How to Store Passwords Securely Without Losing Them

Keep your crypto passwords safe & secure — the old fashioned way

If you’re old enough to remember latter day password security, then you’ll remember being told that you should never write your passwords down. However, times have changed, and this is now no longer the best advice — particularly when it comes to passwords for your crypto.

If you lose or forget your password to your crypto wallet then you lose those funds forever — there is no recovery.

We’ll chat about two different password security techniques for the two different types of wallets — hot wallets, and cold wallets. If you remember from our previous piece, a hot wallet is where you can store a limited amount of funds for spending or transfer (in the case it gets stolen) whereas a cold wallet is where you store the bulk of your crypto — funds you definitely don’t want to lose.

Password storage for online exchanges

Passwords for online exchanges will be like a regular password that you set for other sites, perhaps a little more complex, perhaps with mandatory 2-factor authentication build in, via SMS, email, or some other authenticator service.

Funds sitting in your wallet in the exchange should be minimal — this is just a transfer account.

The problem with someone getting into your exchange account via your password lies in being able to view all your transaction history at the click of a button, and perhaps your account details, which may include your identification, real name, birthdate, etc.

With online exchanges you don’t need to worry so much about storing your password for backup. Exchanges will have backup recovery methods in place should you forget your password. If you’re overly forgetful and don’t want to memorize your password then you can use a secure password management app such as LastPass to do the job for you.

Password storage for your seed words

Unlike exchange passwords, password recovery for your cold wallet is impossible if the original is destroyed or forgotten and you don’t have a backup. These days, you don’t need to remember an unintelligible jumble of characters, you have a combination of 12 or 24 words to remember instead. You should memorise your seed words to have access to your wallet when you need it. Even hardware wallets can fail — but if you remember your seed words you can get up and running again quickly.

However, memories do fail. Even if you commit your seed words to memory, one day they may simply disappear from the memory banks. So, how do you keep them safe?

The first thing to remember is that you should never, ever store them digitally. Even if you have a laptop that’s never been connected to the internet, is securely setup and password protected itself, one day it will just not work anymore, and that’s it — your password is probably lost forever.

Instead, you should jot down your seed words on a piece of paper and laminate it. Make sure you’re away from any cameras when doing so. Then this physical item needs to be stored securely — perhaps in a wall safe in your home, or a lockbox in a bank. It is best to make a few copies and store in a few places for inbuilt redundancy.

This article is part of our Getting Started with Crypto Series; follow Academy’s medium page for more articles like this.