Your Bitcoin is NOT inside your wallet app (and why that saves you)

[Renampun]

A concern that comes up among newcomers online: "My phone broke or app crashed, did I just lose all my Bitcoin?"

That's what newbies need to know that even if their app or phone crashes, their Bitcoin is still safe.. They just need to import their seed phrase into another device and they can recover access to their funds. That's why it's important for everyone to back up their seed phrase because that's the only way they can access their Bitcoin.. If they lose it, then it's certain that they could permanently lose access to their funds.

[Davidloki]

I would say almost every beginner had this misconception about bitcoin, even myself too. I had a misplaced wallet once because I had the screenshot of my seed phrase on my phone without saving it offline, so when my device broke down, I realized my mistakes but my assets were already gone.

Along the line, I had to learn more about wallet security and that knowledge stuck with me until this moment, though there is still room to accumulate more knowledge on wallet security. The lesson I learnt was that, never wait until it happens, keep learning and growing nevertheless.

[ultrloa]

I would say almost every beginner had this misconception about bitcoin, even myself too. I had a misplaced wallet once because I had the screenshot of my seed phrase on my phone without saving it offline, so when my device broke down, I realized my mistakes but my assets were already gone.

Along the line, I had to learn more about wallet security and that knowledge stuck with me until this moment, though there is still room to accumulate more knowledge on wallet security. The lesson I learnt was that, never wait until it happens, keep learning and growing nevertheless.

That's common mistake done by newbies back in the days, because lack of knowledge result bad judgement when it comes storing our coins.

But hopefully in that case, you didn't lose huge amount of coins.

I experience that situation to, lucky for me I didn't lose much money from same like incident happen to you. Since before I always cashing out my earnings and don't care about trading or holding my Bitcoins before.

[Sanitough]

The Seed Phrase = The Master Key: It grants ownership of the coins associated with your addresses on the blockchain.

If your wallet is Electrum, it's fine if you don't add additional words to your seed phrase, but if you do, you might face this kind of problem.

Where the seed phrase alone is not enough to recover your lost wallet.

I do not think you understand what the OP is talking about, he is only talking about how some people are thinking wrongly that their bitcoin wallet contain their bitcoin, not knowing that it only contain the seed phrase, keys and the bitcoin addresses. But you are taking about passphrase which the OP is not talking about yet.

Of course I fully understand. My reply was in response to his comment, "The Master Key: It grants ownership of the coins associated with your addresses on the blockchain.".. I just gave an example that it will not always be enough to recover the wallet. So I cited an example of having additional words that are also necessary for recovery if they were added.

[Sammye3]

Now to you all, what was the biggest misconception you had about wallet backups when you first started out?

The greatest misconceptions I had that you needed the internet to spend your bitcoin and that CEXs were a safe heaven, maybe a lot of people had this mindset back then. I know better now and I use non-custodial wallets and my Electrum wallet has never gone online in years and I don't plan it goes online even in the future. A good open-source wallet + cold storage is the best shot to protect your coins.

It's a good set-up you have there, but you should know that it does not mean that your wallet is free from hacks and potential phishing schemes too. I read about a Multi-sig cold wallet that was compromised recently due to hack and a misplaced seed phrase and that resonated in my mind when I saw your post. It's an everyday learning process with wallet security, and above all carelessness should be controlled with precision and avoiding clicking on unverified links online too.

[Justbillywitt]

When I started I didn’t have any misconception about wallet apps, it was explained to me once and I understood how it works. I was told that the seed phrase was all I needed that even if I’m traveling and I don’t want to go with the device that holds my wallet that I don’t have any issue. All I need is just to travel with the seed phrase, when I get to my location that I can use the seed phrase to import my wallet.

[Aanuoluwatofunmi]

I also keep on wondering seeing some people thinking that they are bitcoin is in the wallet they are using, not knowing that the wallet is just a custodial that helps you luck your wallet keys on the blockchain and unlock them as well.

Only a newbie believes that Bitcoin is stored in their wallet when it is actually on the blockchain; this simple idea is what many don't even know exists with the wallet they are using in relation to the blockchain, in terms of how and where their Bitcoin is being stored.

[Cookdata]

I also keep on wondering seeing some people thinking that they are bitcoin is in the wallet they are using, not knowing that the wallet is just a custodial that helps you luck your wallet keys on the blockchain and unlock them as well.

Only a newbie believes that Bitcoin is stored in their wallet when it is actually on the blockchain; this simple idea is what many don't even know exists with the wallet they are using in relation to the blockchain, in terms of how and where their Bitcoin is being stored.

You can't blame some people at least the newbies, they are too familiar with bank and accounting model. If you lose your phone, your money is literally safe and can be recover if you go to the bank. You need your few info to get into the app again on another device. This is why many people are so used to this model unlike Bitcoin that is based on custody. Another reason that may cause this misunderstanding is the centralized exchange dependency and custodial services, most don't get to experience wallet beyond email, username and password.

Any person that is not new to Bitcoin, that has read about seed phrase and how they should be backup and act nonchalantly forget it never values their investment or perhaps it's never their money to begin. If you are warned that you are going to lose your Bitcoin if you forget your seed phrase or no back up, you don't know what you are doing.

