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Multisig Backup & Recovery

Proper backup is critical for multisig. The complexity that provides security can also lead to permanent loss if backups aren't done correctly.

What You Must Back Up​

For a 2-of-3 multisig, you need to secure:

ItemCopiesPurpose
Seed Phrase #11Recover Key 1
Seed Phrase #21Recover Key 2
Seed Phrase #31Recover Key 3
Wallet Descriptor3+Reconstruct multisig structure
Device PINs3Access hardware wallets
Critical

The wallet descriptor is as important as your seed phrases!

Without it, having all three seeds won't help you — you won't know how to combine them into the multisig.

Understanding the Wallet Descriptor​

The wallet descriptor contains:

Example (simplified):
wsh(sortedmulti(2,
  [73c5da0a/48h/0h/0h/2h]xpub6...ABC,
  [8f3a2b1c/48h/0h/0h/2h]xpub6...DEF,
  [a2c4e6f8/48h/0h/0h/2h]xpub6...GHI
))#checksum

This tells wallet software:

  • wsh — Native SegWit script type
  • sortedmulti(2,...) — 2-of-3 multisig with sorted keys
  • [fingerprint/path] — Which device and derivation for each key
  • xpub... — The extended public key for each signer
  • #checksum — Verification that descriptor is correct

From seed phrases alone, you get xpubs, but you don't know:

  • Which xpubs belong together
  • What the M-of-N requirement is
  • The correct derivation paths
  • The script type used

Backup Storage Strategy​

The Cardinal Rules​

  1. Never store multiple seed phrases together
  2. Never store a seed with its corresponding device
  3. Store wallet descriptor copies with seed backups
  4. Geographic separation — Different buildings, ideally different cities

Notice:

  • Each seed is in a different location
  • No seed is stored with its own device
  • Wallet descriptor has multiple copies
  • Any two locations provide enough to recover

Creating Your Backups​

Seed Phrase Backups (Metal)​

Why metal:

  • Survives house fires (paper burns)
  • Survives flooding (paper disintegrates)
  • Doesn't fade over time (ink fades)
  • Resistant to physical damage

Process:

  1. Purchase 3 metal backup devices
  2. After verifying each seed works, stamp/engrave onto metal
  3. Double-check every word is correct
  4. Store in separate locations

Verification:

  • Read back what you stamped
  • Compare letter-by-letter with the seed
  • One wrong letter = wrong seed = lost funds

Wallet Descriptor Backup​

Export from Sparrow:

  1. Go to Settings tab
  2. Click QR code icon (top right)
  3. Click "Save PDF..."
  4. Print multiple copies

The PDF includes:

  • QR code (scannable for recovery)
  • All xpubs in text form
  • Fingerprints and derivation paths
  • Human-readable format

Storage:

  • Print on acid-free paper
  • Laminate if possible
  • Store one copy with each seed backup
  • Consider an encrypted digital backup (USB drive in safe)

Recovery Scenarios​

Scenario 1: Lost One Hardware Wallet​

Situation: Device #2 is lost or broken, but you have its seed backup.

Solution:

  1. Purchase new hardware wallet
  2. Restore seed #2 onto new device
  3. Re-register the multisig on the new device
  4. Verify addresses match the other devices
  5. Move funds to a fresh multisig (recommended, not required)

Why it works: You still have 3 working keys (2 devices + 1 restored).

Scenario 2: Lost One Seed Phrase​

Situation: Seed backup #1 was destroyed, but Device #1 still works.

Solution:

  1. Device #1 still holds Key #1 — you can still sign
  2. Use Device #1 + one other device to move funds
  3. Create a NEW multisig wallet with 3 fresh seeds
  4. Transfer all funds to the new wallet
  5. Properly backup all 3 new seeds

Why immediate action: If Device #1 breaks now, you've lost Key #1 forever.

Scenario 3: One Device Stolen​

Situation: Thief took Hardware Wallet #3.

Solution:

  1. Don't panic — Thief needs 2 keys, they only have 1
  2. Use Device #1 + Device #2 to move funds immediately
  3. Create a NEW multisig wallet with fresh seeds
  4. Transfer all funds to the new wallet
  5. The stolen device is now worthless

Time sensitivity: Move funds before thief can potentially compromise another key.

Scenario 4: Complete Recovery (Worst Case)​

Situation: All three hardware wallets are destroyed. You have 2 seed backups and the wallet descriptor.

