Introduction: When Things Go Wrong
You've learned to secure your Bitcoin with hardware wallets, seed phrases, and advanced privacy techniques. But security isn't just about prevention—it's about recovery. What happens when disaster strikes?
This module covers emergency recovery planning: preparing for scenarios where your normal access to Bitcoin is compromised, whether by natural disaster, theft, incapacitation, or death.
The Stakes Are Real
Unlike traditional finance, there's no Bitcoin customer service to call. If you lose access to your keys and have no recovery plan, your Bitcoin is gone forever. Estimates suggest 3-4 million BTC are permanently lost due to poor backup practices.
Disaster Scenarios to Plan For
Effective recovery planning starts with identifying what can go wrong. Consider these scenarios:
Scenario 1: Physical Disaster
Examples: House fire, flood, earthquake, tornado
- Your hardware wallet is destroyed
- Your seed phrase backup (if stored at home) is destroyed
- Your computer and all local data is gone
Key question: Can you recover your Bitcoin using only what exists outside your home?
Scenario 2: Theft/Robbery
Examples: Home invasion, burglary, $5 wrench attack
- Attackers find and take your hardware wallet
- Attackers find and photograph your seed phrase
- You're coerced to reveal your PIN or passphrase
Key question: Is your seed phrase hidden well enough that thieves won't find it?
Scenario 3: Incapacitation
Examples: Coma, sudden illness, accident, memory loss
- You can't access your Bitcoin or communicate instructions
- Family members don't know your Bitcoin exists
- Family knows but can't access it
Key question: Can your trusted contacts access your Bitcoin if you can't help them?
Scenario 4: Death
Examples: Sudden death, death after long illness
- Same as incapacitation, but permanent
- Legal/estate complications may arise
- Heirs may not know how to handle Bitcoin
Key question: Have you created an inheritance plan? (Covered in Stage 4)
Scenario 5: Hardware/Software Failure
Examples: Hardware wallet breaks, firmware corruption, lost device
- Device won't turn on or is bricked
- Firmware update fails
- Device is lost during travel
Key question: Do you have your seed phrase backed up correctly?
Scenario 6: Forced Relocation
Examples: Political persecution, war, emergency evacuation
- You must leave immediately with minimal possessions
- Taking physical backups may be risky or impossible
- Border crossings may involve searches
Key question: Can you recover your Bitcoin using only what's in your head?
Backup Verification: Test Before You Need It
The worst time to discover your backup doesn't work is when you need it. Regular verification is essential.
What to Verify
- Seed phrase readability: Can you still read every word clearly?
- Seed phrase completeness: Are all words present and in order?
- Derivation path: Do you know which derivation path your wallet uses?
- Passphrase (if used): Is your passphrase backed up or memorized?
- Multi-sig setup: Do you have all required keys accessible?
How to Verify Without Risk
Method 1: Address Verification (Safest)
- Get a NEW hardware wallet or use a dedicated air-gapped computer
- Enter your seed phrase on this separate device
- Compare the first few receive addresses to your original wallet
- If addresses match, your backup is correct
- Wipe the verification device completely
Why it's safe: You never expose your seed to an internet-connected device.
Method 2: Watch-Only Wallet
- Derive an xpub from your seed on your hardware wallet
- Import the xpub into Sparrow or Electrum as a watch-only wallet
- Verify it shows your correct balance and transaction history
Note: This verifies your xpub, but not your full seed backup directly.
Never Enter Seeds on Everyday Devices
Do NOT type your seed phrase into a computer, phone, or any device that connects to the internet for regular use. Malware could capture it. Use only dedicated, air-gapped devices for verification.
