Readers Crypto Questions. Using Crypto Wallets, Recovering Them Via Mnemonic Phrases And More

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The editorial team at CryptoCoinNews receives regular feedback on the news stories and analyses published on the site. Ranging from the technical to the curious, we do our best to respond to them.

The recent developments in Bitcoin’s widely-covered scaling issues, beginning with SegWit activation and the Bitcoin Cash fork in August and culminating, for now, in the abortive Segwit2x fork have stirred particular interest in our readership. The most common queries coming to us reflect their concerns about how to “claim” new crypto generated by these forks, and how they might affect regular Bitcoin use.

Here is a selection of these questions (and our responses), beginning with one from Irish pro rugby player Jack Carty:

Q:  I have Coinbase as my wallet for BTC, ETH and LTC, then I am using Bitstamp for my XRP. Do you think it would be wise to go about getting a wallet to store all my cryptos or should it be a decision I should take down the road if I was to continue to invest/hold larger amounts?

Ultimately, it’s a question of weighing convenience against security. The idea of storing crypto online with services like Coinbase may appeal to people because of perceived security (you only need a password and username) and safety.

But even if it’s a couple of dollars’ worth of Bitcoin or a small amount of XRP, you should really consider how badly managed these online services are in terms of customer support, the fees associated with using them, and the risk of them simply disappearing with your money one day. You only need to remember the stories of exchanges like Mt. Gox and BTC-E and how they lost millions of dollars worth of customer assets after building up years of trust and reputation.

Storing coins on third-party services like Coinbase makes you vulnerable to several risks. You are not in control of your funds at all, you cannot choose how you spend them, you cannot set your own fees. You rely on their good faith to honour your withdrawals, to credit you with balances in the event of hard forks, to respond to your issues promptly.

Besides putting you (and only you) in full control of your digital assets, learning to use your own wallet is part of the fun and discovery with crypto. Crypto was built on ideals of liberalisation and decentralisation – ensuring you never needed to trust anyone to manage your wealth and letting you spend and transact the way you want.

Learning to use cryptocurrency with a wallet only you control can seem like a daunting task, but here are a few newbie-friendly ones to try.

1. Waves.
Ignoring all the other features of the Waves platform and that it’s also a cryptocurrency, the Waves wallet supports the major cryptocurrencies mentioned (BTC, ETH and LTC). It is a lightweight Chrome extension with a very simple GUI.

2. Electrum.
Bitcoin is king so if you transact heavily with BTC, you want to manage inputs, you want to decide fees, and you want a wallet that’s lightweight, flexible and even transportable. Electrum is highly recommended.

In the latest version, you can even opt to create SegWit wallets that’ll have you ready for full-blownSegWit implementation next year once sites begin to update software. It has a great (replace by fee) RBF feature that is helpful in times of heavy network load – basically, a full-feature Bitcoin wallet that can be as simple or as complex as you need it to be.

3. Coinomi or Jaxx.
Both Coinomi and Jaxx are good multi-crypto wallets, with support for a wide range of altcoins and tokens. They can both act as a wallet app on your phone, and have friendly user interfaces, letting you keep all your alts including XRP within easy access.

The only shortfall these wallets have is that they’re not fully open source. That’s unlikely to affect most casual users, though.

Q: Simon, as Coinbase is an advocate for the fork and if all goes ahead, do you see Bitcoin fork coins become available on Coinbase for BTC holders?

Coinbase has been a long advocate for Bitcoin Classic… their original founders years ago were the first to take sides in the 3-year “civil war” that they surely felt prematurely ended with the Segwit2x suspension. Their close corporate connections and aggressive threats in the past to throw support behind Bitcoin XT/Classic have made their reputation irreparable within the “core” Bitcoin community.

In the case of Bitcoin Cash, with which Coinbase made a U-turn on their original decision to NOT support, it would seem that Coinbase’s next logical step would be to support it after all, especially since Classic has announced its own end and joined ranks with Bitcoin Cash.

But if the resurrected Segwit2x happens, Coinbase can either give up on Bitcoin Classic aspirations and follow their lead to align with Bitcoin Cash… Or go with the riskier alternative of Segwit2x.

Either decision, they are almost certain to credit BTC holders because their long-term view seems to be to make their chosen fork the “new Bitcoin”.

The best answer for the average Bitcoin user: don’t choose sides. Store your Bitcoin in your own wallet and you’ll also own any and all coins on whichever fork happens.

Q: I have a Jaxx wallet on my phone – how do I back it up in case I lose my phone… what do I need to save etc in the cloud?

Jaxx uses a “mnemonic seed” as its method of recovery, currently a random string of 12 words. This seed is what you have to keep as a back up. If you ever lose your device, you can reinstall Jaxx (or any other wallet that supports mnemonic seed recovery) and simply restore your wallet by entering that seed.

To retrieve your seed from Jaxx, open your wallet, select Backup/Recovery Phrase, check the “Yes, I understand how Jaxx backup works”, and click Next. Your seed will be shown. Click Next to confirm.

To restore, install and open. Instead of choosing to Create a New Wallet, choose Pair/Restore Wallet. Enter your seed (Recovery Phrase) in the exact order with spaces. Click Next and continue set up.

Q: Are 12-word seeds good enough? 12 random words from a public dictionary of only 2,048 words don’t sound very secure.

It’s a lot safer than we can fathom. Here’s the simple maths: 2,048 multiplied by 2,048 11 times is a possibility of 1 in more than 5,000,000,000,000,000,000,000,000,000,000,000,000,000 (that’s 39 zeroes). For perspective, a brute force hacker would need to process 10 billion guesses every second for 1.7 X 1022 years… more than twice the age of our planet.

Image from pixabay here.

 

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