A seed phrase is one of the most important concepts in cryptocurrency security. It can be alternatively referred to as a recovery phrase, backup code, or mnemonic phrase.
To fully understand this guide, you should first familiarize yourself with wallets and private keys to understand the basics of what seed phrases protect. Then you will see why seed phrases are so important to properly backing up your crypto assets.
Key Highlights on Seed Phrases or Recovery Phrases
Seed phrases are a series of words that are used for the backup and recovery of cryptocurrency wallets. They are defined by the BIP39 standard, which is implemented by most crypto wallets.
Here are some important facts about seed phrases or recovery phrases:
- Your seed phrase can be used to restore your crypto wallet.
- Your seed phrase must be backed up and kept secret.
- Writing down your seed phrase on paper is not a very robust way to protect it.
- An additive "passphrase" could add some security, but it could cause problems - it is an advanced feature with potential pitfalls.
What is a seed phrase?
In cryptocurrency wallets, the all-important private encryption key that secures crypto transactions is a long string of hexadecimal characters (a mix of letters A through F and numbers zero through nine) that is not possible to memorize, and is tricky to transcribe in any form. For example, "A5CD7462F..." could be just a small part of a 64-character private key. Instead of having to deal with such a long string of meaningless characters, the wallet seed phrase is made up of a much smaller set of words (often 12, 18, or 24) that can be used to generate your wallet's private key.
Crypto wallets handle these complicated transformations for us so that we humans can just deal with simple seed phrases rather than encryption keys.
This seed phrase can be used to back up and later regenerate your private key in case you ever need to restore your wallet. The order of the words is critical: if your seed phrase starts with the words "state, tiger, collect, license...," for instance, they must remain in exactly that order.
When creating a seed phrase, it's important to use a reliable form of random word generator rather than simply selecting words based on your preferences. A random number generator will ensure that your words are chosen more randomly than you could choose, making your seed phrase as secure as possible.
Where did the idea for seed phrases come from? Seed phrases are part of the BIP39 standard, which is an industry-accepted way to generate crypto wallet private keys from seed phrases. Because it is a standard, you can use your seed phrase with any BIP-39-compatable wallet manufacturer, rather than being "locked into" just one wallet.
How does a seed phrase protect your crypto assets?
A seed phrase is essentially a backup for your private key. Because your seed phrase is a secret that no one else knows, and it is so random that it is impossible to guess, losing your private key effectively means losing your crypto assets.
If you lose access to your crypto wallet, re-entering your exact seed phrase into a new BIP39 software wallet is the only way to get your cryptocurrency back. This is why it is so important to back up your seed phrase securely and privately.
Where can you get a seed phrase?
Hardware, software, and desktop wallets can generate a seed phrase for you, or there are methods that you can use to choose a series of random numbers that can be associated with the BIP39 dictionary. There are a variety of techniques you can employ, including using Vault12 Guard. Here is a comprehensive list of ways to generate a seed phrase.
How do you use a seed phrase and passphrases in your crypto wallet?
Most digital wallets will have a "Restore from Backup" option, which will ask you to type in your 12, 18, or 24-word seed phrase. As long as you have your seed phrase backed up, it is simple to restore your wallet: just enter the words in the correct order, and your assets will be recovered.
In addition to relying on your seed phrase to secure your wallet, you could also add an additional "passphrase" to your seed phrase. That way, if someone gains access to your seed phrase, your assets have another layer of protection. For wallets that support the addition of passphrases, like the Trezor hardware wallet, passphrases can be long strings and can even include spaces. However, forgetting this passphrase would also mean you lose access to your cryptocurrency forever, even if you have the seed phrase.
Given the added risk of loss, experts do not agree that the use of a passphrase is helpful, especially if you are confident in your method for securely storing your seed phrase. Most wallet vendors counsel that passphrases should only be used by advanced users. Additionally, not all wallets support passphrases in the same way, so not only do passphrases come with added risks of loss and error in transcription, but they can complicate wallet migration or restoral.
How should you back up your seed phrase?
The most common way to back up a seed phrase is to write it down on a piece of paper - which is not recommended. And while it's also possible to memorize the phrase, it is very risky to rely on memory for such an important piece of data. Each copy must be securely and thoughtfully protected ... do not retain "extra" or temporary copies of your seed phrase anywhere.
