Now that you’ve generated your seed phrase, written it down on paper or the strongest metal that you have access to, and stored it in the most secure location that you know of, the final step in this series is to recover your Bitcoin wallet without compromising any of the security measures from the previous steps.
Knowing how to properly recover a Bitcoin wallet is the final step securing your seed phrase:
Step 1: Generate Your Seed Phrase (Randomness + Verification)
Step 2: Write Your Seed Phrase (Paper & Metal)
Step 3: Store Your Seed Phrase (Location)
Step 4: Recover Your Bitcoin Wallet (Privacy + Security)
Rest Assured; Your Bitcoin Is Likely Recoverable
If your Bitcoin wallet is ever lost, stolen, damaged, or compromised, you’ll need to use your seed phrase to recover your Bitcoin wallet. Luckily that’s the whole point of a seed phrase. In order to best protect your bitcoin, it helps to know the best practices as well as any potential risks during the recovery process.
This, however, assumes you have access to one critical component: your seed phrase.
As long as you have properly generated, written down, and stored your seed phrase according to the previous steps, then recovering your Bitcoin wallet is nothing to worry about. You could lose your hardware wallet in a boating accident and simply replace it with a new one. Instead of generating a new seed phrase, you can import your backup seed phrase that you saved to recover your bitcoin in case of similar accidents.
How Do People Lose Their Bitcoin?
Many times, the user themselves are their own greatest risk. If you’re not careful and intentional with your seed phrase recovery practices, you can easily lose your bitcoin to the void, a hacker, or even a thief who happened to be at the right place at the right time.
Here are some of the most common ways people tend to lose access to their bitcoin:
- Not taking the time to learn proper Bitcoin seed phrase recovery practices: You have to be intentional with each step of self custody. Consider how much privacy you prefer, which wallet you will secure your bitcoin with, how you will purchase or download the wallet, how you will generate your seed phrase, write it, and store it. There’s a lot that goes into safe seed phrase recovery, so be sure to read this entire seed phrase series for the details that don’t get talked about enough.
- Misplacing a seed phrase: Maybe you did everything else right, but you decided to bury the seed phrase in the sand on the beach. Next thing you know, a tidal wave hits, rips that sand up from underneath itself, and sweeps the seed phrase out into sea. Hopefully you will think through your seed phrase storage more than this example figure did, but the point remains: to truly keep your seed phrase secure, be intentional about where you secure it.
- Tinkering without intention: The more complexity you add to your Bitcoin recovery setup, the greater the likelihood that you’ll end up locking yourself out of your money accidentally. Keep things as simple as possible for your situation, and consult with other bitcoiners before tinkering with your recovery setup. Adding additional signers as part of a multisig configuration, designated signers, passphrases, timelocks, etc. — all these things needs careful and methodical implementation.
- Taking unnecessary risk: Besides the potentially unnecessary risk you’re taking from adding additional complexity, the market presents plenty of opportunities for you to lose your bitcoin as the fiat price volatility comes and goes. Don’t try to sell your bitcoin to buy back lower, try to take on extra leverage that could wipe you out of your position, or hand your private keys over to a company promising additional yield on your Bitcoin stack. Don’t get greedy. Stay humble, stack sats.
Assuming you’ve avoided all of the above, but somehow still lost your Bitcoin wallet when it sank along with the sailboat you bought at the top of the last bull market, don’t worry; You’re in luck. Any device designed for standard Bitcoin storage will be able to recover your bitcoin.
And over the years, along with bitcoin’s growth comes an abundance of fantastic Bitcoin-only wallets to choose from.
Import Your Bitcoin Wallet With Your Seed Phrase
One of the paradoxes of seed phrases is that we’ve all been told that we should “never share your seed phrase with anyone of type it into a computer that’s connected to the internet” yet when the time comes for you to actually use your seed phrase to actually recover your Bitcoin wallet, you will need to enter it into a computer or a hardware wallet.
Of course, there’s plenty to mess up if not careful, so read along to learn best practices for recovering your Bitcoin wallet. Some of which you maybe haven’t thought of before.
Secure & Private Location
Just like when you generated and wrote your seed phrase down, you need to be 100% sure that you are in a private location safe from prying eyes or ears. Not only does that mean that you don’t want anyone looking over your shoulder when you recover your wallet, but you also want to make sure that there are no recording devices anywhere near you when you recover your Bitcoin wallet.
This includes both video cameras and audio recording devices.
Entering Your Seed Words
Entering your seed words in a secure environment is potentially the most important step. You want to be sure that you don’t accidentally reveal your seed words to an attacker by entering them into a device that has potentially been compromised with a keylogger or some other malware that is able to see your seed words as you enter them.
To best recover your Bitcoin wallet, it’s best to use a Bitcoin hardware wallet device that is completely air-gapped, or at least enables you to enter your seed words into the device itself rather than type them on a computer keyboard. Recovering your Bitcoin wallet in this manner reduces the risk that your Bitcoin wallet will be compromised by malware during the recovery process.
Passphrases
In the event that you used a passphrase to generate more than one wallet with your seed phrase, you will need to enter your passphrase into the wallet for it to locate/display your addresses and balances.
Passphrases can be a little difficult to understand so you may need to do some research to fully understand how to recover your Bitcoin wallet that has been passphrase protected.
