Would Your Bitcoin Survive a Natural Disaster?

You will no doubt have seen news of the ferocious fires currently ravaging and obliterating huge swathes of Los Angeles. The impacts have been devastating. People have lost their homes, their livelihoods, and entire communities have been decimated leaving little more than smouldering rubble in their place.

It’s beyond tragic to see people lose their entire livelihoods. Loss on this scale would be difficult to comprehend and come to terms with for anyone. Especially when it’s so unexpected and sudden. What now faces many residents in L.A is the grim task of trying to work out what they’ve lost, what’s salvageable, and the daunting task of trying to rebuild their lives. Material things are replaceable, but family heirlooms, cherished memories, and plans for the future are not. Catastrophes like this carry with them not just a huge financial toll, but an emotional one as well.

And accompanying this heartbreak is a growing sense of anger towards the state. Despite paying some of the highest tax rates in the country, many Californians are outraged at the poor preparedness and pervasive incompetence of the authorities charged with keeping them safe.

We are now learning that for years the state has recklessly underfunded the essential services required to deal with the threat of these wildfires. Unimaginable incompetence resulted in fire hydrants and emergency reservoirs running dry when they were needed most, and years of poor forest management created the perfect environment for these fires to take hold and spread.  There are even rumours circulating about gangs of looters pillaging abandoned homes and perhaps even being responsible for starting some of the fires themselves. To add insult to injury, we’re even hearing reports of insurance companies cancelling fire policies mere weeks before the blaze began.

What we’re witnessing here is more than just a natural disaster, it’s a culmination of decades of poor leadership and deep-set corruption. It acts as a stark reminder that you cannot rely on the state to protect you or your property. Nobody is coming to save you. You must protect yourself.

Some are using these fires to try and highlight Bitcoin’s superiority over real estate in terms of protecting and preserving wealth, using it as an example of why you should NEVER own property. But this is a bit misleading. Sure, Bitcoin’s distributed ledger will remain intact so long as there are still nodes running somewhere - a natural disaster is unlikely to knock out the whole global network.

But Bitcoin’s distributed network and your private keys are two distinct things. If you store your private keys locally, then a natural disaster could wipe out both your home AND your Bitcoin. A paper wallet has no chance of surviving a fire and neither do electronic devices. You might have taken steps to store your seed phrase on a fire-resistant metal plate, but looking at the pictures of what happened in California, how confident are you that you’d be able to recover it? The sad truth is that this fire has probably claimed some people’s Bitcoin alongside their house.

The point we’re trying to make is that these fires are an excellent reminder that when protecting your wealth in self-custody, you need to be extremely diligent to make sure that you can always access your funds no matter the circumstances.

That’s why this week we want to explore some of the ways you can start to think about building redundancy into your setup and the importance of scenario planning to keep your Bitcoin safe.

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Bitcoin Self-Custody – The Importance of Preparedness

When it comes to protecting your Bitcoin indefinitely, these wildfires serve to demonstrate that having all the critical data to secure your Bitcoin stored in one location creates increased risk of total loss. You might have been following best practice when it comes to using hardware wallets, storing your seed phrase offline, even on metal, and still have faced losing everything in a disaster like this.

It underscores the fact that you can never be too prepared or too thorough in your approach to keeping your Bitcoin safe. Let’s look at some of the ways that a Bitcoiner can increase the redundancy in their setup to help protect themselves from this kind of risk.

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Geographic Distribution

You can’t keep all your eggs in one basket. Storing backup copies of your seed phrase in different geographic locations is a smart move if you want to protect yourself from events like natural disasters. But before you do this, remember that your seed phrase is a very important piece of information. You can’t just leave it lying around anywhere.

There are various ways to approach this problem. You could go for a multi-sig setup where multiple keys are required to move funds and store them in different locations but never together. Or you could stick to a single private key but include a passphrase or ‘25^th word’ to your wallet to ensure the private key is not enough to move your funds on its own.

Regardless of the approach, the point is that geographic distribution can prevent you from suffering from localised risks that might destroy your critical data. Have you increased the redundancy of your setup by making use of geographic distribution?

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Durability of Storage Medium

This should go without saying, but paper is probably not the best medium to store a seed phrase or any critical information required to access your funds. It simply isn’t durable enough.

Offline hardware wallets are a good place to store your private keys and can be protected with pin codes. But while they’re better than paper, they are still not particularly durable, all electronics can be easily broken and may fail eventually.

Metal is always a great option as it’s a particularly durable medium, but it’s perhaps less readily usable compared to a HWW that you stored somewhere when you need to make a transaction. And as mentioned above, just relying on one metal plate in a single location might not be durable enough.

