your keys, and make sure the necessary file(s) are backed up if your backup program requires you to select which files are included in the backup.<\/p>\n

Backblaze B2<\/a> is an option for those interested in low-cost and high security cloud storage of their cryptocurrency keys. Backblaze B2 supports 2-factor verification for account access, works with a number of apps<\/a> that support automatic backups with error recovery and versioning, and offers an API and command-line interface (CLI)<\/a>, as well. The first 10GB of storage is free, which could be all one needs to store encrypted cryptocurrency keys.<\/p>\n

2. Backing up by Exporting Keys to a File.<\/h3>\n

Apps and wallets will let you export your keys from your app or wallet to a file. Once exported, your keys can be stored on a local drive, USB thumb drive, direct attached storage system, network attached storage system, or in the cloud with any cloud storage or sync service you wish. Encrypting the file is strongly encouraged\u2014more on that later. If you use 1Password or LastPass, or another secure notes program, you also could store your keys there.<\/p>\n

3. Backing up by Saving a Mnemonic Recovery Seed.<\/h3>\n

A mnemonic phrase, mnemonic recovery phrase, or mnemonic seed is a list of words that stores all the information needed to recover a cryptocurrency wallet. Many wallets will have the option to generate a mnemonic backup phrase, which can be written down on paper. If the user’s computer no longer works or their hard drive<\/a> becomes corrupted, they can download the same wallet software again and use the mnemonic recovery phrase to restore their keys.<\/p>\n

The phrase can be used by anyone to recover the keys, so it must be kept safe. Mnemonic phrases are an excellent way of backing up and storing cryptocurrency and so they are used by almost all wallets.<\/p>\n

A mnemonic recovery seed is represented by a group of easy to remember words. For example:<\/p>\n

eye female unfair moon genius pipe nuclear width dizzy forum cricket know expire purse laptop scale identify cube pause crucial day cigar noise receive<\/p>\n

The above words represent the following seed:<\/p>\n

0a5b25e1dab6039d22cd57469744499863962daba9d2844243fec 9c0313c1448d1a0b2cd9e230a78775556f9b514a8be45802c2808e fd449a20234e9262dfa69<\/p>\n

These words have certain properties:<\/p>\n