Derivation Path
Most, if not all, of the most popular Bitcoin wallets utilize a privacy-enhancing feature called “hierarchical determinism”, or HD for short. HD wallets are a type of Bitcoin wallet that generate multiple addresses from a single seed. HD wallets also use deriving paths — strings of text that act as instructions — for how to generate the different address types associated with the seed.
Derivation paths begin with a “m” followed by various numbers and slash symbols that indicate which branch of the tree structure contains the specific key or address being generated. Knowing these derivation paths ensures that funds are not lost in complex wallets with multiple accounts, branches, or sub-accounts.
To recover your Bitcoin wallet, you will need to use the same derivation path as the wallet that you used to generate your Bitcoin wallet.
Recovering Your Bitcoin Across Different Wallets
Although there have been substantial advances in interoperability and recoverability across different Bitcoin wallets using BIP39, not all wallets adopt the exact same standards for wallet recovery. As a result, you can’t use just any wallet tor recover your bitcoin. In order to recover your Bitcoin wallet with a seed phrase that was generated by another Bitcoin wallet, you may need to download or use a different wallet that supports passphrases, the address script type, as well as the key derivation paths of the wallet that was used to generate your seed phrase.
If you are unsure what settings your original wallet used, you can use this wallet recovery guide to see the default settings for some of the most popular Bitcoin wallets.
Hot Or Cold Wallet Recovery?
Not all seed phrase recovery needs are the same; there are multiple ways that you can recover your Bitcoin wallet with your seed phrase. Depending on the amount of bitcoin in the wallet you are trying to recover, you will need to decide which method provides you with the appropriate level of security.
If you are trying to recover a Bitcoin wallet with only a small amount of bitcoin in it, then you may not need to worry as much about the level of security and privacy compared to a wallet with a large amount of bitcoin. You can remover small amounts of bitcoin can typically with a hot wallet, such as a mobile wallet or desktop wallet, while recovering larger amounts with a dedicated hardware wallet. For added security, you can use a completely air-gapped hardware wallet to avoid the risks of your wallet being compromised during the recovery process.
Hot Wallet
If you only have a small amount of bitcoin in the wallet that you are recovering, you may decide that you don’t need a high level of security to recover the wallet. If that is the case, then it should be just fine for you to recover your Bitcoin wallet with a mobile wallet or desktop wallet. Since both of these types of wallets run on devices that connect directly to the internet, they provide less security than using a cold wallet.
For the highest level of functionality, Sparrow Wallet is the best desktop wallet that I have come across. Sparrow can recover seed phrases with 12-24 words, multiple script types, derivation paths, passphrases, multisig wallet setups, and connect to your own node.
Sparrow wallet also supports a wide array of hardware wallet devices in the event that you want to use a cold storage device to recover your Bitcoin wallet in a secure offline environment.
Cold Wallet
If you feel that the amount of bitcoin that you are recovering is worth enough that you would like to take extra steps to protect it from being compromised by any of the risks associated with hot wallets, the best practice is to use a wallet that is unable to connect to the internet by itself. For the highest level of security, it’s best to use a wallet that is completely air-gapped.
If you decide to enter your seed phrase into a hardware device, you can add a layer of security by plugging it into a battery power supply instead of directly into a computer and then entering the seed phrase in a more air-gapped environment.
Using a basic hardware wallet is the best practice for HODLing your bitcoin while also being able to create and send new transactions with relative ease.
If you are able to enter your seed phrase directly into your hardware wallet device to recover your Bitcoin wallet (such as a ColdCard, SeedSigner, or other hardware wallet devices), your hardware wallet should automatically restore the wallet with the default wallet settings.
Again, for the highest level of functionality, using Sparrow Wallet is one of the best desktop wallet softwares to use along with a hardware wallet. Once you plug in your hardware wallet, you can manually select the address script type, the key derivation path, passphrases, and even connect to your own node for optimal privacy.
For larger amounts of bitcoin, using a fully air-gapped computer or hardware wallet device provides the highest level of security. This method requires that you connect your Bitcoin wallet to an independent power supply instead of to an internet-connected computer. Once the air-gapped wallet has been powered on, you can enter the seed phrase into the hardware wallet and use it to sign transactions.
For example, You could connect a ColdCard or SeedSigner to a battery to power the device and recover your Bitcoin wallet without the need for an internet-connected device. Once you recover your wallet with this method, you can export the xPub key to a desktop computer to create and send transactions.
Final Thoughts
Safely recovering your Bitcoin wallet is the final step of 4 steps to secure your seed phrase. Just like when you’re generating, writing, or storing your seed phrase, you need to be sure that you are in a secure and private location without any video cameras or audio recording devices.
To find all of your wallet addresses, you may need to do some research to see what derivation path your wallet used when you generated it, and if you used a passphrase.
Depending on how much bitcoin is in the wallet that you are recovering, you might decide that it makes the most sense to recover using a hot wallet for smaller amounts and a dedicated cold storage hardware wallet for large amounts.
No matter how much bitcoin is in the wallet that you are trying to recover, using all of the best practices will ensure that your seed phrase stays secure and you don’t accidentally lose your bitcoin when you enter it into a computer or hardware wallet.
Thank You For Reading
If you found this article helpful, please consider sharing it, supporting one of these affiliates, or making a value for value donation so that we can continue to publish more Bitcoin-only content.