Recovery Steps:

  1. Obtain new hardware wallets (2 minimum)

  2. Restore seeds onto new devices:

    • Device A: Restore Seed #1
    • Device B: Restore Seed #2

  3. Import wallet descriptor into Sparrow:

    • Open Sparrow Wallet
    • File → New Wallet
    • Click the scan icon next to wallet name
    • Scan the QR code from your descriptor PDF
    • Or: File → Import Wallet → Select Sparrow format

  4. Verify recovery:

    • Check that addresses match what you expected
    • Confirm fingerprints match your records
    • Verify balance appears correctly

  5. Sign a test transaction:

    • Send a small amount to confirm signing works
    • Use both restored devices

  6. Create fresh multisig (recommended):

    • Generate 3 new seeds on 3 new devices
    • Create new multisig wallet
    • Transfer all funds from recovered wallet
    • Properly backup everything

Testing Your Recovery​

Before depositing significant funds, test recovery:

Test 1: Single Device Recovery​

  1. Wipe Device #1 to factory settings
  2. Restore Seed #1 onto it
  3. Re-register the multisig
  4. Verify the fingerprint matches
  5. Verify addresses match other devices
  6. Sign a small test transaction

Test 2: Full Wallet Recovery​

  1. Delete the wallet from Sparrow
  2. Re-import using only the wallet descriptor
  3. Verify balances and addresses appear
  4. Connect restored devices
  5. Sign a transaction successfully

Test 3: Simulate Disaster​

  1. Pretend you lost all hardware wallets
  2. Using only 2 seed backups + descriptor:
    • Restore seeds to new/different devices
    • Import descriptor into Sparrow
    • Verify you can see your balance
    • Sign and broadcast a transaction

If all tests pass, your backup strategy works.

Recovery Checklist​

Use this checklist to verify your backup status:

Seed Phrases​

  • Seed #1 backed up on metal
  • Seed #2 backed up on metal
  • Seed #3 backed up on metal
  • Each seed stored in separate location
  • No seed stored with its device
  • All seeds verified (restore test passed)

Wallet Descriptor​

  • Exported as PDF with QR code
  • Printed multiple copies
  • Copy stored with each seed backup
  • Digital backup on encrypted USB (optional)
  • Import test successful

Hardware Wallets​

  • All devices have unique PINs
  • PINs recorded separately from seeds
  • Multisig registered on all devices
  • Addresses verified on all devices
  • Stored in different locations from seeds

Documentation​

  • Fingerprint recorded for each device
  • Locations documented (where is what)
  • Trusted person knows where to find info (if needed)

Inheritance Considerations​

Multisig adds complexity for inheritance. Your heirs need:

  1. Knowledge that the multisig exists
  2. Access to 2 of 3 seed backups
  3. The wallet descriptor
  4. Instructions on how to recover

Options:​

DIY Inheritance:

  • Write clear instructions
  • Store with a lawyer or in a safe place
  • Consider a time-locked letter service

Collaborative Custody:

  • Services like Unchained, Casa, Nunchuk offer inheritance features
  • They can help heirs recover funds
  • Removes technical burden from family

Trusted Third Party:

  • Give one key to a trusted person/lawyer
  • They can assist heirs but can't steal funds alone

Common Backup Mistakes​

Mistake: Storing Seeds Digitally​

Problem: Screenshots, cloud storage, email = hackable

Solution: Metal backups only, never digital for seeds

Mistake: All Backups in One Location​

Problem: Single fire/flood/theft destroys everything

Solution: Geographic distribution across multiple locations

Mistake: No Wallet Descriptor Backup​

Problem: Can't reconstruct multisig even with all seeds

Solution: Multiple printed copies stored with seeds

Mistake: Never Testing Recovery​

Problem: Discover backup doesn't work when you need it

Solution: Test recovery before depositing significant funds

Mistake: Forgetting PIN Codes​

Problem: Can't access device, need to restore (delays)

Solution: Write PINs down, store separately from seeds

Summary​

Multisig backup is more complex but follows clear rules:

  1. Separate everything — Seeds, devices, locations
  2. Back up the descriptor — As critical as seeds
  3. Test your recovery — Before you need it
  4. Plan for inheritance — Others may need access someday

Your backup strategy should ensure that:

  • Any single loss (fire, theft, failure) doesn't compromise funds
  • You can recover with 2 seeds + descriptor
  • Someone you trust can help your family if needed