If you’re new to cryptocurrencies, then one of the most important things you’ll learn about is something called the “seed phrase.” It’s one of those critical ideas, and learning about is key to keeping your digital assets safe. Let’s break down what a seed phrase is, why it matters, and how you can protect it.
What’s a Seed Phrase?
A seed phrase, also called a recovery phrase or mnemonic phrase, is a set of words derived during the original setup of a crypto wallet. They’re usually 12 or 24 words altogether depending on what the crypto wallet software offers. These series of words are more than random texts since they serve as a representation of private keys of the wallet in a human-readable format.
The private keys of your wallet make sure you can access your assets, make transactions, or even prove ownership of the assets stored in the wallet. The seed phrase allows recovery of all your funds on a new device in case you ever lose your wallet or your device gets hacked. Think of it as the main key to unlock your crypto vault. If someone has access to your seed phrase, they can easily gain control over your crypto assets.
How is a Seed Phrase Generated?
When creating a new cryptocurrency wallet, be it hardware, a software wallet, or even mobile, you are asked to write down a seed phrase. The wallet software generates this phrase for you through algorithms so that the phrase is as random and secure as it can get. Each word in the seed phrase is chosen from a preset list of 2,048 words defined by the BIP-39 standard.
BIP-39 is the standard that defines the list of 2,048 words from which seed phrases are generated. This list ensures that each word is unique and easily distinguishable, reducing the chance of errors when writing or reading them. A minor mistake in spelling or sequence of the seed phrase will prevent unauthorized opening of your wallet.
Here’s an example seed phrase:
unfold loyal pelican radio spirit gun trust sister frost media pigeon draw
Why is your Seed Phrase so Important?
Your seed phrase is your wallet’s lifeline, and that is a fact. If you lose access to your device or your wallet software got corrupted, it becomes the only way you can recover your crypto assets. And without it, your funds are gone forever.
With decentralized systems, such as cryptocurrencies, there’s no bank involved or any central authority whatsoever that can assist you in recovering your funds. However, since the seed phrase is a direct representation of your private keys, you can access your wallet from anywhere in the world on any compatible device with it.
In cryptocurrency, the person who owns the seed phrase is the king, which is why having a good backup strategy right from the moment of generating your wallet is key.
How to Protect Your Seed Phrase
Keeping in view the critical nature of a seed phrase, its security should be your first priority. Here are some best ways to keep it secure:
1. Never store it digitally
You might want to save your seed phrase on your computer, in the cloud, or inside some password manager, but this is dangerous. Hackers steal files, cloud accounts get compromised, and malware can be installed to steal all of your clipboard data. Once somebody knows your seed phrase, they can drain your wallet without you even knowing it.
Instead, you should write down your seed phrase on paper and store it somewhere safe. This might be old school, but it’s the safest way.
2. Use hardware wallets
Hardware wallets are physical wallets that store your private keys offline, exempt from online vulnerabilities like hacking and malware. If you make use of a hardware wallet, the seed phrase is generated inside the device, never touching the internet.
A good security practice is getting hardware wallets from the more trustworthy manufacturers and never buy second hand. Compromised hardware wallets could come with pre-programmed malware that may be used to compromise your wallet, leading to asset loss.
3. Store in multiple locations
To add an extra layer of security, consider making numerous copies of the seed phrase and store them in various different safe locations. For example, you could store one in a safe at home and another in a secure location, like a bank deposit box.
Make sure you don’t store all your copies in a single location to reduce the possibility of theft, fire, or other natural calamities that may destroy your one and only backup.
4. Don’t share your seed phrase
You should never share their seed phrase with anyone. No customer support representatives on any crypto platform would even ask for your seed phrase. The crypto space is full of scammers where a malicious actor may request your seed phrase in order to ‘fix’ some issue or other. If a person asks for your seed phrase, that’s a scam. Always approach with suspicion anyone or any service seeking it.
5. Consider a metal backup
Others go to the lengths of engraving or stamping their seed phrase onto a metal plate, allowing them to have, in general, a durable backup against water, fire, and other environmental hazards that can destroy a paper backup.
6. Use encryption
If you must store your seed phrase digitally, then you should probably encrypt the file. An encrypted file has scrambled information, so whatever data it may contain can’t be read without first using a decryption key. Again, this is a vulnerable approach. Should your encryption method be compromised, your seed phrase might be at risk.
This method should only be chosen by more tech savvy users who are comfortable with using encryption and decryption utilities, but even then, it’s safer to use hardware wallets and paper backups.
Common mistakes to avoid
1. Making screenshots: For convenience or otherwise, never do this with your seed phrase. A phone or a computer might be accessed by some sort of hackers, or the image may get uploaded to some cloud services without your knowledge.
2. Writing on materials that can easily get lost or damaged: It’s a bad idea to write down your seed phrase on Post-it notes, scraps of paper, and napkins because they can well be lost, destroyed, or even trashed.
Conclusion
A seed phrase is the pillar of your cryptocurrency security, and you should take it seriously. Knowing its importance and the best practices to secure it are ways to go in order for your crypto assets to be safe and at the same time under your full control. Remember that in crypto, you’re your own bank. When things go sideways, there’s no customer service to call in, so take the time to secure your seed phrase and protect your financial future.
