The following assumes you are using a Ledger Nano S or TREZOR hardware wallet. Due to their ease of use and security, we recommend a hardware wallet for cold storage.
To save / backup your Ledger or TREZOR device, simply write down the 24-word phrase on the card they provide and keep it very, very safe. Never put this key on an online device or type it into MyCrypto.com.
Backing Up Your Hardware Wallet
When you have a hardware wallet, you use that device to access your funds on a day-to-day basis. 99% of the time, you will never lose this device, have the device stolen, drop it in a toilet, burn it in a fire, or anything else.
If any of the above happens, you will want to be able to access your funds without your hardware wallet. For that reason, you need to have a backup. The backup of your hardware wallet are those 24 words (standard on both the Ledger Nano S and TREZOR). If you have those words, you can access your funds at any time. Your backup is only worthwhile if it doesn't also get destroyed with your hardware wallet.
For example, if you tape the 24 words to your hardware wallet and accidentally drop it off the side of a cliff, both the device AND the words will be lost. Your backup is worthless and you have no access to your funds.
- In order to prevent theft, it's probably not a good idea to carry it on you on a day-to-day basis.
- In order to mitigate damage caused by a large-scale disaster (fire, flood, tornado), it's best to not keep the device and words together, say in your desk drawer.
- In order to reduce the likelihood of the 24 words being stolen, they shouldn't ever be stored on an electronic device, such as a computer or phone—including taking photos of it. Nor should the device or backup phrase be kept in an area where they're at an increased risk of being stolen.
- In order to prevent loss, both should be kept somewhere safe and separate, where neither will be accidentally be thrown away or lost.
Where you keep your backup is up to you. Trusted family members (preferably those who don't know what crypto is), work, storage unit, safety deposit box, buried in your friend's backyard—it's all going to depend on your situation. If you're leaving it with someone else, ensure that they understand it's very valuable to you but only to you. If your uncle or friend decides to grow up to be a crackhead, you don't want them knowing they have access to all your money. You can say it's the password backup to your online diary, misc. documents for work that you would be killed for if you lost, old memories that you don't want your new significant other finding, whatever. I originally told my parents they were old records for clients that I didn't trust myself not to lose while moving.
While you think about this, it's also not a bad time to think about other things that should probably be backed up externally. What happens if you were to get hit by a truck tomorrow? What happens if your house burns down randomly? Are there accounts, records, passwords, keys, information, documentation, etc. that you and only you have? Maybe we're just weird but I know I'm not the only one in this space that has an "if I die...." document. Because of how complicated crypto is, I have contact info for a few very trusted friends to call if I die who I trust will help my family sort out the crypto side of things. It also includes client documents and contact information because the reality is that clients don't save their shit (even though the zip is called "Dont_Lose_This-Important_Docs_for_2017_Website.zip").
You can also opt for a fire-proof bag if you don't have any external place to keep the backup or don't feel like you are a high-risk target at this time (e.g., you don't have millions of dollars worth of crypto, don't have tweakers for neighbors, don't live in a place where there are common hurricanes or fires, etc.). The upside to these over traditional fireproof/waterproof safes is that they are cheaper and easier to conceal someplace random, which reduces the risk of robbery. Safes are known to house valuables. A friend recently had her house broken into and they took the entire safe because she never bolted it down. The only thing in there was some old photos of her great-grandparents and her birth certificate. That sucks.
Analyze your personal risk and your situation. Would your life be over if the funds on that device were to be lost? How upset would you be? How much money do you have stored on it? What would be the impact of losing access to that device (including emotional damage / stress)? This is the amount of money you should spend securing it. We were recently talking and arrived at the conclusion that 100% of people who have over 1-weeks' worth of pay in crypto should have a hardware wallet. Considering that a fire-proof bag is < $20, it's pretty much a no-brainer if you are in this space.
Hope this helps!