A major cause of bitcoin loss is human error, specifically from improper wallet usage. This can start from the first time you generate a new wallet and send bitcoin to it.
Before using or generating a new wallet, there are a few things that are the absolutely minimum you should do before using that wallet and sending all your cryptocurrency to it. This is even more crucial for those who have never used a cryptocurrency wallet before.
These tasks will not only get you familiar with using a wallet, but will provide a sanity check and confirmation you're doing things correctly.
1. Write Down Your Recovery Phrase
When you generated your wallet, it should have given you a 12-24 word phrase in a specific order.
Your recovery phrase is the one thing that will recover your wallet and cryptocurrency if you lose it or break the device it is on. You can enter those words on another device to recover your wallet as many times as you like. You should think of your recovery phrase as your wallet.
If you didn't write it down and don’t have coins on it, wipe the device and generate a new wallet because you're out of luck if something unexpected happens that device.
If you didn't write it down and already have coins on your wallet, we recommend sending your funds to an exchange you have access to. Once confirming they are in the exchange, wipe the device and generate a new wallet. Write down the recovery phrase this time and complete the exercises below before sending the funds back to your device.
If you happen to have another device, generate a new wallet and write down the recovery phrase this time. Do the exercises below and send your funds to the new wallet afterwards.
For more topics on recovery phases, see below:
2. Send a SMALL Amount TO and FROM Your New Wallet
Imagine you're sending all your cryptocurrency to a new wallet for the first time. You check the balance on your new wallet only to see a zero balance. You'd freak out right? Absolutely. You realized you made a typo in the address you sent it to. Uh oh.
Set your wallet to receive its first transaction and test it by first sending a very small transaction and confirming that transaction (minus fees) reached your wallet balance. (It might not be instant as it might take some time for the transaction to go through, so be patient).
Once you have confirmed you can send to your new wallet successfully, send a smaller amount (leave a bit on your new wallet) back to your exchange/old wallet and check that the transaction was successful by confirm the balance.
This not only confirms you're using your wallet and making transactions correctly, but it gives you the confidence you know what you're doing (both sending and receiving transactions) without the stress and anxiety.
If you make a mistake, it's only an inconsequential amount lost and you're able to learn from your mistake to ensure it never happens again.
3. Wipe & Recover Your Wallet
After you confirm that small transaction made it to your wallet and you see it on your balance, the next step is to erase your wallet.
"Why would I do that!?"
Remember, your recovery phrase is your wallet. As long as you have that, you have your cryptocurrency.
You want to erase your wallet to test that you can recover your wallet using your recovery phrase. Again with only a small amount on your wallet, it's an inconsequential amount to lose if you make a mistake.
So wipe your device, and enter your recovery phrase into the wallet to restore it. If you are unsure how to do that, look up your wallet's documentation. There most likely is a guide for how to recover your wallet that is specific to your wallet's software.
Once restored, confirm that small transaction is there. If not, try wiping and recovering again. It's possible that you entered your recovery seed wrong or there was a typo in your recovery phrase. If you have a typo in your recovery phrase, look to the BIP39 wordlist for possible words. If you're unable to figure it out, we recommend generating a new wallet and repeating these tasks.
This exercise will give you practice and the confidence that you can recover your wallet in the future. It will save you from the anxiety and stress if you lost or broke your wallet and were recovering it for the first time.
If you have not done this and already have cryptocurrency on your wallet, we recommend recovering your wallet on a second device and checking if the balance is the same. If it does not match, wipe the second device and try again. If it still does not match, we recommend sending your cryptocurrency to a new wallet where you've completed these exercises.
If you do not have another device, another option is sending a majority of your cryptocurrency back to an exchange. Wipe the device and recover your existing wallet with your recovery phrase. Confirm the balance matches the remaining cryptocurrency you left on the wallet. If it does not match and there is a zero balance, generate a new wallet on your device and repeat these exercises before sending your cryptocurrency to the new wallet.