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There are many reasons to join the crypto revolution and adopt decentralised payments. The speed of transactions and cheaper payment costs are just two of the biggest. Yet, many people have not joined this new wave of financial freedom out of fear that it is unsafe or funds can easily be lost.
When storing cryptocurrencies in a wallet, you are essentially your own bank manager. This means you have to ensure that your funds are secured, or you risk losing them. If you are unfortunate enough to experience fraud and lose money from your usual bank account, the money is likely to be replaced by your bank. There are many luxuries when using crypto - but this isn’t one of them.
Acting negligently when using your wallet, such as using it on a public WiFi can lead you to become a hacker’s next victim. One Australian man found this out the hard way and lost over $100,000 because he accessed his wallet on a public connection. There is also the worry that the device you are using for your wallet could be damaged beyond repair or stolen. So, what can you do about it if these things do happen?
First, Choose a Reliable Wallet
The first step in taking back access to your wallet starts weeks, months or even years before it is stolen or your device breaks. That is because you need to choose a crypto wallet that has more than one method of helping you in this situation - so if it does arise you have immediate solutions.
The Luno Bitcoin wallet is a great example of what to look for and has three different methods of regaining access in these events. You can restore a two-factor authentication code in recovery mode, disable it to regain access - or you can verify your identity to their support team. Having options to restore a damaged or lost wallet can make you feel more in control and is another thing you do not have to worry about.
Other wallets may help you restore your bitcoin wallet in other ways. One of the most common is by using a mnemonic seed phrase to restore your wallet. Read on to learn how this works.
Restoring Your Wallet with a Mnemonic Seed Phrase
Inspired by the ancient Greeks, a mnemonic seed phrase is used in crypto wallets to back up the privacy key. The phrase is basically a string of random words. By entering these words in the correct order, they reveal the key that can be then used to restore your wallet. These words should be written down and not stored electronically, in case your device is broken or stolen. Saving them electronically can be a security risk just like using a public wifi. If hackers access your mnemonic seed phrase, they too could use this to access your bitcoin holdings.
How to Use the Mnemonic Seed Phrase
Once you have a new device that supports your wallet, you will need to download the wallet and select to import an existing wallet - rather than opening a new one. You will then be prompted to enter your mnemonic seed phase to access your existing wallet. The process is as simple as entering the words correctly and regaining access to your holding.
If your mnemonic seed phrase is not granting you access to your wallet, the problem is likely to be a spelling error or the words are being entered in the wrong order. If you are still having problems, you may have written the mnemonic seed phrase wrong in the first place. This is why wallet providers like Luno offer more than one way to restore a wallet, giving you further backups for when unexpected circumstances arise.
Can You Afford Not to Be Prepared?
With a reported 23% of BTC already lost to lapses of concentration or forgetting to play it safe, there is a real urgency for all wallet holders to ensure they know how to restore their bitcoin wallet in these events - even if you think it will never happen to you. It could.