What Is a Cryptocurrency Seed Phrase?

What Is a Cryptocurrency Seed Phrase?


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It’s crucial to protect your crypto assets as much as possible, as it can be a little too easy to make big mistakes when handling your funds. You should always have a plan in place in case something goes wrong with your crypto wallet, and this is where seed phrases can be of use. So, what is a cryptocurrency seed phrase, and how can it help you?

What Is a Seed Phrase?

A seed phrase is just that, a phrase. The phrase is entirely random and consists of either 12 or 24 words. The words used in seed phrases are pulled from a list known as the BIP39 Standard. There are 2,048 words on this list in total. The words in a specific seed phrase are directly related to another random string of characters, this time numbers, known as a seed.

When you enter your seed phrase, it must be in a specific order. Your cryptocurrency wallet will provide you with your seed phrase upon signup, which you’ll need to write down and store very securely (which we’ll get to a little later).

The purpose of your seed phrase is to recover your cryptocurrency wallet in the event that you accidentally lose or delete your wallet. Say, for example, the device on which you access your wallet breaks. Using your seed phrase, you can recover assets on another device. Think of your seed phrase as your master key.

Seed phrases can be used for recovering all kinds of cryptocurrency, including Bitcoin, Dogecoin, Ethereum, Litecoin, and Binance Coin.

But you’ll only find seed phrases on non-custodial wallets. This kind of wallet gives you total custody of your crypto assets, meaning it’s down to you to keep them safe. This is why you’re given a seed phrase that you must keep note of on your own. Custodial wallets, on the other hand, require you to entrust your funds to a platform, particularly an exchange.

For example, the Binance exchange offers users a custodial wallet. With a custodial wallet, you’ll have no need for a seed phrase but won’t have total custody of your funds. Depending on your preferences, either kind of wallet could suit you.

It’s worth noting that seed phrases and private keys are not the same things. While both relate to a crypto wallet, they have different functions. While a seed phrase is used to recover crypto wallets, a private key is used to create signatures for transactions and both encrypt and decrypt important data. In short, they enable the movement of funds from one address to another, as well as prove your ownership of your crypto wallet address.

Private keys are stored in your crypto wallet, not your actual funds (though wallets are usually spoken about in this sense).

There’s something about seed phrases you must always keep in mind: once they’re lost, they can never be replaced. That’s right, never. If you lose your non-custodial wallet seed phrase, that wallet, and the funds within it, are lost forever. You may have heard horror stories of people losing their Bitcoin seed phrases, leaving them unable to access huge funds. This was particularly common in the news when Bitcoin’s price increased drastically, and some early Bitcoin investors couldn’t access their old wallets.

Because of this, the storage of your seed phrase is extremely important.

Storing Your Seed Phrase

The first thing to keep in mind when it comes to storing your seed phrase is that you should never use digital methods. As soon as you store data on a device, that data becomes vulnerable to cyberattacks. What’s more, if your device malfunctions, you may lose your seed phrase forever and, therefore, your funds.

There are some useful and secure ways through which you can store your seed phrase, including:

  • In a steel plate or capsule, such as CryptoSteel
  • On a piece of paper
  • Seed phrase splitting (storing different parts of the phrase in different locations)
  • An isolated flash drive (as a last resort)

Of course, each of these storage options must be placed in a secure location, and ideally, one that won’t get damp, lost, or otherwise.

Seed Phrases Are Invaluable

If you’re using a non-custodial crypto wallet, it’s crucial that you record and store your seed phrase super safely. Plenty of errors can result in the loss or deletion of your wallet, so it’s always best to have a recovery method in place, and that’s where your seed phrase will come in handy.

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November 21, 2022 at 03:43AM

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