Safety ain't sexy,
but nothing matters more.
— A Fact
I wrote Five Dollar Wrench to help people keep themselves and their Bitcoin safe. I hope to do this by telling a story that makes people think about the responsibilities that come with Bitcoin ownership.
Here are a few things I wish more hodlers understood:
Social engineering attacks are real, and they’re preventable. These attacks will surely become more common and more sophisticated. The easiest way to protect yourself is secrecy. A thief can’t steal what a thief doesn’t know you own. Whether you own vintage baseball cards or Bitcoin, keeping it secret helps keep it safe. If you use a hardware wallet, keep that secret too.
Bitcoin is on the blockchain. It’s not on your phone or your computer. It’s not in your hardware wallet either. And it is not in an app. Your wallet holds the keys needed to access your coins. When your wallet shows your Bitcoin balance, it does this by looking up your addresses on the blockchain. Coins are on the blockchain.
The words in a seed phrase are entropy. In other words, they’re your part of the math that generates all of the addresses and keys in your Bitcoin wallet. This is why seed words are random. Being random prevents anyone from being able to guess the entropy used to generate your wallet.
You can recover your wallet on a new device by entering your seed phrase. This works because, by entering your seed phrase, what you’re actually doing is restoring the entropy used to create your wallet. This also means anyone who finds your seed phrase can restore your wallet too, because they found the entropy used to create your wallet.
Your seed phrase is the backup for your wallet. A lot of Bitcoin has been lost by people who either didn’t write down their seed phrase, or did something foolish like write the words but split them up. That’s why they couldn’t recover their wallets when something went wrong. Don’t let that happen to you. Write your seed phrase on paper. Make a metal backup in case the paper gets damaged.
Store the paper and metal backups somewhere only you have access to. A thief can’t steal what a thief can’t find. Never enter your seed phrase on your computer, phone, or any device that can connect to the internet. By keeping your seed phrase 100% offline, you make your Bitcoin unhackable. By keeping your seed phrase secure, you make your Bitcoin unstealable. By not telling people you own Bitcoin, you avoid making yourself a target for theft, which can include violence.
Don’t judge the value of your Bitcoin by what it’s worth today. Don’t judge your security by how safe you feel today. And don’t judge the future by what you know today. Think long term, hold long term, and always keep learning.
I’ve simplified some things here, for the sake of making it easy to understand. For example, I said that a wallet holds keys. More accurately, a wallet uses your seed to derive the keys and other cryptographic information needed to access your Bitcoin. Likewise, seed words aren't technically the entropy. They are the entropy, encoded.
This is serious stuff. I wrote Five Dollar Wrench in the hopes of encouraging you to seriously think about it.