Summary:
- A seed phrase is a secret list of 12 or 24 words that serves as your “master key” to your crypto wallet.
- It is used to regain access to your crypto funds if you lose your crypto wallet. As such, your crypto is only as safe as your seed phrase.
- If someone knows your seed phrase, they can empty your entire crypto wallet.
Be in crypto long enough and you’ll soon come across horror stories of users who lose their crypto wallets and thus forever lose access to all their crypto. The fact is this is actually quite rare, as crypto wallets have a built-in safeguard that protects investors from losing access to their wallet and crypto: seed phrases.
What Is A Crypto Wallet?
Before diving further into what exactly a seed phrase is, it is important to understand what a crypto wallet is. Unlike your physical wallet, you do not store your crypto in a cryptocurrency wallet per se. Your crypto, say Bitcoin, is stored directly on the Bitcoin blockchain itself.
The crypto wallet is simply a device or software that stores the public and private keys needed for you to interact and access your record on the blockchain network. An easy way to think of this is, the blockchain network is the safe that stores your crypto, and your crypto wallet is actually the key to the safe.
Another important aspect of crypto is to understand the two broad categories of crypto wallets: Cold and Hot Wallets. A hot wallet is a wallet that is connected to the internet, such as Metamask’s digital wallet. A cold wallet is an offline physical wallet (also known as a hardware wallet), such as a Trezor or Ledger wallet which typically looks like a small USB stick. Each type of wallet has its pros and cons.
Security and ease of use: How do hot and cold wallets differ from each other?
What Is A Seed Phrase?
A seed phrase – sometimes referred to as a mnemonic seed– is a sequence of random words from a 2048 word bank that serves as a master key that allows you to regain access to your crypto funds if you ever lose your crypto wallet.
For example, if you are out on a walk and lose your physical Trezor Wallet, rest assured, as long as you have your seed phrase you will be able to completely recover the contents of your wallet and re-gain access to your crypto.
How Long Is A Seed Phrase?
A standard seed phrase comprises 12 words. The first time you use a crypto wallet, you will be asked if you want a 12-word or a longer 24-word version–which obviously gives more security.
These words are generated at random with zero interconnectivity between them. However, it is important to note that the order of the words matter, so make sure you record it in the exact order and sequence they appear in.
An example of a seed phrase:
(Source: CryptoMatics)
How Do Seed Phrases Work: An Example
Let’s take the seed phrase of Metamask wallet as an example. The Metamask seed phrase is generated using BIP39, a protocol that enables the creation of mnemonic phrases and converts them into a BIP39 seed phrase. If you lose your MetaMask account, you can restore it using this phrase. Once you do that, you will be able to retrieve all your tokens, addresses and transactions.
According to MetaMask, it does not store any user data on its servers and everything is encrypted in the user’s browser and protected via the user’s MetaMask password.
While MetaMask itself has never been hacked, it has been the target of scarily effective phishing campaigns. The blockchain security firm PeckShield recently put out a warning to users of the popular move-to-earn STEPN app, saying that hackers can insert a forged MetaMask browser plugin to a user’s browser, through which they can steal their seed phrases. Phishing emails from hackers pretending to be from MetaMask are also on the rise, so if you get an unexpected email from “MetaMask” never click on any link in it.
Seed Phrase vs Private Key
You may often hear the term private keys used in the same conversation as seed phrases. However, the two are not the same thing. Private keys are a digital signature that is stored on your crypto wallet that allows you to access your crypto from its blockchain network and authorize transactions.
Your seed phrase is the backup that allows you to regain access to your crypto wallet if you ever lose access to it. Thus, allowing you to regain access to your private keys, which then allows you to regain access to your crypto stored on the blockchain network.
So a simple way to look at it is: the private key is the password you use to access a website, and the seed phrase is the “secret question” option that allows you to recover your password if you ever forget it.
Can a Seed Phrase Be Hacked?
Given that seed phrase is 12 to 24 randomly generated, sequential list words from a word bank of 2,048 words, hackers will have a near impossible chance of obtaining a user’s seed words through brute force hacking, with current technology.
For someone to successfully hack or guess it, they would need to not only guess all the words but in the right order. “A 12-word seed phrase has a possible combination of 340,282,366,920,938,463,463,374,607,431,768,211,456 while a 24-word version has even more combinations,” says TrustWallet, an Ethereum and crypto wallet provider.
One critical thing to remember–never type it into any computer.
In May 2022, a Redditor named Andre discovered that his smartphone’s predictive typing function stored his seed phrase and the moment he keyed in the first word, his phone was able to spew out the second word. He warned others in the post, “Do yourself a solid and prevent that from happening by clearing your predictive type cache.”
3 Tips For Safe Seed Phrase Storage
As mentioned, it is nearly impossible for a hacker to guess your seed phrase. The only way for them to access your account would be if they directly obtained it from you or somehow gained access to it, like through a phishing email.
Here’s how to keep it safe:
- Write it down physically in two copies. If you store your seed phrase digitally, such as writing it on a digital notepad, taking a photo or screenshotting it – you are opening up the possibility for a hacker to access your seed phrase digitally, such as through hacking your iCloud.
- Store the physical copies of your seed phrase somewhere secure but accessible. You do not want to store it where others will easily be able to find, but you also don’t want to store it somewhere so obscure that you may lose it or forget about it.
- Never tell anyone else where your seed phrase is located or what it is, unless you trust them incredibly deeply. Your crypto exchange or wallet will never ask you for your seed phrase; if anyone does, it’s likely a scam.
- Never click on any unexpected, out-of-the-blue email/text message, anything that relates to crypto, or anything else, in fact. Just don’t.
Seed phrase written down (Source: The Crypto Merchant)
How to Use Your Seed Phrases to Recover Your Account?
Using your seed phrase to restore your account is a simple process, but one that varies slightly depending on which wallet you are using. Overall, the process is usually similar and follows the same general steps:
- Buy or obtain a new BIP-39 Wallet (most popular commercial wallets are BIP39 standard).
- Launch the wallet’s recovery process.
- Enter the seed phrases you wrote down into the new wallet. Make sure to enter the words in the same order you wrote them down, as the sequence matters.
- Just like that, your recovery is complete, and you will be able to use your new wallet to access your crypto.
Can I Use My Seed Phrase on Any Wallet?
A common question users may have is if they can use their seed phrase on any wallet – and the answer is typically yes. As long as your wallet is BIP-32 compatible (which most wallets are), you can use the seed phrase with any other BIP-32 compatible wallet.
For example, if you bought a Trezor wallet, recorded the seed phrase, and then subsequently lost your Trezor Wallet, you could then buy a Ledger wallet and use your seed phrase to recover the contents of your Trezor Wallet onto your new Ledger Wallet.
Can I Change My Seed Phrase?
No, you cannot change the words in your seed phrase or their sequential order. The seed phrase initially provided to you is final. The crypto exchange or wallet company cannot switch it, nor can a random person on Facebook who offers to do so. This inability to change it is only further reason to make sure you protect your seed phrase and ensure that nobody gets a hold of it.
Conclusion
Overall, your seed phrase is a powerful tool that allows you to recover your wallet and crypto in the event you ever lose your wallet. If others ever obtain your seed phrase, they can access your wallet and crypto. In other words, your crypto stash is only as safe as your seed phrase.
