Cryptocurrency faqtakeaways
-
A seed phrase is a 24-word series of words that acts as the password to your crypto wallet
-
Your seed phrase is the only backup to your crypto assets and can be sued to access them
-
The seed phrase must be kept safely in order to get access to your crypto wallet
Introduction
The major distinction that makes the crypto space accessible to users is its self-sovereignty. This allows users to access their crypto without proving their identity or rely on a bank. Major cryptocurrencies like Bitcoin or Ethereum use blockchain technology to store and secure the crypto. So basically, you are investing in cryptos by using a P2P network of computers worldwide. The blockchain uses certain codes that are algorithmically generated passwords that can only be accessed by the holder. The seed phrase or recovery phrase is considered the last line of defense when it comes to providing security for crypto users.
A recovery phrase or seed phrase can help you lose access to the crypto wallet in an emergency. While many tend to confuse private keys with seed phrases, they are completely different and serve different purposes.
Let’s dig deeper to learn more about the recovery phase and its importance in the crypto space.
Seed/recovery phrase: what is it exactly?
A seed or recovery phrase is basically a cluster of random words. These are algorithmically generated by your crypto wallet at the time of setting it up. It acts as a backup in need. Your seed phrase helps you to regain access to your funds and crypto wallet in emergencies. For example, if you lose your phone and your mobile wallet, then seed phrase can give back access to you.
How does a seed phrase work in crypto?
Although it is termed a “wallet,” your cryptos aren’t actually stored within it but exist as data on the blockchain. This implies that even if access to your wallet gets interrupted, the funds are still recorded safely. Upon creating a crypto wallet, seed phase is automatically generated. It represents a long series of random numbers that your wallet uses to create private keys for making transactions.
The seed phrase is a string of simple words like “stereo,” “fabric,” or “opera” instead of numeric passwords. The reason behind this is simple. Humans are better at remembering a series of words than a string of numbers. However, instead of relying on your memory, it is always a better idea to secure your seed phrase. Losing it can lead you to lose access to your wallet.
Every seed phrase is generated from a list of 2,048 simple English words known as the BIP39 standard that most of the leading crypto wallets use. Whether it is a hardware wallet or a software one, recovery phrases are generated each time a crypto wallet is created. Each seed phase is 12 or 24 words long and unique to the wallet it was created in.
The “seed” in a seed phrase refers to the strings of random digits that can be used to generate your private master key, which can in turn be used to generate your private keys as well. While the recovery phrase might seem to be simply a set of words, it basically translates into a lengthy series of data that appears similar to a cryptocurrency address.
What does it look like?
Instead of a numeric series, each recovery phrase is generated from the BIP-39 word list, a list of 2,048 English words that were adopted after the Bitcoin Improvement Proposal 39 in 2013. This proposal established a benchmark for a “deterministic wallet” that most crypto wallets follow. Here, one seed phrase will be charged to control all the private keys that are held in the wallet.
While the words are randomized, it is important to remember that the recovery phrase is not in any particular order. To get access to your wallet, you must put the words in the same order in which they were generated, as the order itself is part of the phrase. These seed phrases are also inter-compatible, which makes it easier to switch wallets as well, apart from creating your wallet. It thus goes without saying how important it is to secure your funds in crypto.
Private Key vs. seed phrase
Private keys and seed phrases can often be confused, as both are sequenced and created by new crypto wallets. Since both are crucial to the safety of the wallet, they need to be protected to prevent access by any intruders to your funds. Despite the similarities, they differ in their functionalities.
While private keys are derived from the string of numbers represented by your recovery phrase, enabling users to send or spend cryptocurrencies, seed phrases are the master key that gives you access to your wallet along with the private keys as well.
To put it simply, you can imagine your private key as your ATM’s PIN combination, which is a password that helps in facilitating fund withdrawals or approving a purchase while using a debit card. On the other hand, a seed phrase is more likely the master key to your entire savings, and whoever possesses it can have the ability to have complete control over the account.
How to safely store it?
Since the seed phrase is the “key” to your crypto wallet, it should be kept secret at all costs. The 24-word seed phrase is the main backup of your assets in crypto that can be accessed by anyone if it is compromised. For this reason, most people use different strategies to securely store their seed phrases. Some of them are mentioned below.
- You can secure a seed phrase by splitting it between safe deposit boxes in different locations. However, this strategy might not be convenient for many.
- It is also a smart idea to engrave your recovery phrase on durable metals like stainless steel, while many people simply write it down and have multiple copies safely kept in different locations.
- You can also use a hardware wallet that is legitimate and trustworthy. However, make sure not to keep them in any smartphone application or computer.
Final words
There is no denying the importance of seed phrases to your crypto assets, which is why it becomes critical to store them in a highly secure place. You should always stay away from making a digital copy of your seed phrase and instead take foolproof steps to secure it from getting destroyed or stolen, as the recovery of your crypto wallet solely depends on the seed phrase.
FAQs
Is it possible to recover a wallet with a seed phrase?
You can securely restore your wallet on another device by simply entering a 12-word or 24-word phrase into a new wallet.
What happens when the seed phrase gets lost?
If you lose the seed phrase, it means you will lose access to your crypto wallet as well as your funds.
