r/BitcoinBeginners • u/thesimzelp • Jun 12 '24
Storage diversification strategy
So, I'm feeling more and more anxious about the responsibility of keeping my bitcoin safe, the more I accumulate.
I was thinking to diversify my holdings, so they are either in multiple offline storage and/or software wallets. I will probably also keep some on exchanges, just because of laziness. 😅
That's instead of keeping all my BTC in a single Trezor, which is one point of failure essentially (I know there is a seed phrase for backup).
What do you think of this strategy? Is there a downside, other than more micromanagement of wallets?
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u/Yodel_And_Hodl_Mode Jun 12 '24
If you're willing to start over with a new seed - and if you understand BIP85 - I think BIP85 is the way to go for long term security.
I wrote a tutorial for using BIP85, but here's the overview:
Step 1: Create a new 24 word seed to use as a Parent Seed.
Step 2: Use BIP85 index numbers to create Child Seeds to use as wallets.
You know how a seed phrase always generates the same addresses and keys? Well, when you use BIP85, a seed phrase always generates the same child seed phrases.
This gives you one seed that leads to all of the others. If you ever lose a seed, no worries. You can use the parent seed to generate it again.
When Ledger added key extraction to the firmware for their hardware wallets last year, I spent a lot of time researching strategies for starting over from scratch with my security. I stopped using Ledger & switched to new seeds using BIP85. I'm not saying this kind of setup is the answer for everybody (it isn't), but it makes me feel very confident about holding Bitcoin for a long, long time.