This ended up longer than expected
TL;DR: I’m looking for your thoughts on passphrases, yes or no? Taking into consideration a balance of security and usability.
Post:
So here’s my situation: I currently have a Ledger which I am very happy with. When I set it up I read a lot about the passphrase feature or “25th word” (I know that’s a bad name for it created by Ledger) and I decided to use the feature. However, since then I have been questioning my decision and keep going back and forth on the idea.
Here are some of my thoughts:
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The main reason I set up the feature was security from a hacking point of view. In my mind at the time was that in theory someone could guess/bruteforce my 24 words, so with a passphrase they would stand virtually no chance since it could be anything (doesn’t need to be a real word). However, now I have a better understanding I realise that guessing/bruteforcing would be next to impossible. So I’m left wondering if a passphrase is unnecessary complexity or still best practice.
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Am I unnecessarily complicating things for my next of kin in the event I suddenly died/dementia or whatever. I’ve discussed my Bitcoin holdings with my wife and she knows that the 24 words are everything, but trying to explain the passphrase side of things isn’t easy to explain to someone with no experience in this area. It seems much less complicated with just 24 words. I’m left wondering if I’m potentially locking my next of kin out or if I should be trying harder to explain the feature.
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Moving on from point 2, I obviously want to lock anyone else out that may have stolen my seed. That’s where the passphrase is an advantage. The decision I struggle with here is how likely that is. My seed has never seen a camera, computer, printer etc. and is stored on metal in my safe.
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Is a seed + passphrase considered 2 of 2 multi-sig? I’ve heard that’s a bad idea from a lot of sources. I’m not supposed to store my passphrase with my seed and I have nowhere else to put it so it’s stored in a password manager (passphrase only). I’m not worried about hacking here, they would need the 24 words as well, but more like I somehow lock myself out of the password manager, it’s wiped somehow, my wife can’t get in etc. I have the passphrase memorised but it’s 5 words and human memory isn’t reliable.
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Compatibility. With only the 24 words I can use just about any wallet, with the passphrase I’m restricted to some hardware wallets and maybe 1 or 2 software wallets? Thoughts here are that in an emergency (seed stolen or something) I can quickly get a trusted mobile wallet to move my funds and set up a new seed later. Where as with a passphrase there are far less options and could mean waiting for shipping. Also, with the 24 words I can tell my wife “forget the Ledger and complicated stuff, put these words into a trusted mobile wallet, move funds” but it’s not that straightforward with a passphrase. The downside of course is that anyone else could do that too.
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Plausible deniability. This was a thought when I set it up but not as much now. Someone sticks a gun to your head you’re going to give them whatever they want, sure a decoy might work but if it doesn’t you’re probably getting kneecapped and then robbed anyway. I don’t have a Lambo outside or any other reason for someone to think I’m worth robbing so I’d like to think the chances of an attack are low. A different option here could be to store your seed away from your home or hide it really well but if an attacker knew you have crypto then you’re probably getting kneecapped again.
I’ve probably forgotten things but these are the main points. Would love to here your thoughts
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