[Hyphen(-)]

3. Beginners education:

• If your phone falls into water or gets destroyed, your Bitcoin is safe as long as you have your offline seed backup.
• If you lose your seed backup, your wallet app staying open is like living on borrowed time. Back it up immediately.
• Never type your seed words into any website, search bar, or form given to you in a Direct Message. No genuine support staff will ever ask for them.

.

Now to you all, what was the biggest misconception you had about wallet backups when you first started out?

These is what beginners needs to know as basics because if all beginners can understand and make sure they keep their seed phrases safe offline, then their fear of losing their Bitcoin investment has reduced because they are safe from wallet or exchange hacks since they know that they have saved their private keys or seed phrases saved offline and safe, their Bitcoin will be safe.

Not your keys, not your Bitcoin. This statement is what beginners should always remember before thinking of making any decision of either typing their seed phrase publicly or give it someone in the name of customer support or so from any wallet.

[ColdLava40]

If your wallet is Electrum, it's fine if you don't add additional words to your seed phrase, but if you do, you might face this kind of problem.

Where the seed phrase alone is not enough to recover your lost wallet.

Just like what happened in this situation, though it was solved.

Adding a passphrase to your seed doesn't give you any problem as far as I understand.

It adds an extra layer of security to your seedphrase.

As long as you can remember the word you added to your seedphrase there is no issue. Best thing is to make sure both are not stored at same location.

One thing I leart about passphrase was the fact that we can create multiple wallets from one seedphrase when we add a passphrase to it. The passphrase+ seedphrase creates an entirely different wallet from that without passphrase, it's cool.

[Smartvirus]

This should not be convinced to mean that if your phone gets stolen or hacked it cannot be used to take your bitcoins. A wallet with which you interact with private key for signing transactions is your ultimate proof of ownership. If it gets into a different hand the now also own your coins and can take them to a different wallet.

There is a new scrap business within my local community now where, a scrap merchant is always up and about looking for olds stuff, mainly electronics to buy and every now and then, you find people being too willing to dispose off their old electronics, mainly because they are not using it again, it has a minimalist fault where certain hardware gadgets required for a quick fix isn’t available in the market and so, they just sell it off.

One thing they quickly forget is that, a bad hardware doesn’t mean it can’t be sourced and fixed, it might be scare but these scrap guys understand the old stock market and at times, they can always swap parts from other similar devices.

At times, they go for the ROM and RAM, hard drive and other parts of equal value which might hold sensitive informations they can utilize for illicit purposes. People don’t understand this and so, they become vulnerable, not knowing where they are being hit from when certain infiltration happens.

While your wallets might not hodl your coins as it exists on the blockchain, a broken device still has access and when it’s fixed, the rest is history.

[bhadz]

This is the reason why we should jute down our seedphrase on the process of creating the wallet. For instance, there are people who usually store their seedphrase on their note pad with the hope that whenever they needs they would have to go Open that place and copy them, without them knowing that their phone can damage at any time very easily.

Not only that, but I bet you all did the same thing in the past like screenshotting the seed phrase after creating a wallet through your mobile phone. Because I did that and I thought that it was just nothing but that is a serious security matter especially if you're that guy who allows friends and relatives to use your phone. They can easily go to the gallery and have it checked, message themselves through your social account as it's just a few clicks away.

But when the seedphrase are written down on a paper it would enable them restore back their fund back and even if is not that particular they actually input it on another wallet and your balance will display.

The method is just different but both can still restore the wallet but, writing it online and having it saved in the cloud is riskier.

[GeorgeJohn]

This should not be convinced to mean that if your phone gets stolen or hacked it cannot be used to take your bitcoins.

I don't really comprehend you here... because before someone have access to your bitcoin they most have the seed phrase or you password depends on the wallet you're using...

A wallet with which you interact with private key for signing transactions is your ultimate proof of ownership. If it gets into a different hand the now also own your coins and can take them to a different wallet.

How can they take them to different wallet without decoding your password...They can access your transactions you have done with the wallet, but I don't think it will be easier to move the coins in your to another wallet without your password or seed phrase

If you lose your seed backup, your wallet app staying open is like living on borrowed time. Back it up immediately.

If you lose your recovery phrase you should get a new wallet and sweep all your fund there.  The seed could have been compromised already, backing it up again does not protect you from any exposure that may have happened.

I don't think it's possible to sweep your funds to a new wallet without your seed phrase...Please I will like you to enlighten me on these...

[khaled0111]

I don't think it's possible to sweep your funds to a new wallet without your seed phrase...Please I will like you to enlighten me on these...

The reason why you didn’t get what Upgrade was trying to say is that you focused on the bolded part but didn’t pay attention the scenario OP was presenting.
In this scenario, the seed backup (could be a piece of paper or whatever) is lost but the wallet app is still open. So Upgrade is right because since the wallet app is still open, you can retrieve the seed phrase and transfer your coins. However, since there is a possibility that the lost seed could have  been compromised, then the first and wisest thing to do is to create a new wallet and sweep all your funds into it.

