Crypto wallet recovery is the process of resetting the private key for a crypto wallet if the device containing the private key is lost, stolen or destroyed. It is particularly important for people who use hardware crypto wallets, which are more prone to theft and destruction than software wallets.
A crypto wallet generates a recovery phrase, which is a string of random words. When the seed phrase is entered into another wallet (in the correct order), it will restore the private keys used to store your cryptocurrency, making it easy to recover your funds in the event of a loss.
Most wallets will also create a backup copy of your seed phrase in the cloud for easy recovery. This backup copy is stored in encrypted form on Google Drive or iCloud, so you can access it anytime you need to. However, this backup is only a fallback, and it doesn’t guarantee your wallet is secure from hackers who can break in and access your account.
In fact, hackers have been able to crack and steal private keys from tens of millions of wallets, according to security researchers Chris and Charlie Harding. These hackers are not confined to Bitcoin, either – about half of the wallets they crack have no coins at all, revealing an increasingly wide range of digital assets trapped on hard drives around the world.
Luckily, these hackers can’t do anything with your coins because they need to have the private key to access them. It’s the same principle as how you would protect a bank account: keep your password safe, not the money in it.
To make this happen, you’ll need to remember your recovery phrase. Some wallets will give you the phrase when you first start using them, but it’s important to always write down this phrase or save a screenshot of it so you can access it again.
You can also store your recovery phrase in a physical safe or safety deposit box or in a hardware wallet, which is a secure way to keep it offline. These are more secure options because they’re not connected to the internet, and can be harder for thieves to hack.
But while recovery phrases and automatic backups can help users protect their wallets, they are a single point of failure for hackers who have access to the cloud services where these backups are stored. This was the case in April, when scammers phished $650,000 worth of crypto from a MetaMask user after obtaining his iCloud credentials.
The best way to safeguard your recovery phrase is to never share it with anyone, even if that means keeping your passwords hidden. You can also choose to make a physical backup of your recovery phrase on paper or in a hardware wallet like a Trezor or Ledger, which will not be connected to the internet and are less vulnerable to theft and destruction.
As with any other type of crypto, recovery phrases can be difficult to memorize if they are long, so it’s important to keep them secret. It’s also a good idea to create multiple backups of your recovery phrase, and to store them in different locations, such as in your home or at a friend’s house.