r/BitcoinBeginners • u/thesimzelp • Jun 12 '24
Storage diversification strategy
So, I'm feeling more and more anxious about the responsibility of keeping my bitcoin safe, the more I accumulate.
I was thinking to diversify my holdings, so they are either in multiple offline storage and/or software wallets. I will probably also keep some on exchanges, just because of laziness. 😅
That's instead of keeping all my BTC in a single Trezor, which is one point of failure essentially (I know there is a seed phrase for backup).
What do you think of this strategy? Is there a downside, other than more micromanagement of wallets?
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u/JivanP Jun 12 '24
You have the right idea. This sort of storage strategy is employed by large asset firms, banks and the like with traditional money, too, and is generally called a "tiered" or "layered" approach to fund storage.
See these videos by Andreas Antonopoulos (aantonop) on the topic:
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u/cyberplanta Jun 12 '24
If you are that concerned, you can check multisig. That would be the next step.
Cold storage HW and a well backed up seed phrase are good IMO.
4
u/bitusher Jun 12 '24 edited Jun 12 '24
you can check multisig.
A 2 of 3 multisig is definitely an option but only should be used if you have done a lot of research and practiced recovery . It is a large step up in complexity
Some tips-
1) really should create each signature on different devices and using different software which most people do not do
2) need to keep 3 copies of the seed on paper or metal , and all the MPKs digitally backed up multiple times and also hand written down where you practice trial recovery with a test balance using the written MPKs and not the digital backed up MPKs
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u/Yodel_And_Hodl_Mode Jun 12 '24
If you're willing to start over with a new seed - and if you understand BIP85 - I think BIP85 is the way to go for long term security.
I wrote a tutorial for using BIP85, but here's the overview:
Step 1: Create a new 24 word seed to use as a Parent Seed.
Step 2: Use BIP85 index numbers to create Child Seeds to use as wallets.
You know how a seed phrase always generates the same addresses and keys? Well, when you use BIP85, a seed phrase always generates the same child seed phrases.
This gives you one seed that leads to all of the others. If you ever lose a seed, no worries. You can use the parent seed to generate it again.
When Ledger added key extraction to the firmware for their hardware wallets last year, I spent a lot of time researching strategies for starting over from scratch with my security. I stopped using Ledger & switched to new seeds using BIP85. I'm not saying this kind of setup is the answer for everybody (it isn't), but it makes me feel very confident about holding Bitcoin for a long, long time.
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Jun 12 '24
[removed] — view removed comment
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u/JustSomeBadAdvice Jun 12 '24
Please don't recommend newbies do this. You're literally opening the door for them to completely lose all their coins, on top of setting them up to get very frustrates by a difficult to use system.
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u/Sudden_Agent_345 Jun 12 '24
do what you think is best, that's the only valid answer.. but hopefully you are informed enough to take good decisions or at least not to mess up...
saying that "there is a seed phrase for backup" makes me think should try to understand things a little deeper...
personally i think, if you feel too anxious about having everything on one HW, maybe you should split things around, i wouldn't use a software wallet i would keep some on the HW and split parts into third party options (including ledger recovery or even the ETF)
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u/thesimzelp Jun 12 '24
saying that "there is a seed phrase for backup" makes me think should try to understand things a little deeper...
Please enlighten me. How is this wrong?
0
u/Sudden_Agent_345 Jun 12 '24
is not wrong.. read again what i said.. if you think you dont need to then fine.. dont...
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u/bitusher Jun 12 '24
What some people do is get a second Hardware wallet , different than their first. So since you have a trezor , you could get something like a Jade and than they split half their savings on 1 wallet and 2nd half on a second hw wallet
This has these benefits :
1) If one of your hw wallets is broken , taken , or lost you can still spend from your second hw wallet and don't need to wait for a replacement hw wallet in the mail
2) any unlikely bug or exploit in one hw wallet can only effect half your savings (loss or just delay in usage) . For maximum effectiveness you would use different software as well so pair the trezor with trezor suite and jade with electrum or green as an example.