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Storage & Self-Custody

3 min read

The Spectrum of Custody

LEAST SECURE ←————————————————————————→ MOST SECURE
Exchange   Hot Wallet   Hardware Wallet   Multisig
(custodial) (software)   (single-sig)     (2-of-3+)

The right setup depends on the amount you’re holding and your threat model. For significant holdings, a Hardware wallet plus multisig is a common recommendation.

Option 1: Software Hot Wallet

For small amounts only (spending money on Lightning, small on-chain amounts).

WalletPlatformBest For
BlueWalletiOS/AndroidBeginners, Lightning
ElectrumDesktopAdvanced users, coin control

Warning: Software wallets are always-online. They are appropriate for “spending money” amounts, not savings.

Option 2: Hardware Wallet (Single-Sig)

Keeps private keys offline. Significantly better than software wallets for savings.

Coldcard

  • Best security: secure element, airgapped (microSD signing), open source firmware
  • Supports PSBT (Partially Signed Bitcoin Transaction)
  • Advanced features: duress PINs, brick-me PIN, passphrase support
  • Learning curve is steep; most powerful option

SeedSigner

  • DIY: Raspberry Pi Zero + camera + display
  • Stateless: no persistent storage — generates keys from seed words + camera entropy at runtime
  • Airgapped (QR codes for signing)
  • Very affordable (~$50 in parts)
  • Excellent privacy (no serial numbers, no manufacturer account)

Electrum on Old Phone/Laptop

  • Take an old phone, factory reset, install Electrum or Samourai, put in airplane mode permanently
  • Functions as a basic airgapped signing device
  • Lower security than dedicated hardware wallet but better than nothing

BlueWallet

  • Primary use: watch-only wallet + PSBT coordinator for multisig
  • Can sign with hardware wallets via QR
  • Good for beginners moving to multisig

Multisig requires M-of-N keys to spend. Eliminates single point of failure.

2-of-3 setup (most common):

  • Key 1: Coldcard (home safe)
  • Key 2: SeedSigner (different location)
  • Key 3: Unchained Capital collaborative custody (or another Hardware wallet with a trusted person)

One key lost → still spendable (use remaining 2) One key stolen → still secure (thief needs 2 keys)

Setting Up Multisig

  1. Generate each key independently on separate devices
  2. Record each seed phrase separately (never together)
  3. Create the multisig wallet in Electrum or Sparrow (combining all 3 public keys)
  4. Test receiving and spending a small amount before funding

Source: Multisig — Part I, Multisig — Part II

Seed Phrase Best Practices

  • 12 words: adequate for most users; smaller backup to store
  • 24 words: higher entropy; recommended for large holdings
  • Write on paper: initial backup only; not durable long-term
  • Metal plates: fire/water resistant; essential for primary backup
  • Never digital: no photos, no cloud, no typed copies, no photos
  • Passphrase (25th word): strongly recommended for hardware wallets; store separately

Verifying Your Software

Before using any Bitcoin software, verify the developer’s cryptographic signature on the download. See: Verifying software with PGP.

Threat Model

Consider:

  • Loss (fire, flood, hardware failure): solved by geographic distribution of backups
  • Theft (seed stolen): solved by passphrase (25th word) + multisig
  • Physical coercion ($5 wrench attack): solved by multisig with geographically distributed keys (attacker can’t get all keys in one location) + small “decoy” wallet with plausible deniability
  • Technical failure (device breaks): solved by seed backup + multisig redundancy

Sources

Graph View

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