Many people are asking how to store cryptocurrencies securely, and they are right, this is an important question, because the number one rule when it comes to money is to not lose it, and then and only then you can work on multiplying it.

Risk management is the key, and in this case, the risk is the theft by a malicious actor, or the destruction of the coins by natural forces.

I will give here a strategy how to store large amounts of cryptocurrencies safely in my opinion, and then you can evaluate whether this is good enough for you.

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DISCLAIMER

WARNING, use this method at your own risk, I will not be responsible if you lose money or any other form of assets, as a result of using this method/strategy.

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Step 1: Memorize the Private Key/Seed

With Bitcoin this is easy, in wallets like Electrum, you get a 12-13 word seed that can be used to restore the wallet file with all private keys inside it. Instead of memorizing a 64 character long random string, you only need to memorize a 13 word random phrase, it's much easier.

Now you must never use this Seed, only in case of emergency if you lose the wallet file, this is only for worst case scenario, and you should never forget the seed, just repeat it multiple times a day and you probably won't.

Step 2: Split the wallet file into multiple fragments

Some wallets allow multisign wallets, like Electrum, but not all wallets have this, especially in altcoins.

So what you want to do is then encrypt it with different layers of encryption. If you have a multisign wallet then you can set 2/3 or 4/5 or any other combination. I believe it should require 100% consensus to access the funds, because otherwise you would need too many fragments to ensure that the other parties won't steal the money from you.

Like if you put a 4/5 and give 4 shares to family members and 1 for yourself, then they can easily rob you if they all agree on it. Now you may trust your family that much, but I wouldn't. So make sure you have ultimate authority over your money.

So have small fragments, but require 100% agreement to access the money. This means 3/3 or 4/4 basically.

If you can't use multisig wallet, then just use nested encryption schemes, because who knows some encryption schemes are more vulnerable to quantum hackers, so having multiple layers of different encryption standards is a good idea.

Also in nested encryption, you need all the keys, by default, to access the inner layer. So in this example let's say it's 3/3.

Example

• 3 Layered encrypted wallet with 3 different algorithms, and 3 different good random passwords:
  • First layer will be the default encryption the wallet uses (probably AES)
  • Second Layer: I recommend Camellia, since it's chosen by both NESSIE and CRYPTREC
  • Third & Outer Layer: I recommend Serpent since it was the second best candidate for the AES competition, in fact it's a big monster, very slow and practically impossible to crack, giving pretty good security for the outer shell of your wallet.

So basically your wallet will be protected like this:

• Private Key -> First Layer (Wallet Encryption) -> Second Layer -> Third Layer

Of course each layer encrypted with a different password, which you will have to organize well.

After the key is wrapped in 3 layers of encryption, the file can just be made public, like uploading it to multiple file hosting places such as Google Drive or Dropbox and a few copies on CD or USB thumbdrive, to ensure that you won't lose the file itself.

Step 3: Managing the password

Now you have 3 different passwords, so you need to store these 3 passwords in separate locations. So for example:

• 1st password you keep in your home safe
• 2nd password you give to your most trusted person to safeguard (mother,wife, best friend)
• 3rd password you put it inside a safe deposit box in a bank

Risk Analysis

Now let's see what possible risk could happen with this setup:

• You forget your private key/seed: well no problem beause the key can be salvaged from the triple encrypted wallet with the use of the 3 passwords
• Your house burns down: well hopefully the safe is fire proof, otherwise you can only have access to your money if you remember the private key/seed
• The bank spies in your deposit box: they already do this, but they have no access to the money without the other 2 passwords
• Your friend betrays you: no problem, he would need the other 2 passwords to steal your money
• One cloud storage service terminates your account: no problem because you have the encrypted file uploaded to multiple places + USB + CD backups
• You lose 1 password and forget the seed: well then you will lose access to the money forever

So these are the risks on average, there are probably others too, like for example encrypting on a secure machine, and having a good random number source for the password/keys, but that is another topic.

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Disclaimer: I am not responsible if you occur financial or other material losses using the information on this page!

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Sources:
https://pixabay.com

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