Last checked 31 October 2026. A drill is only useful if it is honest about problems. Record what went wrong as well as what worked. If anything here conflicts with the linked source, the source wins.
A 2 of 3 multisig protects a company only if the keys and backups work when needed. A recovery drill proves that, without waiting for a real emergency. We suggest doing one at least once a year, and after any change of keyholder. NIST guidance on contingency planning recommends testing plans through exercises so that problems are found and fixed before they matter.
Source: NIST: SP 800-84: Guide to test, training and exercise programmes for IT plans and capabilities, NIST: SP 800-34 Rev. 1: Contingency planning guide for federal information systems.
Recovery drill record sheet (fillable PDF)
A three page record for each drill: who took part, which keys were tested, each check passed or failed, issues and actions. Fill it in on screen and keep it with your board papers and audit evidence.
Free. One email with the whole template library, then one short lesson each Thursday. Unsubscribe at any time. See our privacy notice.
Source: Ledger: Message from the CEO on the 2020 customer data leak, NCSC: Phishing: spot and report scam emails, texts, websites and calls.
Rotate which keys you test
| Year | Keys used | Third key |
|---|---|---|
| Year 1 | A and B | C stays sealed |
| Year 2 | A and C | B stays sealed |
| Year 3 | B and C | A stays sealed |
Over three years every pair is shown to work, and every key is used at least twice.
The drill, step by step
Watch the 60 second version on YouTube.
Plan
Pick the date, the two keyholders, a board member to observe, and a quiet place. Bring the wallet backup (the descriptor), the key register and a spare signing device that has been reset.
Source: Bitcoin BIPs: BIP 380: Output script descriptors, general operation (wallet backups and exports).
Inspect the backups
Check each backup is where the register says, that tamper-evident bags are intact and their serial numbers match the register. Record anything unexpected. For steel plates, see checking steel backups in the drill. While you are there, confirm no receive address has been reused, which keeps public keys hidden (see Bitcoin and quantum computing).
Rebuild the wallet watch-only
On a clean computer, load the wallet from the descriptor backup alone. Check that the first receiving address matches the one recorded at the key ceremony and that the balance matches your records.
Restore one key from its backup
On the spare device, restore the key being tested from its recovery words. Check its fingerprint matches the key register. This proves the written backup is correct and readable.
Source: Bitcoin BIPs: BIP 32: Hierarchical deterministic wallets (extended keys), Bitcoin BIPs: BIP 39: Mnemonic code for generating deterministic keys.
Sign with two keys
Create a small transaction to an address in the same wallet, check the address on each device, and have the two keys sign it. You can stop before broadcasting, or broadcast it to prove the full path at the cost of one network fee.
Source: Bitcoin BIPs: BIP 174: Partially Signed Bitcoin Transaction format (PSBT), Bitcoin BIPs: BIP 11: M of N standard transactions (multisig).
Reset and reseal
Reset the spare device, reseal the backups in new bags, record the new serial numbers, and complete the record sheet. Agree actions, owners and the next drill date.
If something fails
A failed check is the point of a drill. If a backup is unreadable, a fingerprint does not match or a device will not sign, the wallet still has a margin of one key, but treat it as urgent. Fix the backup, or move the funds to a new wallet created at a fresh key ceremony, and update the key register and continuity plan.
Read next
- Key ceremony, creating the wallet in the first place.
- When a keyholder leaves, rotating a key.
- Audit evidence, drills as evidence of control.
Sources
Primary sources only. Each link was checked on 31 October 2026. Rules change, so confirm the current version with your adviser.
- NISTSP 800-84: Guide to test, training and exercise programmes for IT plans and capabilities
- NISTSP 800-34 Rev. 1: Contingency planning guide for federal information systems
- LedgerMessage from the CEO on the 2020 customer data leak
- NCSCPhishing: spot and report scam emails, texts, websites and calls
- Bitcoin BIPsBIP 380: Output script descriptors, general operation (wallet backups and exports)
- Bitcoin BIPsBIP 32: Hierarchical deterministic wallets (extended keys)
- Bitcoin BIPsBIP 39: Mnemonic code for generating deterministic keys
- Bitcoin BIPsBIP 174: Partially Signed Bitcoin Transaction format (PSBT)
- Bitcoin BIPsBIP 11: M of N standard transactions (multisig)
One email. The whole library.
Policy checklist, board paper, recovery drill record, document pack and the rest, in one send. Then one short Thursday lesson for small companies in the UK and the US.
Free. One email with the whole template library, then one short lesson each Thursday. Unsubscribe at any time. See our privacy notice.
Next step: your own node. Once the keys, backups and drill are in place, a company can check the chain itself. Running your own bitcoin node.
This is general information and education only. It is not financial, investment, tax, accounting, legal or regulatory advice, and it is not a recommendation to buy, sell or hold bitcoin or any other asset. It does not take account of your circumstances or those of your company. You must obtain your own official professional advice to confirm this information is correct before acting on it.
Rules change. This information is correct to our understanding at the last-reviewed date, but it may be incomplete or out of date, and official sources take precedence. Bitcoin is volatile. A company that buys it could lose some or all of the money it puts in.
Using this site does not create an adviser or client relationship. IoT Financial is not authorised or regulated by the Financial Conduct Authority (FCA) and is not registered with the US Securities and Exchange Commission (SEC) as an investment adviser. Read the full disclaimer.
Timelocked recovery for company bitcoin: delayed threshold paths, per-output clocks and the maintenance they require.