The most important part of your bitcoin (or another coins) protection strategy is your seed phrase. Your seed phrase is all you need to manage your coins: from these 12 or 24 words, keys are generated that allow you to spend your funds. Naturally, this information is critical and must be kept secret.
In the case of a single-signature click, your seed phrase is the last line of your defense - if it's compromised, your bitcoins are compromised. Fortunately, multisig schemes eliminate this single point of failure, so losing control of a single seed doesn't compromise your funds. Nevertheless, even the seed-phrases used in a multisig scheme are very important. Here is a look at what seed phrases are, what their role is in single-signature wallets and multisig schemes.
What is a Seed Phrase?
Generally, a seed phrase (also known as a crypto seed phrase, backup, recovery phrase, mnemonic phrase, secret words, etc.) is familiar to many as the 12 or 24 words that must be saved when creating a bitcoin wallet. More specifically, a seed phrase is a human-adapted representation of a seed, which is actually a long string of random numbers, such as this one:
00000001010011110001110011000001000001110100100000100001111011100001101100010111010101010111001101111010101010110001011000011100
The average Bitcoin user is unlikely to ever come across this string of numbers - most interact with the more familiar word format.
This is what a seed-phrase looks like:
Understanding Seed Phrases
Seed phrases are a crucial component of cryptocurrency wallets, serving as a master key to access and recover digital assets. Essentially, a seed phrase is a sequence of random words that encapsulates the data required to access or recover cryptocurrency on blockchains or crypto wallets.
Also known as a seed recovery phrase, backup seed phrase, or mnemonic phrase, these words are generated by crypto wallets and are indispensable for the safety of your digital assets. Without a seed phrase, recovering your funds in the event of a lost or damaged wallet would be nearly impossible. Therefore, understanding and securely storing your seed phrase is paramount to safeguarding your digital wealth.
BIP39 Seed Phrase Standard
The BIP39 standard is a protocol that outlines how crypto wallets generate a string of words to create a mnemonic sentence. This sentence is then converted into a binary seed, which produces a set of keys that encrypt and decrypt crypto transactions. The BIP39 design aims to convert the sentence into a binary seed, providing an additional layer of safety for digital assets. Widely adopted in the crypto industry, the BIP39 standard is considered a secure method for generating seed phrases. By adhering to this standard, crypto wallets ensure that the seed phrases they generate are both secure and compatible across different platforms, enhancing the overall security and interoperability of digital assets.
Where is My Seed Phrase?
If you are using a software wallet, you were probably prompted to create a physical backup of your seed phrase when you created it. Wallet software plays a crucial role in generating and managing your seed phrase, ensuring that you can recover your funds if needed.
Different types of wallets may offer different approaches to backup. If your wallet of choice doesn’t provide you with a seed phrase, it’s worth looking at proven reputable apps such as Sparrow or Blue Wallet, which offer hierarchically-determined wallets with support for BIP39. They will allow you to recover funds in other standard bitcoin wallets.
Many hardware wallets prevent key creation by bypassing the physical seed phrase backup. When you create a wallet, you will be asked to make sure that you have recorded the seed correctly and will even check that you have not made any mistakes in doing so. If you lose a seed phrase, the best practice is to create a new seed and move the funds to an address under that seed control.
Seed Phrase Generation and Storage
Most crypto wallets are designed to automatically generate a seed phrase upon setup. This process is typically mechanical, with limited options for customizing the seed phrase’s settings. Some applications go a step further by helping users create an encrypted ‘vault’ to store their seed phrase, thereby enhancing the security of their digital assets.
Another method for offline phrase generation is using a calculator-based seed phrase, which can be a more secure option for those wary of digital storage. Regardless of the method, it is essential to store your seed phrase safely. Writing it down on paper and keeping it in a secure location, such as a safe or a locked cabinet, is highly recommended to ensure that your seed phrase remains protected from both physical and digital threats.
How Do Deed Phrases Work?
Seed phrases are created every time you create a new hierarchically-determined bitcoin wallet or crypto wallet. This applies to both software wallets like Sparrow and hardware wallets like Trezor, and Coldcard. Next, it’s important to secure that seed phrase for safekeeping in case you ever need to recover your wallet.
Technically speaking, these 24 words are a representation of a string of random numbers called seed (from seed) from which all wallet keys are generated. The seed is used to generate your private master key (master private key), which is the basis for the rest of your private keys. Private keys are used to create the corresponding public keys. Public keys can be used individually (singly) or in combination with other public keys (multisig) to construct bitcoin addresses.
Private and Public Keys
Private keys are a string of numbers and letters used to approve a transaction from an owner’s public address. Public keys, on the other hand, are numbers that users can publicly share to receive cryptocurrencies or exchange assets with others. These keys use cryptography to encrypt user data, maintaining the security of transactions. Each private key is linked to a corresponding public key, allowing users to receive crypto from others. Seed phrases play a crucial role in this system by enabling users to recover their private keys from the blockchain. This recovery capability ensures that even if you lose access to your wallet, you can still regain control of your digital assets using your seed phrase.
