HOW TO STORE BITCOIN SAFELY?

GLOSSARY OF TERMS

Seed phrase – a set of 12 random words that represent access to your funds

PIN – a sequence of numbers that unlocks your device. The PIN only protects the hardware wallet and you don’t need it when importing a seed phrase to a new device.

Passphrase – an additional phrase that can contain letters, numbers, characters and spaces, giving you an extra layer of protection for your digital wallet.

Private key – a set of letters and numbers that represent access to your funds. For convenience, the private key is mostly expressed as a seed phrase and you do not need to know it.

Public key – a string of letters and numbers from which the wallet address is generated.

Wallet address – the address your device displays when you want to receive funds in your digital wallet. The device changes addresses for higher privacy, but you can use a single address multiple times. The sum of the balances in all the addresses belonging to your public key represents your bitcoin wallet and therefore your bitcoins.

BIP-39 – a bitcoin protocol standard that allows you to express your private key in the form of 12 random words (seed phrases).

Safe 3 – a hardware wallet that works according to the BIP-39 standard

Trezor Suite – one of the programs that interface between your device and the assets on the bitcoin network. Your device communicates your transaction to the network via the app, which allows you to send your funds elsewhere.

To help you understand the concepts described, see the figure below.

Trezor Safe setting 3:

• About the Trezor Safe wallet 3: https://trezor.io/trezor-safe-3

Safe 3 is currently the wallet with the best user experience and the best price. It contains all the essential elements to ensure security. It connects via the USB-C to USB-C cable included in the box. The wallet has no battery, which extends its lifetime. It currently only connects to computer programs and has no mobile app support. The Trezor Suite Lite mobile app only allows you to monitor your balance and receive coins in your wallet, while sending from your wallet is only possible with a desktop application (Trezor Suite, Sparrow Wallet and similar).

• Wallet replacement:

If you lose or break your wallet, you can replace it with any other device that follows the BIP-39 standard (most wallets on the market). Order your wallet via the official website of the seller or the Bitcoin Shop in Slovenia. It is recommended to buy the same or a similar device from the same manufacturer, as you are most likely used to their software and user experience. Devices from other manufacturers have their own program or app for accessing the wallet, but most wallets can also be accessed using the open source Sparrow Wallet program, which is not tied to a specific manufacturer but requires more technical knowledge.

• Install Trezor Suite: https://trezor.io/trezor-suite

Follow the programme instructions. Download the software only from this website and nowhere else.

• Connection and initialization:

Connect Trezor Safe 3 to your computer and start the Trezor Suite software. Follow the on-screen instructions to initialize the device.

• Install the software:

The first time you start up your device, it may require a firmware update or installation. Follow the instructions to complete this process.

Creating and storing seed phrases:

• Generating seed phrases:

To generate a new seed phrase* in Trezor Suite, select the “Create New Wallet” option. During setup, Trezor Safe 3 will generate a seed phrase consisting of 12 words. These words will be displayed on the device screen. Follow the instructions on the device to print the words in the correct order and re-enter them into the device when prompted to do so. This will check that you have recorded the words correctly. Never store words digitally and always keep them out of reach of others.

*The seed phrase is randomly generated from a set of 2048 English words according to the BIP-39 standard. The device contains a random generator specialised in entropy. This means that it achieves the highest level of randomness, making your seed phrase impossible to guess again. Never try to come up with the seed phrase yourself, as the human capacity for entropy is surprisingly low and your funds will most likely be stolen. There are as many possible combinations of the seed phrase as there are atoms in the known universe.

• Importing a seed phrase from the old device to the new one:

If you already have a seed phrase from a previous wallet and want to import it to the new device, select “Recover Wallet” instead of the above option, then follow the instructions. Only enter the phrase via the device and never via the computer, even if the program tells you to, because in that case it could be a virus trying to get your phrase.

• Correct spelling:

Transcribe the seed phrase accurately on the paper card provided or on another secure medium. Make sure that the words are written in the correct order and without mistakes. Unlike a passphrase, a seed phrase does not distinguish between upper and lower case letters. If you are ever unsure which word you have written on the slip because of a fade or a scribble, you can check it in the “BIP-39 wordlist” at one of the links, for example:

https://www.blockplate.com/pages/bip-39-wordlist?srsltid=AfmBOopwlyn8fsJkwauF4Zbiz8hOJFfeMmKiMsW1ULHFP-TRVHem26IG

• PIN code:

The device will also ask you to create a PIN code to unlock the device, similar to a phone or computer. The PIN only protects the device itself, and not other copies of the seed phrase. Store the PIN securely, you can also write it down on your phone or computer, but do not hint at what it unlocks.

• Safety storage:

Keep the seed phrase in a safe place that is inaccessible to other people. It is essential to store the phrase offline, for example on paper or a metal plate, and avoid digital storage. It is advisable to make several copies and keep them in several locations, safe from water, moisture or fire. You lose the funds forever when you lose all copies of your words, including the device.

