TL;DR
- Seed phrase serves as a master password for a crypto wallet. It is capable of initiating transactions for every type of crypto linked to that wallet, removing the need for individual private keys.
- Seed phrases often take the form of a 12 to 24 word combination and cannot be changed once generated.
- If you lose your seed phrase, you lose your crypto; and if anyone else knows your seed phrase, they can steal your crypto.
Introduction
Seed phrase, or recovery phrase, sounds just like one of those unnecessarily confusing terminologies in the world of crypto technology. But not everyone knows that seed phrase is one of the most important concepts in cryptocurrency investing.
So, what exactly is seed phrase, and how does it work? This article will provide you with everything you need to know about it.
What Is A Seed Phrase?
Most cryptocurrencies use “private keys” to verify users’ information. This is essential for security purposes. However, this process could be annoying for the users as most of these keys are a random combination of numbers and words too complex to be handled by the average human mind. The solution to this is “seed phrase”.
A seed phrase (or recovery phrase) is a line of password-like code that is generated when you set up a crypto wallet on any platform. This line of code serves as the base to algorithmically compose your private keys. In other words, it serves as a master password for your crypto portfolio.
Every blockchain in your possession can be managed using the seed phrase without the need of any individual private key. Better yet, the seed phrase is often created as a combination of 12 to 24 simple words, making it fairly easy to handle.
Why Is Seed Phrase Important?
Protecting your seed phrase is important, and the reason is quite simple. If you lose your seed phrase, you will lose the access to all of the crypto currencies linked to it. If you let it fall into the hands of the wrong person, that person gains access to your crypto.
If a list of 12 words from a known 2048 words dictionary sounds like a small set to randomly select such an important key from, then that’s because humans are really bad at imagining just how big, big numbers are.
How To Safely Store Your Seed Phrase
There are many ways to protect seed phrases, and the ideal one for you will depend on how much crypto you have and how much concern you put on convenience vs security.
1. Pen & Paper
This sounds intuitive enough, doesn’t it? You write your seed-phrase down to a notebook of your private possession, keep it safe and accessible at all times.
While it’s almost “unhackable”, you can sometimes lose or spill your drinks on paper, which may result in you losing access to your seed phrase. Paper – is after all – neither fireproof nor watertight safe.
2. Physical Devices
Some people have their seed phrases engraved into strong materials like stainless steel using specialized services. You can also engrave your seed phrase onto more than one place to diversify your basket, and reduce the chance of losing access to it. If this sounds interesting to you, take a close look at Jameson Lopp’s thorough testing of physical engraving solutions for details.
3. A Digital Replica
Relying on a digital replica of your seed phrase is not recommended. This entails avoiding emailing or texting it to a friend or yourself. Some people save their seed phrase in password managers, however this is not foolproof since weak passwords have been successfully broken, giving hackers access to all the passwords in a person’s vault, including seed phrases.
As a general rule, you should never reveal a seed phrase to anybody else. Why? The obvious reason is that if a third party gains access to the seed phrase, they can control all the cryptocurrency funds stored in the wallet. On top of that, you can’t rule out the chances that their devices might be vulnerable to hacking attempts.
Closing thoughts
Seed phrase is, perhaps, one of the most handy tools in crypto currency investment. But it also comes with the downside of being extremely vulnerable and requires absolute protection. All and all, the success of a crypto investor depends heavily on how good he handles his seed phrase.
