Oh how we have become so accustomed to “backing things up”

Today we will be reviewing the different ways of insuring against the loss of funds from a hardware wallet as a result of external factors. That’s a fancy way of describing a scenario where one unconsciously loses their wallet due to misplacement, theft, or if truly unlucky, something as extreme as a house fire or a wild jaguar attack.

We live in the age of information. With instant messaging, GPS tracking, and cloud storage at the tip of everyone’s fingers, the average person today is wrapped tighter than ever in a safety blanket of reassurance and immediate gratification. When communication is required, one can instant message; when lost, one can use a map app. If someone loses their smartphone — the font of personal information around which modern ease pivots — they are doubtlessly reassured that their data is retrievable from the cloud.

It is only natural that, with widespread access to such modern contrivances, people today conflate convenience with security. Let us further examine this subtle erosion in the instance of the misplaced smartphone (we’ll call it an iPhone). People unconsciously engage in an exchange of security for convenience when they backup their personalized trove of data to the cloud. In this instance, a centralized institution is effectively guaranteeing a full restoration of one’s lost data including photos, messages and apps in return for one’s trust and continued subscription.

With the data being so easy to recover, one can be forgiven for overlooking the gravity of losing it. After all, a commodity that can freely and instantly be replaced can hardly be considered valuable. However, in the digital age, one’s very identity, memories, communiqués, and assets are inextricably tied to the data that they have backed up out of convenience. Only look at the many incidents involving leaked personal messages, pictures, or identity theft in recent years. How did we become so desensitized to this glaring security flaw?

There is a growing rift between the convenience that we have embraced and the security that we have sacrificed to obtain it. The ubiquity of such institution backed insurance plans have created a misguided generation that does not believe that their mistakes have real consequences. The reality, however, is that one’s information is not made more safe by creating more replicas of it; it is just easier to replace. The distinction is between actual security and a contingency plan for failure. This is especially significant regarding your crypto private keys.

When a wallet’s private key is exposed, the entirety of the crypto assets on that wallet are exposed. Unlike losing an iPhone or its contents, there is no government agency or cloud storage company that will restore crypto assets once they have been misappropriated. Private key ownership, unlike access to one’s photos or contacts, is a zero sum game; either you own it or someone else does. When someone creates a backup for their wallet, such as the 24 word recovery seed phrase commonly seen in BIP-39 standard wallets, that person is effectively increasing their private keys’ vulnerability to misappropriation by a factor of two.

“What I want to talk about is backup. With online photos, with online music, you want to make backup copies that way, if a hard drive crashes, if you lose a computer, you have backups of your photos and music, right? That’s a good thing. However, with private keys, you don’t want to have too many backups because in theory, you don’t want to lose your coins. Every time you make a backup, you actually increase the loss, the chance of loss because all it takes is one backup to get into the wrong hands.”

— Bobby Lee | On a CryptoFactor 2 podcast

Of course, there is nothing wrong with creating an informed contingency plan against loss. A backup hedges against uncontrollable things like the hypothetical wild jaguar who bafflingly decided to turn your cold wallet into a snack. If that ever happens to you, no doubt it will come as a great relief for you to have not only escaped with your life but to have continued access to your crypto assets. However, it is important for one to not have any misguided notions on the function and limitations of a backup. Ultimately, a backup mitigates losses to accidents at the cost of increasing exposure to malign actors.

There is an old truism involving not placing all of one’s eggs in one basket. This is especially true when it comes to crypto asset storage. Would it be preferable to store 100% of one’s assets in a wallet and then create a contingency backup for it, thereby creating two copies of it? Or is it preferable to have two wallets each holding half of one’s assets? The latter option compartmentalizes your losses in the event that a malign actor does find access to one set of your private keys, while maintaining the same total surface area of risk. The former option would result in a complete loss of funds.

Some say the sagest advice in life involves chickens.

Well, buckle up because here they come!

Is duplicating your basket of eggs futile?

Andrew Carnegie may have once said, “Put all your eggs in one basket, and then watch that basket.” However, if Andrew were to put all his figurative eggs in one basket, then he would have had to fully safeguard that basket against all kinds of dangers like a fox (or a wild jaguar) in the henhouse or the whole henhouse catching fire. Conversely, if Carnegie opted to create a backup of his basket, he would have found himself in a chicken-or-egg quandary of which basket to prioritize watching. After all, if either one fell into the wrong hands, then surely one can say that Andrew’s chickens, in his folly, had come home to roost! One can never use too many chicken idioms.

Don’t be an Andrew. Bad chicken analogies notwithstanding: spread your assets out into multiple wallets; keep them in safe places, separate from one another, ideally offline and in areas not prone to natural disasters. For a no frills, no nonsense cold wallet, you can do no better than a Ballet wallet to act as one of your multiple egg baskets.

Seriously, do you still not get the analogy?

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About us

Ballet is a U.S. company that provides simple and secure cryptocurrency storage solutions for the global mainstream market. Ballet is the team behind the world’s first multi-currency, non-electronic, physical crypto wallet. The company was founded in 2019 by Bobby Lee and an international team of cryptocurrency industry veterans. Ballet is headquartered in Las Vegas, Nevada in the United States, and has an office in Shanghai, China.

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