BEST Crypto Safety Guide 101 (Keep Your $$ SAFE with Passphrases)

Posted 17 mins ago | by Catoshi Nakamoto

If you have just started your crypto journey or maybe just crypto curious there is a phrase you’re going to hear it all the time: not your keys, not your crypto. All cryptocurrency has a public address that can be shared with anyone for receiving crypto; and a private key that gives access to move funds OUT of your digital wallet; THAT should never be shared. Proper use of seed phrases and passphrases can help secure private keys. What is a passphrase though, and how do I create one? How do passphrases fit in with seed phrases? If you’re asking this question about your own portfolio security, you’ve come to the right place.

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Let’s get it.

Welcome to Bitboy Crypto, my name is Ben. My mission is to help you find financial freedom through crypto assets. If that sounds good, make sure to click that subscribe button and don’t forget to tap that little bell.

Let’s define some terms first. Private Keys, Seed Phrases and Pass phrases.

PRIVATE KEY: It’s backbone of crypto assets. It’s the base layer 256 bit randomly generated code of numbers that is made when you make a digital wallet. They look like THIS. But if you had to type that number in to retrieve your Bitcoin, Litecoin or any other crypto asset, that would be very tedious. So the developers made a shortcut that retains the security of a privatekey but is easier to manage.

The SEEDPHRASE is a collection of 12 to 24 words that represent your private key. It can be custom made or randomly generated from the wallet itself. It’s something you should write down on a piece of paper and keep it stored in a safe spot. Most crypto experts suggest memorizing it as well. Either way. If you lose it. Your assets will be gone forever.

PASSPHRASES: a heightened level of security similar to two-factor authentication that you can choose to add to your seed phrase. Passphrases are also called “seed extensions”, “extension words”, “extension phrases”, “13th word” for twelve-word seed phrase wallets, and “25th word” for twenty-four word seed phrase wallets. Whatever it’s being called, a passphrase is an extra layer of security added to your seed phrase, that the user creates themselves.

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We know that means leaving coins on exchanges or storing them in custodial wallets, which gives others ownership of private keys, allowing them to control how much of our crypto we can move, when, and for what cost. It’s a little like keeping a genie in a bottle: giving final say on something as powerful as crypto to someone else. (*cut to “phenomenal cosmic power” scene in Aladdin¹*). Passphrases can be added to your wallet configuration. Once you set a passphrase, it has to be entered every time you run your wallet. This is unlike the seed phrase, that you write down when you configure your wallet, store it somewhere safe and only use it when you need the wallet to be restored.

By default, wallets leave passphrases blank, and some don’t support passphrases at all. To add a passphrase to a Leger or Trezor wallet for example, passphrase configuration can be found in advanced settings. Enter any passphrase you want, and make sure you remember it.

Choosing a good passphrase can be tricky. They should be complicated and randomized, but easy enough to remember. A conventional passphrase like “to the moon” and don’t get me started on “diamond hands”, is easy to guess especially considering there is password cracking software out there, and hackers are using it. Your favorite movie quote or song lyric? Same applies. They’re too easy to guess.

A good passphrase should be strong and memorable, and be at least four words in length. Wallet platforms allow different character length limitations. Trezor allows fifty characters, while Coldcard and Leger allow a hundred. You have to consider how often you will log in to your wallet, and how likely it is that you will remember the password. It’s always best to back up the password with pen and paper, and keep it safe in a fireproof vault. There are also many encrypted digital password managers that provide a safe way to store your passcode.

No matter what you choose as your passphrase, and how you choose to store it, remember to assess the risk if you forget or lose it, and act accordingly.

Once you set a passphrase, a wallet can no longer be recovered with a seed phrase alone. This means that if you lose your hardware device or something happens to the phone² or computer where a software wallet is stored, you’ll need the seed phrase and the passcode.

Also, when you set a Passphrase and put some crypto into your wallet, you will see your crypto. If you install a second wallet using just the Seed phrase without the Passphrase, the new wallet will show a zero balance, even if there’s crypto in it. This could lead some to panic, especially if you’re new to wallet configuration and security. Once the passcode is set, it’s necessary for all wallets to be configured with the same Seed phrase and Passphrase.

