seed-otp

seed-otp is a Python-based one-time pad CLI tool for storing your Bitcoin seed mnemonic words securely using multi-factor auth. The simple, well-written code can be easily audited, and the method itself can be applied using pen-and-paper, rather than using a computer.

📹I made a presentation about this tool (YouTube)

Background

The Problem

You have an HD wallet such as a Trezor or Ledger for storing your Bitcoin, and you would like to store your seed mnemonic phrase. You may also want to store multiple copies of your seed in different places. Unfortunately, if any one of those copies of your seed becomes compromised, anyone with access to the seed can now take all your coins, and buy themselves a lambo.

Normally you would not need access to your seed mnemonic. However, should something happen to your wallet (perhaps you lose it, or it breaks), you may need to restore the wallet using the seed phrase.

This Solution

Combine a one-time pad with multi-factor authentication.

By using mult-factor auth (something you know plus something you have) and one-time pad encryption, you have a simple yet extremely hard to crack solution. With your OTP key and seed mnemonic stored separately, it becomes onerous to obtain both. Even if someone does obtain either your mnemonic or OTP key, you would have time to move your coins to a new wallet with a brand new seed before anything happens to your coins. A one-time pad is considered perfect secrecy: it's nearly impossible to brute force attack so long as the key remains secret.

Your auth factors are:

• Something you know: A one-time pad key which you have stored securely in a password manager, which is locked with a password only you know. The password DB is backed up securely.
• Something you have: An encrypted mnemonic seed phrase stored on archival paper or another long term physical cold storage device. The phrase itself looks like a normal mnenomic phrase, which provides plausible deniability, and does not indicate to anyone who might find the phrase how it's actually used.

Caveats, Limitations, Considerations, Gotchas

• To use this tool, you need to enter the seed words into a computer. If your computer is compromised, someone could still use a keylogger or other tool to capture the seed mnemonic. Only use this tool if you trust the computer you are using.
• The BIP-0039 mnemonic includes a checksum. After encrypting the words, the checksum will break. Encrypted seed words are unlikely to be valid. This may be a problem since it breaks the plausible deniability of storing the encrypted seed words (as the encrypted mnemonic is not actually a valid phrase). The disadvantages of handling the checksum gracefully is that it's backward incompatible, and it would be much more difficult to apply the OTP by hand using pen and paper.
• The OTP encoding (see the "OTP key" section below) does not include any version/format metadata. The reason for doing this is to reduce the amount of information in the key which could be used to derive some other information (i.e., reduces the degree to which it is information-theoretically secure). The trade off, of course, is that it's difficult to modify the key format and maintain backward compatibility.

Other Solutions

There are a variety of other solutions to this problem, some of which may be more appropriate for your needs. Let's go over some of the alternatives and discuss why they might not be appropriate:

1. Custody with a third party, such as Coinbase.
   • The main problem with any third party custody service is that you must place complete trust in that third party.
   • Custody providers are not immune to crime, theft, rogue employees, mistakes, going out of business, or government intervention. Rekt.
2. The Horcrux design (using a multi-signature scheme).
   • This pattern is based on the idea of storing small pieces of your seed phrase in several different places, much like Voldemort did with his soul in Harry Potter.
   • While it's not impossible to do this on your own, it's logistically tricky and prone to error.
   • There is at least one company which provides this option as a service, but at the time of writing they're asking for several thousand dollars per year in subscription fees, an amount that is both absurd and out of reach for normal people. Rekt because you have no money left.
3. Storing your seed phrase in a super secret place and hoping nobody finds it.
   • This is equivalent to burying a chest full of treasure in your backyard and hoping nobody looks there. Rekt when your neighbour buys a metal detector.
4. Store the seed phares itself using a password manager.
   • The main downside is that you do not have multi-factor auth: if someone gains access to your password manager, you will be rekt.

Quickstart

Checklist

Before using this tool, you should have a few things:

• Get a decent hardware wallet from a reputable vendor. 2 popular options are Trezor and Ledger.
• Get a password manager, and learn to use it (if you haven't already). A few good options are KeepPassX, 1Password, or BitWarden. Make sure your passwords are backed up, and test the restore process.
• Figure out a good way to store your mnemonic seed phrase, such as using archival paper or a metal seed storage product (check out @lopp's stress test here).
• Have a safe place to store the seed mnemonic, such as in an actual safe, or a safe deposit box.
• Make sure you have a secure computer to run the software. It should be running an up-to-date and secure OS. Avoid using any computers which might be controlled by third parties (such as a work computer, or your friend's computer). If you want to be extra safe, consider using a privacy OS such as Tails

After using the tool, make sure you test the seed restore process!

Install from PyPI

$ pip install seed-otp

Generate an OTP key

$ seed-otp generate 12
{
  "otp-key": "AAwCnwGIAe0EWABWAI4AkAMjAFQBLgZjB1T1PJtz",
  "success": true
}

Store the key above in your password management tool.

Encode your seed mnemonic using the OTP

$ seed-otp encrypt AAwCnwGIAe0EWABWAI4AkAMjAFQBLgZjB1T1PJtz abandon ability able about above absent absorb abstract absurd abuse access accident
{
  "encrypted-words": [
    "fault",
    "couple",
    "digital",
    "merge",
    "area",
    "bar",
    "barrel",
    "grab",
    "argue",
    "cheap",
    "soap",
    "typical"
  ],
  "success": true
}

Store the phrase above in your safe place.

Decode your seed mnemonic using the OTP

$ seed-otp decrypt AAwCnwGIAe0EWABWAI4AkAMjAFQBLgZjB1T1PJtz fault couple digital merge area bar barrel grab argue cheap soap typical
{
  "decrypted-words": [
    "abandon",
    "ability",
    "able",
    "about",
    "above",
    "absent",
    "absorb",
    "abstract",
    "absurd",
    "abuse",
    "access",
    "accident"
  ],
  "success": true
}

Synopsis

Usage: seed-otp [OPTIONS] COMMAND [ARGS]...

Options:
  -h, --help  Show this message and exit.

Commands:
  check-key  Check OTP key for encoding or checksum errors.
  decrypt    Decrypt seed words using an OTP key.
  encrypt    Encrypt seed words using an OTP key.
  generate   Generate a secure OTP key for up to NUM_WORDS number of words.

Command output is usually formatted as JSON, so you can pipe the output to other tools (such as jq) and get wild.

Implementation Details

OTP Key

The OTP key is a URL-safe base64 encoded key (without padding) composed of N subkeys, where N is the number of keys specified at creation time. The values are stored as big-endian short unsigned integers (2-bytes each). The last 4 bytes of the OTP key is the first 4 bytes of the SHA256 digest of the preceeding bytes.

0                   1
0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5
+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+
|         Number of Keys        |
+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+
\                               /
/   Keylist (variable length)   \
\                               /
+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+
|                               |
+            Checksum           +
|                               |
+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+

BIP-0039 uses 11 bits per word, but in this scheme we're using 16 bits per word. This is mainly for simplicity, with the trade-off of using more bytes. It also allows the possibilty of using larger wordlists (of up to 65536 words).

Encrypting/decrypting words

Below is some pseudocode for encrypting/decrypting. Assume that the words and keys are mapped to integers representing an index position in the wordlist.

To encrypt a word, the algorithm is as follows:

ciphertext = (word + key) mod 2048

To decrypt a word, do the following:

word = (ciphertext - key) mod 2048

You could perform the encryption/decryption using pen and paper if you feel the need to do so. This would prevent the necessity of typing your seed words into a computer. Naturally, you could also generate your own keys and store those offline as well. For practical purposes, however, this is probably unnecessary.