Should I Back Up My Backup Seed Phrase?
All leading wallet manufacturers strongly recommend that users write down their seed phrases on paper and keep them in a safe place.
Seed phrases are your guarantee of access to your funds:
in case you lose access to your wallet
if your device is lost or stolen
If you forgot your PIN
if a firmware update has caused compatibility issues or critical errors.
If your seed phrases protect a significant portion of your savings, it is recommended that you carve them into fire-resistant metal plates, store them in a fireproof safe, or even keep them in a safety deposit box. Multisig solutions allow you to geographically distribute these critical elements to eliminate single points of failure.
Whether you use a separate hardware wallet or multisig storage, be sure to make sure your seed phrases are stored in secure locations.
What words do crypto wallets generate for seed phrases?
Wallets following the latest Bitcoin protocol standards take seed phrase words from a list of 2,048 unique words. This list is set up as part of the Bitcoin Improvement Proposal 39, or BIP39. Each word represents a range of bits in that long random number, which is your seed.
Interestingly, the first four letters of each of the selected 2048 words are unique - no two words in the list have the same first four letters. All you need when storing a seed phrase is the first four letters of each word and their order.
Can anyone guess my seed phrase?
This is a common misconception about mnemonic phrases. After all, it’s only 12 words, right? It sounds like you can pick up at least someone’s seed phrase if you take a little time. In fact, it’s impossible to guess the seed phrase.
There are 2048 unique words in the BIP39 list. Guessing a 12-word phrase in the correct order is like guessing a number from 1 to 5,444,517,900,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000.
It is difficult for the human mind to realize how large this number is. By comparison, it is in the same realm as the estimated number of atoms in the visible universe. It would take the world’s most powerful supercomputers an incalculable amount of time to match your seed phrase just by going through combinations of these words.
Can I restore my phrase on a hardware wallet from another manufacturer?
Your seed phrase is fully compatible with any vendor’s wallets that support the BIP39 standard. This compatibility extends to both hot and cold wallets, ensuring that you can recover your funds regardless of the type of wallet you use. If you properly store your seed phrase, your hardware wallet is no longer a single point of failure. If something goes wrong, you can regain access to your funds by depositing your seed into any other wallet.
Electrum uses a different approach to seed phrase generation, however, the wallets created with it can be restored in many applications, and Electrum itself supports restoring wallets created according to the BIP39 standard. You can read more about this flexible and years-tested wallet in our guide.
It’s worth noting that not all hardware wallets use BIP39 to generate seed phrases. Moreover, some of those that do use this standard do not always do so properly or document their backup and recovery processes. You can learn more about various wallets and their recovery practices at WalletsRecovery.
The fact that with a seed phrase, anyone can recover access to almost any wallet is a key advantage; especially in a multi-sig context. The hardware manufacturer can always make a mistake that compromises your funds, or make software changes that inconvenience self-storage. In such a case, you can use your passphrase to regain full access to your funds.
Is it possible to change an existing seed phrase?
No, but you can create a new wallet and therefore a new seed phrase, and move funds to that new wallet. While you cannot change an existing seed phrase, most wallets offer limited options for customizing the seed phrase's settings during the initial setup.
Remember, seed phrases ultimately allow you to unlock funds and spend them from your address. If your seed phrase is compromised, it is important to move the funds to a new address controlled by the new seed phrase as soon as possible. Otherwise, control of the funds will be lost. In the post “Create a backup wallet” we discussed an effective practice, according to which you should prepare an additional backup wallet in advance in case of force majeure.
What is a passphrase?
A passphrase is a 13th or 25th word that can be specified in addition to the randomly generated 12 or 24 words of a crypto seed phrase. They are most commonly used with single-signature wallets as an easy way to add an extra layer of security. It’s important to emphasize that if you forget or lose your passphrase, your access to your wallet backup will go with it.
This approach, like other coin security practices, has tradeoffs. If you use a single-signature wallet, a passphrase can improve the security of your coins. It’s your secret, without which your passphrase carries little or no value. Other approaches to eliminating single points of failure, particularly multisig, are more robust. They help reduce the risk of critical error and discount contingencies.
Best Practices for Seed Phrase Management
To keep your seed phrase safe, it is essential to keep it a secret at all costs. Anyone who knows your seed phrase can import a copy of your wallet onto their own device and potentially empty it. Therefore, it’s crucial to keep your seed phrase safe and private to protect your digital assets.
It is recommended to write down the seed phrase on paper and store it in a secure location, such as a safe or a locked cabinet.
Additionally, it is essential to keep the seed phrase offline and not store it on devices or computers that can connect to the internet. By following these best practices, you can ensure that your seed phrase remains secure, safeguarding your access to your cryptocurrency.
Confidence in possessing access
Once you know the basics of Bitcoin, a recovery seed phrase will be a fairly simple component of coin security for you. Those 12 or 24 words are a guarantee of access to your funds.
