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Display of random numbers
Basics of Crypto Security

What is Entropy?

Entropy helps keep your digital assets safe


Digital assets are just one of many classes of things that rely on entropy to achieve randomness.

Entropy is a measure of how unpredictable a complex system is: more entropy yields greater uniqueness.

For high security, significant entropy must be used to generate your digital wallet seed phrase.

Numbers with high entropy can be generated either by computers or manually.

Vault12 can produce high-quality, high-entropy seed phrases for you.

Entropy is applied in many fields of study

Entropy is important to cryptography generally, and to digital assets specifically. In this article, we will briefly explain why. But did you know that entropy is also used in many other scientific realms?

In the 1940s, Bell Labs scientist Claude Shannon studied entropy in losses of information in telecommunication signals to produce groundbreaking advances in applying randomness to encrypt information. Since that time, entropy has been analyzed to better understand physics (e.g., the second principle of thermodynamics), biology (e.g., DNA sequences), climate change, and countless other areas of scientific analysis. Although the methods of measurement and application vary, each of these areas has produced ways to better predict, harness, or productively control phenomena that have appeared to be random.

Partly due to these advances in applying entropy, cryptography is more reliable and useful.

What is entropy, and why does it matter?

Let's take a closer look at what entropy is.

Entropy is a measure of the disorganization and unpredictability of a complex system. The more entropy something has, the less predictable it is ... in other words, the less guessable it is. You can think of entropy as randomness (although true randomness is very rare, so in practice, we often settle for as close to random as we can get: pseudo-randomness, as we explain in the article "What is a Random Number Generator?" ).

Entropy becomes important to crypto wallets because it is the unguessability of your private encryption keys that keeps your crypto wallet secure. Your private keys must be both secret and unguessable. You might do a great job of keeping your encryption keys secret, but if someone can just guess it, all of that secret-keeping would be for naught. Conversely, if your encryption keys are not guessable, but you allow them to be stolen, then they would be compromised, and your digital assets stolen.

Let's take a moment to consider how randomness leads to entropy, which is relied upon by your crypto wallet.

Your unique seed phrase is used to generate your digital wallet

Think back to when you created your first crypto wallet. As you set up your wallet, you chose or accepted a seed phrase, and then your wallet used it to manage your digital asset transactions as you happily bought and sold crypto and NFTs.

Transparently to you, in that setup process, your wallet relied on the BIP-39 standard to transform your seed phrase into encryption keys and blockchain addresses. (We offer another article that explains more about how that BIP-39 wallet generation process works.)

Because your seed phrase was used to generate your private and public encryption keys, you can also restore your crypto wallet from your backup copy of your seed phrase using any other BIP-39-compatible wallet. Or you could install your crypto wallet on more than one of your own devices. This is a great convenience!

However, if a bad actor were to guess your randomly-selected seed phrase, they could restore your crypto wallet using any other BIP-39-compatible wallet. Obviously, this would be bad!

Your seed phrase must have high entropy! 

You can see how important it is that the words that you choose for your seed phrase - or which are chosen for you by a seed phrase generator - are random. This also explains why you can not just pick and choose your favorite words from the BIP-39 word list as your seed phrase: you would not be able to achieve true randomness in your word selections, and as a result, your seed phrase would be more likely to be guessed through brute-force attacks.

In other words, if you did not incorporate a good source of randomness in your seed phrase selection, your result would have a lower level of entropy than if you randomly selected them. The more random the inputs, and the more of them, the more entropy in the output, and the more unique (and secure!) the output will be.

At a certain level, sufficient entropy in seed phrases protects them from being guessed by even the fastest computers imaginable. This is why a 12-word, randomly-selected seed phrase, which has 128 bits of entropy, is all that is considered necessary to protect your crypto. After achieving this level, additional bits of entropy would not add significant security against brute-force guessing attacks.

Producing numbers with high entropy

Random numbers can be sampled from highly-variable natural events like radioactive decay, heat changes, or noise levels. Clearly, this requires sensitive instruments.

Modern computers do a much better job of choosing random numbers than in decades past. After years of learning from incorrect assumptions and buggy implementations, developers now leverage software and hardware random number generators that incorporate unpredictable realtime environmental inputs to derive reliably-unpredictable numbers. These random numbers can be strung together into sets that, as they get longer, contain more and more bits of entropy.

