Bitcoin, Ethereum, Chainlink, (SUSHI?) and many more coins are increasingly more valuable every day so it’s not uncommon if many traders are looking for a safer place to hold their coins. An obvious option would be to move the coins from the exchange to a wallet of choice, preferably a hardware wallet or a cold wallet. Many would create an account, sends all their coins to the wallet and think that it is safe as long as their wallet is safe. However, that isn’t the case.
Keeping the wallet safe doesn’t necessarily lead to your coins being safe if you do not pay attention to the mnemonics, the 12 (or 24) words you get when you create the wallet. If you do not understand why, this is because you must first understand how wallets are created.
How is your wallet created?
Creating a wallet is simple but understanding the concept behind it will make you much better at securing your coins. When you set up a new wallet, you will have to create an account name. The system will generate a set of 12 or 24 words for you which you will need to write down. After you wrote it down, you will have to verify it by listing the words again for the system to validate. Once that is done, you are left with your new empty wallet.
This set of 12 or 24 words is actually your private key that the system has generated for you. A private key is unique to each wallet and works as a key for when you wish to transfer coins. Therefore, whoever has this key has the access to your crypto. We call the 12 or 24 words, mnemonics.
Most wallets will say that mnemonics are the only back-up to your account, in which it really is. If you lose or break your wallet, you can use the mnemonics to recreate your accounts again and your coins will be there.
Your coins are actually not in the wallet…
To answer the question left from the beginning of this article: where really are your coins? The answer is that, it is actually on the block chain. However, no one can touch the block chain so it is actually in the mnemonics. The reason is simple; the mnemonics allows anyone the ability to access your coins by recreating your wallet.
Imagine if someone were to steal the ELLIPAL Titan Cold Wallet from you, they will not be able to access your coins without knowing your password. Hacking isn’t possible as the ELLIPAL Titan is both air-gapped and anti-tamper. On the other hand, if someone finds the paper you wrote your mnemonics in, they will recreate your wallet on their own phone or cold wallet device and sends your coins away.
A fun fact is that, most people didn’t lose their coins because the wallet is not secure. Most of the time, it is a user error of losing their mnemonics to thief or scammer. Therefore, keeping the mnemonics secure and not giving it to any strangers is very important.
What is the solution?
Obviously, the solution isn’t to get rid of the mnemonics unless you can accurately remember it for years to come. There will be a day you will need to back-up and recovery your coins. Without the correct mnemonics when your wallet is lost or broken, your coins will be lost forever.
The best solution is to properly secure your mnemonics. How you wish to do this depends on you. Some users puts it in a bank, some tattoos it on their body etc. This might sound extreme but when the mnemonics represents a big part of your wealth, securing it is top priority.
For those who aren’t ready to go to the extreme, ELLIPAL offers an easier yet, very secure way to keep your mnemonics safe.
Use the ELLIPAL Mnemonics Metal to keep your mnemonics in metal. It is water proof, fire proof, won’t fade away and can be kept forever. Lock it up with a good lock and store it somewhere safe and you can rest easy knowing your coins won’t be stolen.
If you go ask advice from an expert or a serious trader, keeping your mnemonics in metal is what they will agree to. Most will let you know that holding your coins with a secure air-gapped cold wallet and backing up the mnemonics with a mnemonic metal is the best security combination.