Let's talk about seed phrases

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Let's talk about seed phrases!

Today we're exploring the basics of seed phrases and why they are so important. Seed phrases, also known as recovery phrases or backup phrases, are a set of words used to generate a private key for cryptocurrency wallets. It is crucial to understand their purpose in order to effectively protect your crypto assets. We hope that the information we provide here is useful and helps guide you in ensuring the safety of your crypto.

Summary

Having control over your cryptocurrency funds necessitates being able to secure them in your own way. The most crucial aspect of security for your crypto assets is related to the seed phrase or recovery phrase for your wallet.

Let’s start with an overview of seed phrases: 

• Seed phrases and private keys are true access keys to your cryptocurrency wallets and accounts. They are sort of a “password” that authorize you as an owner of your blockchain “accounts” and wallets.
• Private key is usually an access key to just one address (account), while your seed phrase is an access key to the whole wallet, which can hold multiple addresses.
• Wallets use a recovery seed phrase as both access key and instruction to set up all addresses (accounts). Wallets always create the same set of addresses and private keys from a given seed phrase.
• Seed phrases are made of words from a carefully chosen list of 2048 words. Seed phrases can be 12-24 words long. The words are taken randomly from the list.
• Both seed phrases and private keys use state-of-the-art encryption so it is virtually impossible to brute force hack them.
• If your seed phrase backup is lost or destroyed, and you lose access to your wallet, you will not be able to get your funds back, ever. This is why it is important to store seed phrase backup safely.

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Private keys and recovery seed phrases are both essential components of Bitcoin, cryptocurrencies, and blockchain technology. These security features work in tandem with blockchain technology and appropriate encryption methods to ensure the safety of wallets and coins.

Seed phrases and private keys are true access keys to your cryptocurrency wallets and accounts. They are sort of a “password” that authorize you as an owner of your blockchain “accounts” and wallets. With them, you have full access to the funds but without them, you can lose access to your funds forever. However, it is important to know that although similar, they are not the same and we provide all the details below.

It is important for the safety of your crypto funds to know how seed phrases and private keys work and how to use them. Getting confused about these key blockchain features can put you at risk of losing all your crypto holdings. We will do our best to provide a full explanation and provide lots of knowledge while avoiding difficult technical terms.

What is a private key?

A private key is your access key to the given bitcoin (or other cryptocurrencies) address. The address is an “account” where given coins are stored. To gain full access to the bitcoin address you need to show the correct access key – a private key.

With the private key you “prove” that you are the  “owner” of your bitcoin address and can have full access to this address. This means completing transfers and withdrawals from the address. It means total control of the funds associated. 

How do private keys work in a wallet?

Nowadays private keys are used as access keys for individual addresses (accounts). If you have just one Bitcoin (or another cryptocurrency) address, you probably will have just a private key as an access key. If you have a paper wallet with just one address (account), you will have just a private key as a backup and access key.

However, if you are using a wallet that can store multiple addresses (accounts) possibly of multiple cryptocurrencies, the wallet itself is usually protected not with a private key but with a seed phrase. This type of wallet is now the industry standard. 

This kind of multiple address wallet will act as a master wallet for all cryptocurrency addresses (accounts) inside. The wallet itself will create and store private keys to each individual address (accounts) so you don’t have to write them all down. You only require one master access key, which is the seed phrase, to access all of your crypto assets within that wallet.

Our top tips for seed phrase security.

We’re not here to tell you exactly how to secure your money. Ultimately, you will need to come up with a method that is secure and works for you. All we can do is set some parameters and let you decide on which path to take. That being said, there are some key things to keep in mind when backing up your wallet: 

1. Physical vs Digital: There is much debate around the use of physical backups (written down on a piece of paper), and digital ones (encrypted USB or drive). A combination of the two can offer increased redundancy, but it’s absolutely up to you. You need to figure out what feels safe for you. 
2. Quick access: We suggest that you store a seed phrase somewhere that allows prompt access should something go wrong. Whether that is 5 minutes or a day is up to you, just make sure it’s accessible!
3. Trusted members: it is absolutely fine to share a backup of your seed phrase with a trusted member such as a partner or family member. However, you must keep in mind that anyone who has this, has access to your entire wallet.
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Got any questions about seed phrases? Our support team are always happy to help!