Bitcoin Holder’s Biggest Nightmare: How To Recover Funds In A BTC Wallet In A Few Simple Steps
Drafts (291)A Bitcoin Holder's Biggest Nightmare – How To Recover A Bitcoin Wallet In A few Simple Steps
One of the worst nightmares for any HODL-er of Bitcoin is the idea of losing it or being locked out of your digital wallet. For the nightmare scenario for Bitcoin investors, it happens more frequently then any of us care to consider.
This is according to a recent study conducted by the analytics company – Chainalysis. The study found that anywhere from 2.78 to nearly 3.79 million Bitcoin becomes inaccessible to their users or permanently lost, meaning billions of dollars in investments are lost through a simple mistake. For the total circulation of Bitcoin out there at the moment, that is one out of every five.
This truly hammers home the need for users to take some steps in order to secure their crypto wallet once they have bought and stored their Bitcoin.
Here are some fundamental lessons to take into consideration when storing your Bitcoin, and ensuring your Bitcoin doesn't fall victim to a forgotten password or locked wallet.
Be the 4 Out Of 5 – How Not To Lose Your Bitcoin
If you have concerns about storing and subsequently storing Bitcoin, or just want a refresher course to make sure you're doing asset storage right. Here are some important principles to bear in mind:
Firstly – make sure that your wallet is fully encrypted with a challenging password that you can still remember
Second – Ensure that, once you have the Bitcoin wallet encrypted, that you back it up in order to prevent any unnecessary losses. Having and/or creating a back up for your wallet is paramount so as not to suffer critical hardware or software failures, preventing an avoidable loss of Bitcoin.
Next – be sure that you have these backups available from several locations as opposed to just one. These can be via a paper wallet, USB, even a CD.
Finally – every time that you decide to back up data, including information from your existing wallet.dat file, be sure that you follow it up with a backup of your wallet.
Initiating a backup for your wallet doesn't have to be challenging either, you can use one of the following to do it with relative ease:
In order to further ascertain the best kind of backup solution, you need to select the one that best developed for the kind of wallet you're using. The vast majority of wallets out there make use of the third – BIP Mnemonic Seed Phrase – as the most common one.
BIP39 Mnemonic Seed Phrase – Restoring Your Bitcoin Wallet With it
There's a reason why so many people make use of the Mnemonic Seed Phrase for their Bitcoin Wallets is because it provides an effective system for backing up and restoring funds. What these seed phrases often entail is a digital sequence of 12, 18 and even 24 words which make up a single phrase.
It's not just soft digital wallets that make use of this kind of solution, but Hardware wallets too. This includes a series of hardware backed wallets like Ledger Nano and Trezor, which provide the user with the ability to choose Mnemonic seed phrase as their recovery option.
Whether it is a soft or hard wallet that you're trying to back up or restore, a seed phrase is made up of a certain number of words which were randomly generated and comprise a single randomized phrase. You need to make sure that these words are written down in order and held in a secure place. Specifically somewhere off the internet like on a piece of paper that you can store off-grid. Just so long that you never have to put it at risk by putting it on the internet.
It is for this reason that a good number of people decide to write down these seed words on paper, then laminate that same paper, so as to allow these phrases to remain legible over the long term.
Using the Mnemonic Seed – An Example Of How you Can Restore Your Bitcoin Wallet
Now that you have this phrase written down on that piece of paper, this is the only kind of backup that you will have in order to restore any hardware wallet that you may have lost, had stolen or accidentally destroyed. All you'll need to do is click on the ‘Recover Wallet' option (if you're using Trezor wallet) before typing in your seed phrase.
Whatever arrangement or sequence that these words take from either the Ledger / Trezor devices make use of BIP39. This means that they are fully compatible with any kind of wallet that is also using BIP39 in order to regain access to your digital wallet.
When it comes to wallets, whether they're online or through a desktop, they operate in the same way. The majority of these wallets provide you with a series of twelve randomized words for your seed phrase. These words are dire for regaining access to your wallet. As a result, if you lose access to your funds and consequently, your funds, you can easily restore access by importing this Seed phrase.
Restoring Your Wallet By Using Wallet.dat File
In some instances, there are desktop wallets that use the restoration application file known as Wallet.dat as an alternative to seed phrases in order to store their private keys and other information as it relates to their wallet.
While this depends on the kind of operating system that you use, you should be able to gain access to this file through one of the following locations from your OS:
- %APPDATA%\NameOfWallet/ – For Windows OS
- ~/.NameOfWallet/ – For those using Linux
- ~/Library/Application Support/NameOfWallet/ – For Mac OSX
Once you have managed to locate this file, the process of backing up your wallet is pretty straight forward. All you need to do is copy this file over to another device, this can include other computers or an alternative external hard drive.
For restoring your wallet – you'll need to copy and paste the backup over the wallet.dat file that you already have within the installation folder for your wallet. You will need to bear in mind that this will result in the wiping of your already existing data from the file, so please make sure that you're not losing anything by overwriting the existing file.
So, In Summary
It is always important to have a plan B for every kind of situation, especially where your wallet comes into play, no matter how much in the way of Bitcoin you have.
Unlike any other kind of asset, stock, bond or commodity from a financial institution, there is no such thing as cryptocurrency insurance when you're looking at a minor or major loss. As a result, make sure that you're taking all the steps necessary to ensure they are secure.
You and you alone are the ones responsible for the storage and security of the coins that you own. And the only way that you can make sure that that is something that is uncontestable, and that is by having a backup plan in place.
And for a plan B, it is a simple solution – and that is just writing down a series of words, or just copy and pasting a file, and that is all you'll need to do, in many instances.
The time to act is now, back up your digital wallet and safeguard the Bitcoin that you have in there. With those kinds of simple to do measures for security in place, you can avoid a lot of future grief.