Many crypto wallets offer to generate seed phrases for users, and these are generally considered effective and secure.

Some people will never trust a computer to choose random numbers for them, and they may turn to using techniques like rolling dice to generate highly-random numbers to select their seed phrase words, as explained in the article "Generate a Seed Phrase Using Dice". This type of offline seed selection technique is especially recommended for high-value wallets.

Vault12 Digital Vault can generate high-entropy seed phrases

Among the many convenient and high-security features offered by the Vault12 Digital Vault, it can generate a high-entropy seed phrase for you. Read more about how it works in the article "How to Generate a Seed Phrase with Vault12." Give it a try!

Recover, Back Up, and Inherit Digital Assets

(including Cryptocurrency Seeds, NFTs and Art)

Every digital asset you own should be backed up, protected and remain accessible. Cryptocurrency in particular is difficult to secure. With natural disasters, hackers, to badly implemented security, you are always at the mercy of others.

Vault12 Personal Digital Asset Security helps you recover, backup and provide legacy inheritance for all your digital assets, including Bitcoin, Ethereum, NFTs, other cryptocurrencies, private keys, seed phrases, digital art and of course, your crypto wallets.

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Recover, Back Up, and Inherit Digital Assets

Introducing Digital Inheritance

Pass on your Digital Assets to future generations

Vault12 Digital Inheritance is the first solution to offer a simple, direct, and secure way to ensure digital assets can be accessed by future generations. Digital Inheritance enables investors to designate an individual who will inherit their entire portfolio of digital assets stored in a secure Vault once the time comes, eliminating undue risk and the need to continually update an inventory or continually issue updated instructions.

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Personal Security for your Cryptocurrency and Digital Assets

Designed to be used alongside traditional hardware, software and online wallets, Vault12 helps cryptocurrency owners, ICO investors, professional cryptocurrency traders, and high net worth investors safeguard their digital assets without storing anything in the cloud or in fact any one single location. This increases the protection and decreases the risks of loss.

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Personal Security for your Cryptocurrency and Digital Assets

Easy to setup, easy to secure, easy to access.

A digital Vault containing your digital assets is assigned to trusted people or devices, known as Guardians. Your Guardians can be adjusted as needed in real-time so that the appropriate number are always guarding your digital assets. No one can access your assets and only you get access when you need.

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The Winklevosses came up with an elaborate system to store and secure their private keys. They cut up printouts of their private keys into pieces and then distributed them in envelopes to safe deposit boxes around the country, so if one envelope were stolen the thief would not have the entire key.

Nathaniel Popper, New York Times, December 19, 2017

20% of all Bitcoin is lost forever. That's $20B, in fact, in 2018 alone, $1.1B has been stolen.

Elliott Krause, The Wall Street Journal, July 5, 2018

The idea behind Vault12 is how do we essentially split that responsibility, make that problem of key control less a technological one by essentially making it into a social one with networks of people that they trust.

Terence Spies, former CTO, HP Enterprise, Data Security

Exchanges are the main target for hackers. Those are the biggest honeypots. So the number one rule in Crypto is, do not keep your money on an exchange, and if you're going to custody that money, you need to do it off of the exchange with a product like Vault12.

Joe DiPasquale, BitBull Capital

Security and usability are inextricably linked, the former cannot exist without the latter. Vault12 understands the need for end-to-end management of this experience as well as the importance of integrating into the prevailing crypto ecosystem

Sathvik Krishnamurthy, Founder and Managing Partner, Security Leadership Capital

As we move to a more open financial system driven by advanced blockchain technology and cryptocurrency, we need smarter ways to ensure that the system is trustworthy. Vault12 does this by addressing a foundational need -- ensuring that your crypto assets are not only protected by decentralized security, but also by your trusted inner circle. Your private key never exists in one place or with one entity, reducing risks from hackers as well as everyday accidents.

Vinny Lingham, Entrepreneur and Advisor

Security is the lifeblood of industry, commerce, and leisure. As more people use decentralized applications, they will need a way to back up their crypto wallets and exchange accounts. Vault12 provides a simple and natural way to reduce risks and combat the fear of forgetting seed phrases and private keys.

Jon Callaghan, co-founder of True Ventures

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The Vault12 app is now available from iOS and Android app stores.