Verification Schedule
- Annually: Full verification of all backups
- After any change: New wallet, new passphrase, new multi-sig setup
- After disasters: If a backup was exposed to water, fire, or relocation
- Before large deposits: Verify before moving significant funds
Geographic Redundancy: The 3-2-1 Rule
A single backup location isn't enough. Apply the 3-2-1 rule:
- 3 copies of your seed phrase
- 2 different storage media (e.g., steel + paper)
- 1 copy in a different geographic location
Geographic Separation Ideas
Home Location
- Hidden in a non-obvious location (not a safe—first place thieves look)
- Fireproof and waterproof storage if possible
- Consider hiding multiple pieces of a split backup
Bank Safe Deposit Box
- Protected from home disasters
- Some privacy concerns (bank employees, legal subpoenas)
- May be inaccessible during bank holidays or system outages
- Consider encrypting or splitting what you store there
Trusted Family/Friend
- Someone in a different city or region
- They don't need to know what they're holding (sealed envelope)
- Or use Shamir Secret Sharing so they hold only one piece
- Consider what happens if THEY have a disaster
Encrypted Digital Backup (Advanced)
- Seed encrypted with a strong passphrase you've memorized
- Stored in multiple cloud services (e.g., encrypted file on Google Drive, Dropbox)
- The encryption key is NEVER stored digitally
- Provides ultimate geographic redundancy
Warning: This is advanced and risky if done incorrectly. Only consider if you understand encryption well.
Trusted Contacts and Emergency Access
If you're incapacitated or dead, someone needs to be able to access your Bitcoin. This requires careful planning.
Choosing Trusted Contacts
- Technical competence: Can they follow instructions to recover Bitcoin?
- Trustworthiness: Will they honor your wishes and not steal?
- Reliability: Will they still be around and capable in 20 years?
- Accessibility: Can you reach them or their backup?
Information They Need
- That you own Bitcoin: Many people don't know their family member is a holder
- Where backups are located: All locations, not just the obvious ones
- How to recover: Step-by-step instructions for their technical level
- Who to contact for help: A Bitcoin-savvy friend, lawyer, or service
- What NOT to do: Don't trust random "recovery services," don't share seeds publicly
Creating an Emergency Document
Create a physical document (stored securely) that explains:
- What Bitcoin is and that you own some
- Where to find your seed phrase backup(s)
- What wallet software to use
- Step-by-step recovery instructions
- Contact information for a trusted Bitcoin-knowledgeable person
- Warnings about scams and fake recovery services
Important: This document should NOT contain your seed phrase—only instructions on where to find it.
The Trust Dilemma
The more people know about your Bitcoin, the higher the risk of theft. The fewer people know, the higher the risk of permanent loss. Find your balance based on your personal situation and threat model.
Dead Man's Switches
A dead man's switch is a mechanism that triggers automatically if you DON'T take action. It can be used to release information to heirs if you become incapacitated.
How Dead Man's Switches Work
- You set up a service that requires periodic "check-in" (e.g., weekly or monthly)
- If you miss a check-in, you get reminders
- If you miss multiple check-ins, the switch triggers
- When triggered, pre-written messages/files are sent to your designated contacts
Options for Dead Man's Switches
Google Inactive Account Manager
- Free, built into Google accounts
- Triggers after 3-18 months of inactivity
- Can share Google Drive contents or send email
- Relatively trustworthy (Google isn't going anywhere)
Use for: Sending encrypted instructions or location of physical backups
Dedicated Services
- Services like Dead Man's Switch, SafeNote, or similar
- More flexible check-in schedules
- Less certain about long-term availability
Warning: Evaluate carefully—company could shut down
DIY with Scheduled Emails
- Schedule future-dated emails to your contacts
- Reschedule them each month (your "check-in")
- If you stop rescheduling, emails eventually send
Downside: Requires discipline to maintain
Don't Send Seeds via Dead Man's Switch
Never configure a dead man's switch to directly send your seed phrase. Instead, send:
- Instructions on where to find physical backups
- Decryption passwords for encrypted backups
- Contact information for your trusted Bitcoin advisor
Emergency Recovery Kits
An emergency kit contains everything needed to recover your Bitcoin in one package. You might create multiple kits for different scenarios.
Home Emergency Kit
- Seed phrase backup: On steel plates, stored securely
- Passphrase reminder: If you use one (don't write it plainly)
- Hardware wallet: Pre-configured with your accounts
- Written instructions: How to use the hardware wallet
- List of accounts: Which wallets/coins you own
Go-Bag / Travel Kit
For scenarios where you must leave immediately:
- Hardware wallet: Small, easy to conceal
- Memorized passphrase: Your seed is at another location; passphrase in your head
- Or: First few/last few words of seed memorized; rest at remote location
Remote / Offsite Kit
- Complete seed backup: In case home is destroyed
- Recovery instructions: For you or your heirs
- Stored at: Bank safe deposit box, trusted contact, or secure location
The Memorization Option
For the ultimate in portability, some people memorize their entire seed phrase. This is risky (memory fades, especially under stress) but can be valuable as a backup of last resort. If you do this:
- Use memory techniques (memory palace, story method)
- Practice regularly (at least monthly)
- Still maintain physical backups—memorization is your emergency fallback
Recovery Procedures: Step-by-Step
Document your recovery procedures so you (or your heirs) can follow them under stress.
