Presently I have some BTC in a custodial wallet which I want to transfer out. I don't want a use a wallet at all. Neither hardware nor software.
If I install Electrum on a live Ubuntu session, create a wallet, transfer BTC to it, note down the seed phrase and terminate the live session, will I still be able to recover my wallet with coins several years from now?
What are the downsides of this method over a cold storage wallet?
If I install Electrum on a live Ubuntu session, create a wallet, transfer BTC to it, note down the seed phrase and terminate the live session, will I still be able to recover my wallet with coins several years from now?
Yes. Your mnemonic phrase is all you need to store to recover your funds and your passphrase if you added one.
What are the downsides of this method over a cold storage wallet?
I mean technically what you are describing is a cold storage wallet, it's a cold Hierarchal Deterministic wallet with a bip39 mnemonic backup. The wallet being electrum which you used to derive a bip39 mnemonic. Since the backup method is a popular standard even if Electrum disappears you can be sure you will be able to recover your coins several years from now.
Essentially what you are proposing would be a cold storage if you install electrum via usb stick and not connecting your computer to the internet. What is really important that you note down not only the seed but also the derivation path to your HD wallet. This is necessary for recovering the coins years from now. There is a good side where you can check:enter link description here
You are describing a cold storage Account-Wallet, secured by a BIP39 Seed Recovery Phrase, (aka mnemonic phrase + passphrase) to allow regeneration of the seed.
That MAY be all you need to recover your assets in cold storage assets, using any BIP39 etc compatible Wallet-Client.
Of course, your Seed and mnemonic phrase (+passphrase) must be generated according to the BIP39 standard. This is not to be assumed with Electrum, whose creator hates BIP39 with a passion and has adopted other nonstandard systems for seed / mnemonics.
I suggest an amnesiac and airgapped Linux Live boot PC using the iancoleman tool and dice rolls myself.
Or a Hardware wallet, which can then later be reset to service your hot account wallets.
Obviously your SRP is the "key to the kingdom" - do not rely on memory, nor choose any words yourself! Use a true random (high entropy source) method to generate all of them. See EFF DiceWare notes to ensure a strong passphrase or perhaps just generate another 12-word mnemonic for that.
I recommend then etching to multiple stainless plates distributed to multiple secure locations, mnemonics separate from passphrase.
As to derivation path, if you
stick to BTC only, and
accept the standard path(s)
and the default Zero Account#, and
use the addresses auto generated, without skipping past say 20 of the unused (google gap limits)
Then any modern BIP39 compatible wallet-client should find all your assets as part of the account wallet (seed) recovery process, even many decades in future.
The seed is supposed to be a backup to your offline storage rather than your primary storage, so you're reducing your storage security.
You're also limiting your ability to access your funds quickly.
But if you know that you don't need to access the funds and you're happy about where you'll keep your phrase, there's no reason you can't do this.