This is why a passphrase is an excellent tool, but it can also be a risk. Because a passphrase is an added layer of security that only you know, it can quickly become a single point of failure that could allow all the crypto in that wallet to be inaccessible, forever. This is true also with the seed phrase, but many users are now accustomed to storing seed phrases properly when they configure their crypto wallets. With a passphrase, the user may assume that they will remember the phrase, but if they don’t back it up properly by writing it down and storing it somewhere separate and offline, it could spell trouble. There’s no “forgot my passphrase” button. If it’s lost or forgotten, so is the crypto.

Do you need a passphrase? If you have a lot of crypto and you’re very careful with recording and storing its backup information, it might be a good idea. If you’re the type to store seed phrases meticulously on a steel plate or in a fireproof safe, a passphrase can be an added level of security that you might want to use. If, on the other hand, you have seed phrases written down and stored in forgotten places, well, a passcode might add another possibility for crypto to be lost forever. Don’t worry, I know you’re better at safekeeping your crypto than that, but there have been plenty of stories of people losing millions to lost seed phrases, keys and passwords.

In a lot of these cases of lost crypto, the problem is that when the crypto was initially bought or mined, it wasn’t worth much. It seems less critical to back up a wallet with a few hundred dollars worth of crypto in the wallet, and it usually doesn’t get the same care as, say, a wallet that holds a bitcoin or two. That’s why it’s always best to backup passcodes and wallet restoration information as if the coins are worth a million dollars. Because who knows, some day, they might be.

Passphrases, seed phrases and private keys only work on a non-Custodial wallet, which means a wallet that you own the private keys to. The first indication that a wallet is non-custodial is when you are prompted to record a seed phrase to set up the wallet. A custodial wallet means that someone else has custody of the private keys, like an exchange or custodial wallet platform.

Examples of non-custodial hardware, or cold storage, wallets that store crypto offline are: Exodus, Leger, Trezor, KeepPay, and Cold Card. Examples of non-custodial software wallets that store crypto online are: Crypto.com, MetaMask, Bitpay and Trust Wallet.

Examples of custodial wallets that don’t give users private keys, and no option to create a Passphrase to secure their crypto, are: Coinbase, FreeWallet, Binance, and BitMEX.

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Although less secure, some customers prefer custodial wallets because there is less risk involved in making a mistake, or losing the information needed to restore a non-custodial wallet. Custodial wallets are a great way for beginners to start purchasing and storing crypto. Just don’t forget to use strong passwords and two-factor authentication, like google authenticator to verify login attempts and withdrawals. You can also use hardware security keys with some wallets, like Coinbase. Security keys are encrypted USB devices that can be registered to a Coinbase account, and are small enough to fit on a keychain. Like everything we’ve talked about today, the security key can be lost, so it’s best to register multiple security keys and have a backup. Setting up any two-factor authentication can usually be done in the platform’s security settings.

We stand by: “not your keys, not your crypto”, and prefer non-custodial wallets that give users their own private keys, and allow them to move their crypto, and secure it, in any way they want. This is crypto afterall, a way to have ownership over money in a way that has never been done before.

So let’s review: non-custodial wallet means owning private keys. Private keys should never be shared and represent final control and ownership of cryptocurrency.

Public keys facilitate transactions and verify the digital signature: a wallet address is basically a hashed version of the public key. Both public keys and wallet addresses can be shared with other people.

Seed phrases are generated when a new wallet is created, and can restore a crypto wallet. And finally, passphrases are an optional extension of the seed phrase, created by the user.

Once a passphrase is set up, it has to be entered with the seed phrase in order for the wallet to be restored. Seed phrases and passphrases should be recorded somewhere safe and never be shared. Crypto is about decentralization and self sovereignty. You control your wealth. Not banks. Not governments. Not your great uncle. If you’re watching this video, your ahead of the curve and well on your way to securing your future.

That’s all I got! Be Blessed, Bitboy out.

Source: https://thebittimes.com/best-crypto-safety-guide-101-keep-your-safe-with-passphrases-tbt10232.html?utm_source=blogger_source&utm_medium=blogger_medium&utm_campaign=blogger_cam

Category: Cryptocurrency News

Post by: TheBitTimes.com