Use of passphrases:

• What is a passphrase:

A passphrase is an extra layer of security that acts as the “13th word” of your seed phrase. It is not a PIN that unlocks your device, but a special word that unlocks your digital wallet where the bitcoins are. It allows you to create hidden wallets that can only be accessed by entering the correct passphrase.

It is important to remember that each passphrase is in fact correct and will open one of the hidden wallets that belong to that passphrase. If you do not enter the passphrase of the wallet you have coins in, the software will open an empty wallet without your coins. So make sure you enter the passphrase exactly as you entered it when you created it. Please pay attention to case and spaces.

Basically, after entering your PIN, the wallet opens a wallet consisting of just the seed phrase. This wallet is accessible to anyone who knows your seed phrase. Passphrase-protected wallets, on the other hand, are only known to those who have access to both the seed phrase or the device PIN, and the passphrase.

If you use a passphrase, you will need to enter it using Trezor Suite each time you unlock your wallet after entering your PIN. There are two ways to enter your passphrase:

1. Trezor Suite basically offers you to enter your passphrasevia your computer
2. Under the passphrase entry box, you can choose to enter your passphrase on your device, which is much more secure and recommended. This way, you enter your passphrase on Trezor Safe 3, not on your computer.

• Using multiple passphrases:

From a single seed phrase, you can use a passphrase to create any number of wallets that cannot be accessed without the corresponding passphrase. For example, you can store funds separately for each family member by setting a passphrase for that family member and sending funds to that wallet. In this way, a single device with a seed phrase can store any number of hidden wallets secured by their own passphrases. Each one should store its own passphrase, and the seed phrase should be stored somewhere separate. If necessary, entrust the location of the seed phrase to family members. To help you get an idea, see the picture below.

• Set your passphrase:

Enable the passphrase function in Trezor Suite and enter any word or string of up to 50 characters. Passphrases are case sensitive and space sensitive, so be precise when entering them. The password acts as an extra layer of protection to protect you, especially against physical theft of the seed phrase, as it will be very difficult for a thief to guess it without a special program trying to guess your passphrase by force. The device itself is inherently secure because it is protected by a PIN code that is very difficult to guess, which makes the passphrase the primary protection for the physical seed phrase that you keep as a backup of the device. For this reason, it is advisable to keep the passphrase separate from the seed phrase, and to have multiple copies of the seed phrase stored in different locations so that you can access your coins even if one of the copies is potentially stolen. In the event of theft, transfer your funds immediately to the wallet address with the new seed phrase.

• Passphrase storage:

Remember the passphrase or write it down and save it separately from the seed phrase. If you forget or lose the passphrase, you will not be able to access the funds in your hidden wallet. In an extreme case, the passphrase can potentially be guessed by brute-forcing via specialised hardware, but this does not apply to the loss of the seed phrase, which cannot be guessed. When you create a passphrase, Trezor Suite will also list best practices that should be followed. It also warns you that the wallet you opened with the passphrase is empty, hinting that you may have entered the wrong passphrase. If you already have funds in your passphrase wallet, try re-entering the passphrase in the correct way to open the correct wallet.

Restoring your wallet:

• Loss or damage to the device:

If you lose or damage your Trezor Safe 3, you can recover your wallet on a new device using a seed phrase and passphrase. On the new device, select the option to restore your wallet and enter the seed phrase and passphrase to regain access to your funds. The devices are compatible with each other and follow the same standards, so it doesn’t matter which device you use to access your funds, as they are located on the network and not on the device. The device is just one copy of your “key” or access to your assets on the network. This way you can have the same seed phrase restored on multiple devices at the same time, as if you had multiple identical keys to your house.

Additional safety tips:

• Regular checking:

Periodically check that you have a correctly spelled seed phrase by performing a dry-run in Trezor Suite, where you check the correctness of the seed phrase without actually restoring it.

• Multiple copies:

Consider creating multiple copies of the seed phrase and passphrase and storing them in different secure locations for additional security. Engraving the seed phrase in a titanium or at least steel plate is highly recommended, as it is virtually indestructible and can withstand the highest temperatures or contact with water. Plates are available from the Bitcoin Shop or elsewhere under the search string “BIP 39 titanium plate”.

• Avoiding digital storage:

Never store seed phrases in digital formats such as photos, text files or in password managers, as this increases the risk of theft. The charm of a hardware wallet is that it expresses access to your coins in physical form, so the seed phrase is never in contact with the internet. The machine only transmits signed transactions to the software so that you can send your funds to others, never revealing the seed phrase itself.

A final note: for the full process of buying, transferring and storing bitcoins, you can read the How to buy bitcoin safely guide at https://bitcoin-shop.si/kako-varno-kupiti-bitcoin/, which we created at the Bitcoin Shop.