Self-custody is currently the best way to keep your Bitcoin secure, provided that you have the time to plan it properly and implement a few best practices. The idea is that you become your own bank and don’t rely on anyone else to protect your store of value.
This sits right in line with Bitcoin’s principle of self-sovereignty and censorship-resistance.
In this article, I’ll describe what I believe is the best setup for self-custody that we have at the moment.
What you will need:
The first item we will need is a tool for cold storage. The “cold” part means that we are keeping the private keys stored in a device that is not connected to the internet. The Ledger Nano X or a Trezor will do that part of the job perfectly.
The next thing we need when working with any hot or cold wallet, is a way to store the backup seed, which contains 24 words. With this seed, you will be able to recreate your wallet should you lose it.
This is as important as your wallet, in fact, I would say it is even more important. If someone gets possession of your wallet, he won’t be able to do anything with your crypto unless he knows the password to that device, but if they get your backup seed they need nothing else to be able to recreate the wallet and transfer all your crypto assets to their own wallet.
And that is why we need to be very careful about how we store this backup seed. Traditionally, the easiest way to store the backup seed has been a piece of paper stored somewhere safe. In fact, cold wallets such as the Ledger Nano come with a cardboard sheet that is prepared for backing up your seed.
However, after so many horror stories of these papers being thrown away, displaced, or simply destroyed in some for or another, it became apparent to serious holders of Bitcoin that a better solution was needed.
Here are some typical scenarios:
I had my seeds written in a paper notebook that I put in my safe which was 4 1/2 feet off the ground. During Hurricane Harvey we got 6.5 feet of water. I had $1 million of [cryptocurrency], now I have nothing.
Enter the Billfodl, a stainless steel device with laser engraved tiles. It serves as secure storage for your backup seed.
Why do we choose something like the Billfodl instead of just writing the seed words down on a piece of paper? There are several reasons:
- Fireproof – Forged to withstand more than double the average house fire.
- Waterproof – Marine-grade 316 stainless steel means it will never rust
- Shockproof – Shockproof up to 1 million volts means serious protection
- Hacker proof – Seeds and keys remain completely offline
- You proof – Unlike a piece of paper, you will never accidentally throw away your Billfodl
The Multishard setup is essential, in my opinion. With the Multishard, you are given 3 single-sided stainless steel units very much resembling the original Billfodl. However, each of these units only stores 16 of the 24 words your seed phrase is made of. Each unit tells you which 16 of the 24 words to load, and after full installation, you will have backed up each seed word twice. Any recovery efforts in the future will require 2 of the 3 devices because that is the only way to know the entire seed phrase.
Anyone with a significant amount of crypto who is relying on paper seeds or any other similar means of backup should consider switching to the Billfodl Multishard setup.
How to Setup a Billfodl
Setting up is straightforward, but make sure you have some time reserved for this procedure, in order to make sure you understand what you are doing and double check everything.
The best way to explain how to set things up is to show you, so just follow this 5 part video tutorial and you’ll be all set.
We can talk of two types of alternatives. There are other devices that help you backup your backup seed securely, with the
This means that in order to transact with your crypto you will need to have multiple signatures that approve the transaction. This could be, for example, a 2-of-3 or a 3-of-5 key setup. This is a good setup however you have to pay these companies monthly for the service.
It might be a good solution for those with very little technical knowledge, institutions or those who absolutely don’t want the burden of responsibility for taking care of their cold storage wallet and seed phrase setup.
Yet another alternative is to set up your own multisig setup using the open-source tool Caravan, which was developed by Unchained Capital. The downside is that this is still quite a new tool, while the cold storage wallet + seed phrase setup has been in use for many years now.
It is true that a hardware wallet device, when used by itself to secure funds, is a single point of failure. Using hardware wallet devices as part of a multisig setup offers greater resilience.
The best value and most convenient setup for most holders of Bitcoin and other cryptos is the combination I mentioned:
The Ledger and the Trezor are the undisputed top dogs when it comes to cold wallets, while the Billfodl is cheaper than competition while at the same time using better materials and making it very easy to set up.
For just $89 for the Billfodl or $199 for the Billfodl Multishard (my recommended purchase), plus the Ledger or Trezor, you will have a very secure setup that is pretty much hacker-proof, meaning you can rest safe with the knowledge that your crypto investment will be there for you tomorrow or years ahead.
Do you have any questions about crypto custody or have explored other setups that I didn’t mention? Let me know in the comments section.