According to Chainalysis, a leading blockchain analytics firm, almost 4M BTC (worth $79.5B at today’s price) have been lost since the first Bitcoin block was mined. Furthermore, according to CipherTrace, billions of dollars worth of crypto are stolen every year in thefts, hacks, and frauds.
The data speaks for itself—there are just too many ways for your crypto to be lost or stolen.
So how can you protect yourself from hacks, fraud, and scams? And how can you reduce the chances of losing access to your wallet due to lost seed phrases?
In this guide, you will learn how to store crypto in the safest way possible (exactly as whales do.)
Whales Don’t Store Crypto on Exchanges ⚠️
Before identifying what to do to secure your crypto like whales, let’s first see what not to do with your crypto.
First of all, whales don’t store crypto on exchanges.
An exchange (or custodial wallet) is one where the private keys are managed by a third party.
Custodial wallets work similarly to a bank or other financial institution—they have full access to your funds and work as an intermediary between you and other wallets.
Custodial wallets are easy to use and require little personal responsibility for storing the private keys, but if the database gets compromised, all your funds are lost forever. This has happened many times in the past.
Indeed, a total of nearly $2.66B has been stolen from crypto exchanges since 2012, with 46 exchanges compromised.
“Not your keys, not your crypto” is a common saying in the crypto space that means if you don’t have control of your private key, you are not entirely in charge of what happens to your crypto assets.
If you use custodial wallets, the institution reserves the right to perform any action on your account. For example, in January 2022, Binance froze the accounts of 281 Nigerian users in compliance with “international money laundering laws.” So far, they have only restored 79 of those accounts.
With custodial wallets, you don’t have full autonomy of your account because you don’t have access to your private key.
Another problem with leaving control of your keys to a centralized exchange is that they are prone to losses due to corrupt practices and embezzlement. No example proves this better than the story of Gerald Cotten and QuadrigaCX.
During the crypto boom of 2017, QuadrigaCX was the biggest Canadian custodial exchange with over 350,000 users and hundreds of millions of dollars in transactions. However, after the crypto boom, there was a crash that uncovered many unforeseen secrets.
People discovered that the exchange was an elaborate Ponzi scheme. Moreover, Cotten alone held the private keys to many cold wallets containing hundreds of millions of users’ assets that they never recovered.
Cotten died in late 2018, and about $200 million worth of crypto assets followed him to the grave.
Whales Don’t Use a Simple Self-custody Wallet ❌
With self-custody wallets, only you control the private key. This means that only you have access to your crypto assets and no one else.
So when you download a non-custodial wallet, it will give you a list of 12 to 24 words (also known as a seed phrase) that you have to remember to access your funds.
So if you’ve lost your phone where you had your crypto, you can recover the wallet by downloading the app again and inputting your seed phrase. You can back up the key or write it down. However, if you forget it, you could lose access to your funds forever.
Self-custody wallets are definitely better than exchanges. However, simple self-custody wallets are not secure enough for whales.
Why? Let me explain…
With most non-custodial wallets, the seed phrase is the only way to recover the wallet. If you lose your seed phrase or someone steals it, all your funds are lost forever.
This is what Vitalik Buterin (Ethereum’s co-creator) calls a “single point of failure.”
Let’s imagine that you have hundreds of millions of dollars worth of crypto to secure. Would you be comfortable with knowing that if you lose your seed phrase, you’ll lose your entire net worth?
It is worth noting that this applies to hardware wallets too.
While hardware wallets are definitely a safer place to store crypto, they still have a single point of failure.
So how do whales store crypto?
Whales Store Crypto in Multi-key Wallets 🔐
Multi-key wallets are the safest way to store crypto and reduce the risk of lost seed phrases and phishing scams. All whales store crypto using multi-key wallets.
So how does that work?
While most crypto wallets are secured by one seed phrase only, multi-key wallets are protected with multiple keys.
For example, a multi-key wallet with a 2-of-3 setup uses 3 seed phrases, and 2 of those 3 are required to access your wallet or recover it.
This means that if you lose one seed phrase, you can still access your wallet. Furthermore, if someone steals one, they still can’t access it.
This makes multi-key wallets much more secure than other wallets.
And that’s why for years, crypto funds and whales have been using multi-key wallets to secure their crypto assets.
One of the most secure multi-key wallets is Gnosis Safe, with $40B of crypto secured and a $1M bug bounty program.
However, setting up a multi-key wallet like Gnosis Safe is extremely complex. That’s why it remains an inaccessible solution for 99% of users.
Store Crypto Like Whales With Linen Wallet
At Linen Wallet, we took Gnosis Safe technology and made it simple to use, building a wallet that allows EVERYONE to store crypto exactly as whales do with the simplicity of a mobile app.
So how does that work? Below are 3 points to help you understand everything you need to know:
1. Linen Wallet is built on the same technology used by whales and crypto funds
Linen Wallet is built on Gnosis Safe’s smart contract, the gold standard in crypto security. For years, crypto funds and whales have been using Gnosis Safe’s contracts to secure their crypto assets. However, until now, multi-key wallets were too complex to set up for everyone else. For the first time, Linen has made the same technology and security accessible to everyone with a simple app.
2. How does it work?
Linen Wallet is not a simple crypto wallet but a multi-key wallet. While most crypto wallets are secured by one seed phrase only, Linen Wallet is protected using 3 seed phrases, and 2 of those 3 are required to access your wallet or recover it.
This makes Linen Wallet much more secure than other wallets. You lose one seed phrase? You can still access your wallet. Someone steals one? They still can’t access it. This prevents many seed phrase phishing attacks on DeFi and NFT community members.
3. Where are the 3 seed phrases stored?
With most non-custodial wallets, the risk of losing your seed phrase is very high. According to Chainalysis, a leading blockchain analytics firm, almost 4,000,000 BTC (worth $79,476,000,000 at today’s price) have been lost since the first Bitcoin block was mined.
Linen Wallet makes it easy to manage your seed phrases to reduce the risk of losing them:
- 1 seed phrase is stored in a secure area of your iPhone.
- 1 seed phrase is stored in your iCloud Drive.
- 1 seed phrase is secured by Linen, and you can access it using your phone number and email.
Download Linen Wallet on iOS 👉 https://apps.apple.com/US/app/id1480509067
Join the Android Waitlist (Coming later this year) 👉 https://linen.app/android-waitlist/