[GeorgeJohn]

I don't think it's possible to sweep your funds to a new wallet without your seed phrase...Please I will like you to enlighten me on these...

The reason why you didn’t get what Upgrade was trying to say is that you focused on the bolded part but didn’t pay attention the scenario OP was presenting.
In this scenario, the seed backup (could be a piece of paper or whatever) is lost but the wallet app is still open. So Upgrade is right because since the wallet app is still open, you can retrieve the seed phrase and transfer your coins. However, since there is a possibility that the lost seed could have  been compromised, then the first and wisest thing to do is to create a new wallet and sweep all your funds into it.

That's good explanation, now i grab his point of views...actually I only concentrate on his replies, but you have explained more better for me to comprehend it perfectly, I'm glad for your explanation...Upgrade00 is right..Thank you buddy...

[AVE5]

A concern that comes up among newcomers online: "My phone broke or app crashed, did I just lose all my Bitcoin?"[/i]

Understanding how a wallet actually works is important for every beginner and others. I thought I should write something about it today about the mental model every new user needs to understand. I will keep it as simple and short as possible.

The simplest way I can also put this is that your funds isn't really stored in your device but your public address keys which is your wallet address.
And while you're using the hot wallet, you can always logging your address Key's and your seed phrase including passwords if necessary, and you can always navigate using different device to access your crypto account even when your device is damaged or unreachable.
If app crash is about system update error, that can be fixed but when it has been tampered based on target, then it'll always be adviced to get a new wallet to mitigate risks of loosing your funds.

[SilverCryptoBullet]

The simplest way I can also put this is that your funds isn't really stored in your device but your public address keys which is your wallet address.

There are Private Keys, Public Keys and Public Addresses.
There is nothing as Public Address Key, you posted it inaccurately and your post misleads newbies.

Bitcoin keys and addresses.
Keys and addresses in Mastering Bitcoin book.

Private keys belong to you and you must be the only person knows your Bitcoin private keys. To receive bitcoins, you can share either your Bitcoin Public Keys or your Bitcoin addresses. Bitcoin addresses are shorter versions of your Bitcoin public keys but both addresses and public keys can not be used to get your Bitcoin Private keys.

[The Cryptovator]

It doesn’t matter really where your Bitcoin exists, because everyone knows it exists on the blockchain, and that’s the reason your balance is visible to everyone who has your address. The matter is to secure your private keys or seed phrase of your wallet. Because your private keys or seed phrase gives you access to your funds. Your wallet credentials are everything for your Bitcoin.

If you have seed or private keys, then the wallet doesn't matter. You can access your funds even from the other noncustodial wallet as well. Nothing is actually inside of the wallet; it’s all about making it easier to access your funds. So secure your wallet credentials.

[SilverCryptoBullet]

It doesn’t matter really where your Bitcoin exists, because everyone knows it exists on the blockchain, and that’s the reason your balance is visible to everyone who has your address. The matter is to secure your private keys or seed phrase of your wallet. Because your private keys or seed phrase gives you access to your funds. Your wallet credentials are everything for your Bitcoin.

If you have seed or private keys, then the wallet doesn't matter. You can access your funds even from the other noncustodial wallet as well. Nothing is actually inside of the wallet; it’s all about making it easier to access your funds. So secure your wallet credentials.

We can import private keys or mnemonic seeds to other wallets that support the same BIP, it's a mandatory condition.
Example of how to import private keys into Electrum wallet.
Importing and sweeping private keys of core and paper wallet into Electrum.
Importing your private keys into Electrum.

How Private keys, Public key, and addresses are created and connected with each other are explained in this one https://learnmeabitcoin.com/technical/keys/

The wallet is not important, having wallet backups in private keys or mnemonic seeds (and wallet passphrase /custom words) are enough to recover that wallet with same wallet software/ manufacturer or import it to another one.

[Call_Me_Guru]

This should not be convinced to mean that if your phone gets stolen or hacked it cannot be used to take your bitcoins. A wallet with which you interact with private key for signing transactions is your ultimate proof of ownership. If it gets into a different hand the now also own your coins and can take them to a different wallet.

If you lose your seed backup, your wallet app staying open is like living on borrowed time. Back it up immediately.

If you lose your recovery phrase you should get a new wallet and sweep all your fund there.  The seed could have been compromised already, backing it up again does not protect you from any exposure that may have happened.

That's smart, @Upgrade00. Thanks for calling those critical part out, you've highlighted the distinctions beginners need to understand.`

1. Regarding device access and ledger storage, your software app or hardware device is the gateway holding the private keys to sign transactions. If someone physically compromises an unlocked device, your funds are gone. My point was simply to separate the data ledger itself from the interface ap, meaning deleting an app doesn't burn your coins as long as the keys are backed up elsewhere.

2. Regarding the compromised seed phrase, You are equally right. If a seed phrase has ever been exposed, viewed by a third party, or typed into a shady site, backing it up again does nothing. Generating a brand new wallet with a fresh seed and sweeping the funds is the only safe protocol.

Precision matters in security, and your additions are crucial for keeping newbies safe. I appreciate it.