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We've all seen the recommendation against storing our wallet seed phrases digitally. And while I understand the sentiment and reasoning, in reality, for many it could be even less secure to store a piece of paper with the seed phrase.

This morning I tested encrypting a seed phrase from my computer (Mac OS). I'm curious what people think about the safety of the following process. I tested this using a randomly generated BIP39 mnemonic code.

  1. Create a wallet and temporarily copy the seed phrase into a text file.
  2. Open a terminal.
  3. Encrypt the file with the following command openssl aes-256-cbc -a -salt -in ~/path/to/seed.txt -out /tmp/walletName.enc.
  4. Enter a long but memorable string for the aes-256-cbc encryption password.
  5. Save the contents of the resulting file in password manager.
  6. Delete the text file from step 1.

Decrypting the wallet seed in the future then simply requires copying the contents from your password manager into a local file and using the encryption password saved in step 4 with the following command: openssl aes-256-cbc -d -a -in ~/path/to/walletName.enc -out /tmp/seed.txt.

The main problems with this method, that I see, are 1) It requires a small amount of technical know-how, and 2) users who are using automated backups (TimeMachine, etc.) might expose the wallet seed text file if they don't delete it or if the backup system happens to run while they're encrypting it. Other security issues I'm missing?

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    This is not a Cardano specific question. May not be appropriate here.
    – gRebel
    Apr 28 at 10:42
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One of the biggest security threats right now is malware and key loggers.

That is why offline backup and hardware wallets are so important, as you try to shield your signing keys from your day to day computer.

You could use the method you have described on a dedicate laptop that has been airgapped (no network or outside world connection). However, hardware wallets are today very cheap and probably make sense to invest into one instead spending your time with a dedicated hardware.

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    Hm. Good point about key logging. However, doesn't a hardware wallet also represent a single point of failure? Meaning, I either have to make sure I never lose my hardware wallet, or, I'm in the same situation and have to figure out how to securely store my hardware wallet seed phrase?
    – a-fro
    Apr 28 at 11:19
  • You do store the seed phrase offline, either on a piece of paper in a fireproof safe or use a product like cryptosteel. To enhance your seed security, learn more about Shamir backup: trezor.io/shamir Apr 28 at 15:31
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The risk is the same as storing the encrypted login details of your bank account in a password manager.

However, the bank may have their own controls that limit withdrawal amounts, monitor/block suspicious activity etc.

So, although the risk is the same, the consequences can be different.

The primary vulnerability moves from the password manager to the encryption password for the encrypted file. Where do you store that and the instructions for recovery?

No matter how you choose to store a wallet seed, you must consider the risk/reward of it being breached and of the seed being corrupted, destroyed or lost.

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  • I disagree that storing an encrypted string is the same as storing a username and password to a bank account. Even someone who could access the encrypted string could only decrypt it if they knew both the encryption method and the encryption password.
    – a-fro
    Apr 28 at 11:17
  • @a-fro Yes, you're correct. I will edit accordingly.
    – gRebel
    Apr 28 at 11:41
  • Depends probably on the region of the world, but for example in Europe, there is no way retrieve/send funds from a bank account without having two factor authentication. Apr 28 at 15:32
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It's true that this topic is not simple, but based on the number of times we've heard from folks on /r/cardano who have suddenly found their wallets unexpectedly empty.. I would never store a wallet recovery phrase, for any length of time, in any kind of digital device.

(You said "copy" above, perhaps meaning to avoid typing and keyloggers - be aware that copy/paste is also vulnerable to malware.)

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