Procedure 1: Hardware Wallet Lost/Broken
- Don't panic. Your Bitcoin is safe if you have your seed.
- Acquire a new hardware wallet (same brand is easiest, but any BIP39-compatible wallet works)
- Retrieve your seed phrase from your backup location
- Restore the wallet using the "recover from seed" option
- Enter your passphrase if you use one
- Verify your balance appears correctly
- Securely return the seed backup to its storage location
Procedure 2: Home Destroyed (Fire/Flood)
- Prioritize your safety first. Bitcoin can wait.
- Access your offsite backup (bank safe deposit, trusted contact, etc.)
- Acquire a new hardware wallet
- Restore from your backup seed
- Consider moving funds if you're worried the disaster compromised any backups
- Create new backups for your new living situation
Procedure 3: Suspected Seed Compromise
- Act immediately. Time is critical.
- Generate a NEW seed phrase on your hardware wallet
- Create secure backups of the new seed
- Send ALL funds from the compromised wallet to the new wallet
- Verify the transfer completed
- Destroy old seed backups securely (burn, shred, or melt steel plates)
- Investigate how the compromise happened to prevent recurrence
Procedure 4: Recovering for Deceased/Incapacitated Person
- Locate the emergency document (if one exists)
- Find all backup locations listed in the document
- Contact the trusted Bitcoin advisor if specified
- Acquire a hardware wallet if needed
- Restore using the seed phrase
- Do not rush to sell/move. Take time to understand the holdings
- Consult a tax professional about inheritance implications
Regular Maintenance Checklist
Emergency preparedness isn't a one-time task. Use this checklist regularly.
Monthly
- Check-in with any dead man's switch services
- If memorizing seed, practice recall
- Review any time-sensitive elements of your plan
Quarterly
- Verify hardware wallet firmware is up to date
- Confirm you can access offsite backup locations
- Review and update emergency contact information
Annually
- Full verification of all seed phrase backups (readability, accuracy)
- Test recovery procedure on a new device
- Review and update emergency documentation
- Reassess your threat model and adjust plans
- Communicate any changes to trusted contacts
After Major Life Events
- Moving: Update all location-based backups
- Marriage/Divorce: Reassess trusted contacts and inheritance plans
- Children: Update inheritance planning
- Significant BTC accumulation: Consider upgrading security (multi-sig)
- Death of trusted contact: Find replacement and update plans
Key Takeaways: Emergency Recovery Plans
- Plan for multiple disaster scenarios. Fire, theft, incapacitation, and death all require different preparations.
- Verify your backups regularly. A backup you haven't tested might not work when you need it.
- Geographic redundancy is essential. Use the 3-2-1 rule: 3 copies, 2 media types, 1 offsite.
- Prepare trusted contacts. They need to know your Bitcoin exists and how to access it if you can't help them.
- Consider dead man's switches. Automated systems can release information if you become incapacitated.
- Create emergency kits. Everything needed for recovery in one secure package.
- Document your procedures. Written step-by-step guides reduce errors under stress.
- Maintain your plan regularly. Emergency preparedness requires ongoing attention.
Congratulations! You've Completed Stage 3
You now have the knowledge to self-host Lightning, use advanced privacy techniques like PayJoin and PayNym, and create comprehensive emergency recovery plans. You're operating at a high level of Bitcoin sovereignty.
Next: Stage 4 — Building Your Bitcoin Citadel
The final stage covers bringing everything together: building a complete sovereignty stack,
inheritance planning for your heirs, and living on a Bitcoin standard.
⚡ Apply This Knowledge
Practice on a real Bitcoin test network — free coins, zero risk.
Inspect UTXOs and Build a Transaction
Open Sparrow on signet, browse your UTXOs, use coin control to pick inputs, set a custom fee rate, sign, and broadcast. Verify on mempool.space/signet.
Decode a Raw Bitcoin Transaction
Get raw hex from mempool.space, decode every field on learnmeabitcoin.com (version, inputs, witness data, locktime), then visualize in Sparrow.