Lost or broken hardware wallet in a 2-of-3 multisig: what now?

First: which situation is it?

• Broken or lost device, seed backup safe: no rush. Follow the steps below.
• Device stolen, seed backup safe: also no rush. The thief has one PIN-protected device and still needs a second key.
• A seed backup was seen, photographed or taken: this is the one case with time pressure. Skip to the last section.

Replace the device

1. Buy a replacement. It doesn’t have to be the same brand: any hardware wallet that restores a 24-word BIP39 seed and works with Sparrow for multisig will do.
2. Choose restore from recovery phrase and type the 24 words on the device itself. Never on a computer.
3. If you use a passphrase, set it again. A restore only brings back the 24 words, never the passphrase. Without it the device opens a different wallet that doesn’t fit your multisig.
4. Register the wallet on the new device again, as in step 8.
5. In Sparrow, check that the master fingerprint (the 8-character code that identifies a key) matches the one in your notes. If it does, the new device is the old key.

Until you’ve done this you can keep spending with the other two devices. You just have no spare left, so don’t wait months.

If the device was stolen

Extracting a key from a modern secure element is very hard, but not impossible. If you want to remove even that small risk, build a new multisig with a fresh seed for that slot and move your coins to it. There’s no hurry as long as the thief can’t reach any of your seed backups.

If a seed backup was exposed

Someone who saw one seed has one of the two keys they need. You still have two keys nobody else knows, so you can move your coins before anyone gets a second one. Create a new seed (or three), build a new 2-of-3 as in the setup guide, test it, and send everything from the old wallet to the new one. No need to panic, but do it this week.