A seed phrase (also known as a recovery phrase) works like a master key password. It is a randomly generated list of 12 or 24 words that are used to recover access to a software or hardware wallet containing cryptocurrency funds.
Seed phrases work like a master password, that allows you to recover your crypto assets even if you lose your password, phone, or hardware device. Scroll down to see how it works and other relevant information concerning how to store it and what happens if you lose them.
What is a Seed Phrase?
A seed phrase is a set of random words generated by your crypto wallet during setup that can be used as an emergency backup if you ever need to regain access to your assets.
This recovery phrase provides access not just to your wallet but also to the cryptocurrency stored within it. Although similar, Recovery keys should not be confused with Private keys, which are alphanumeric sequences that allow users to perform crypto transactions from their wallets.
They should both be protected with similar diligence, though, because anybody with access can make a replica of the matching wallet or drain its money.
How Does a Seed Phrase Work?
A recovery phrase is generated automatically when you create a crypto wallet. The recovery phrase is a lengthy string of random words that your wallet uses to produce the private keys that allow you to transfer and spend your cryptocurrency.
Knowing a seed word is similar to knowing a debit card and its PIN, only there is no bank to call to retrieve anything. Also, keep in mind that there is no “forgot password” option. You have no other choices if you lose access to your wallet’s recovery phrase so your crypto assets will be lost permanently.
Each recovery phrase is chosen from a selection of 2,048 easy phrases. The recovery phrase concept gained popularity following Bitcoin Improvement Proposal 39 in 2013, which created a standard for a “deterministic wallet” — which most wallets today are — in which one recovery phrase controlled all of the private keys contained in the wallet.
The standard also makes major wallets interoperable: if you wish to move wallets, simply input your recovery phrase into the new wallet, and your cryptocurrency will be available there.
Why Is a Seed Phrase Important?
The three main goals of a seed phrase are to preserve your cryptocurrency money, let you to retrieve them elsewhere, and prevent unauthorized access to them.
You’ll want to make sure that other people can’t easily find your seed phrase. As a result, you must exercise caution and abstain from telling anyone you do not fully trust.
Also, keep in mind that keeping your seed phrase electronically, whether through an email you wrote yourself or another method, might be risky, particularly if your account or device is compromised. This step is crucial since anyone with knowledge of your seed phrase has access to your account and may, at their discretion, empty it.
Remember that nobody from the organization that manages your wallet or who is otherwise connected to the cryptocurrency industry will ever ask you for your seed phrase. Don’t input it into any websites either. Similar methods have been used to scam some people, who ended up losing everything in their wallet.
Of course, many people’s initial thought is to just jot down their seed phrase on a piece of paper, but this approach has drawbacks as well. For starters, don’t put anything in writing where it may be seen by others. Another thing to consider is the material you write on because it too might be harmed by fire, water, or other hazards.
This is why some cryptocurrency owners carve their seed phrase onto steel, which is typically waterproof and fireproof up to 2,500 degrees, or write their seed phrase on stone paper, which is water- and tear-resistant. After that, they store it in a safe, safety deposit box, or another location.
Of course, if you don’t mind losing your money, you may skip these stages. But keep in mind that the value of the items in your cryptocurrency wallet might rise significantly without your awareness.
Is a Seed Phrase the Same as a Private Key?
A seed phrase is not the same as a private key, yet they both provide access to your crypto. A private key is a code that automatically protects your transactions by verifying your possession of the crypto. It is managed by your wallet, so you should never have to input it manually.
Because your seed phrase is closely related to your private key, if someone else obtains it, they can control your private key and transfer your crypto.
What Happens if You Lose Your Recovery Phrase?
If by chance you lose access to where you store your recovery phrase, or you pass away without giving it to an heir, You will lose access to your crypto wallet and all your assets stored in it. Additionally, even if your recovery phrase is stolen, your asset will still be safely stored on the blockchain without any method for you (or your heirs) to access it. So be sure to safeguard your recovery phrase!