Another useful method is spending the time to commit your seed phrases and passphrases to memory. It’s an excellent option as it means you always have access wherever you go. But let’s not forget that a head injury might quickly render this method unreliable as well.

Every method available to store your critical data comes with its own trade-offs. Sit and consider your own setup. Could you introduce more redundancy by adopting a variety of these options to balance security and usability?

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Encrypted Vaults

Your self-custody setup might include storing some of the data needed to protect your funds offline and some of it online. This means that online threats can’t access your funds without also compromising you in the real world, and any real-world threats can’t access your funds without also compromising your online data.

Ultimately, this might mean you find yourself using encrypted online vaults to protect data that’s critical to accessing your funds. If this is the case, you again need to be thinking about building in redundancies. Have you made encrypted back-ups? Where are those stored? What about the passwords used to secure them? Are they memorised or do you have a sensible way of backing these up as well?

You need to be picking over every aspect of your self-custody setup to ensure that under a variety of different circumstances, you can still access the data you need.

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Access Protocols

Another key consideration is to think beyond just your own needs. What happens if you are incapacitated or you’re simply no longer around? It’s all well and good you understanding your setup and having various protocols for accessing your funds, but what about your family? How well do they understand your setup and how to use it under various circumstances? Have you left instructions for them to follow? How can you be sure that these are only accessible to them?

It's important to remember that redundancy planning isn’t just reserved for metal plates, electronics or online data. It also applies to you! You need to have plans in place for the eventuality that you become redundant in your setup.

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Distributed Nodes

Thinking about your fundamental Bitcoin security is one thing. But what about introducing redundancy to your sovereignty as well? It’s extremely important that you broadcast transactions via your own node to ensure your privacy and to make sure you’re not trusting any third-party hardware and verifying things for yourself.

Now imagine that something, perhaps a natural disaster, knocks your node offline but you’re in a situation where you need to broadcast a transaction. You are either going to have to wait until you can spin up a replacement node or risk broadcasting through someone else’s.

Perhaps extending your redundancy planning by running multiple geographically distributed Bitcoin nodes might be something you want to consider. That way even if your primary node goes offline, you can quickly connect to another that’s under your control.

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Bitcoin Self-Custody & Scenario Planning

Throughout this week’s newsletter we have used various scenarios to bring to life potential risks to your self-custody setup. By imagining things that might go wrong it makes it easier to prepare for them, and to the best of our ability, mitigate against them by building in redundancy.

Scenario planning is a useful thing to do and it’s often as straightforward as asking yourself some simple questions. For example:

• If your hardware wallet fails or goes missing,what are your next steps?
• If your physical back-ups get destroyed, what are your next steps?
• If your computer fails, what are your next steps?
• If your phone with your 2FA dies, how do you restore it?
• You forget the password to your encrypted vault. How do you regain access to it?
• There was a natural disaster, all your devices are gone. How do you recover your funds to new devices?
• There is instability in your region and travelling with Bitcoin related hardware is risky. What do your plans look like?
• Your node went offline permanently, how would you regain connection to the Bitcoin network?

This is not an exhaustive list. If you sit and ponder these types of questions long enough, you’ll realise that there are all sorts of scenarios that you can potentially plan for and mitigate against. You might even get as far as buying Faraday bags to protect your devices in the event of an extreme solar flare or Electro Magnetic Pulse (EMP) attack.

That last suggestion might seem a little extreme to some, but the point we’re trying to make is that you can always invest more time and effort into protecting your property. The more time you spend thinking about it, the more prepared you will be, and scenario planning is something you should definitely devote some time to.

(Also Faraday bags are very cool and also inexpensive, so there’s very little downside in using them)

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Protect Your Property - The Bitcoin Way

What’s happening in California is devastating and our hearts go out to everyone caught up in it, Bitcoiners and no-coiners alike. Nobody deserves to suffer their entire lives being destroyed in an instant and every person living there deserved better from their government.

Nevertheless, shying away from the reality of these events doesn’t help anyone and we should have all learned long ago that relying on government to protect us is not a wise strategy. We feel it’s our duty to at least highlight the ways in which you can prepare yourself so that if you do suffer something similar, then at least you don’t lose everything and any wealth you did store in Bitcoin remains protected.

We understand that the task can seem extremely daunting. Have you accounted for every scenario? Are there any blind spots? How do you leave sensible instructions to family members without revealing too much sensitive data in one place? These are all considerations that must be taken very carefully.

If you feel you need a helping hand working through all those scenarios and making your self-custody setup as robust as possible, then that’s exactly what we’re here for. Book a call with one of our experts today and let’s make sure you are prepared for anything.