What is a Seed Phrase?

Table of content

• Key Takeaways
• Seed Phrase Meaning And Purpose
• How does Seed Phrase work?
• The BIP39 Standard and Seed Phrase Word List
• How to Generate a Seed Phrase?
• Difference Between Seed Phrase and Private Key
• How to Protect Your Seed Phrase?
• FAQs about Seed Phrase

A 12 word seed phrase is mainly used to protect your cryptocurrency wallet by acting as a backup. 

If you misplace your device, have a corrupted hard drive, or experience any other issue preventing you from accessing your wallet, you can use your seed phrase to locate and retrieve your money by logging in from another mobile or desktop device.

The importance of a seed phrase in cryptocurrency cannot be overstated.

Without it, you risk losing your cryptocurrencies forever. Securing your wallet is also important because anyone who knows your seed phrase can take control of it.

A seed phrase functions by serving as a link between you and the private keys in your cryptocurrency wallet. The software generates a seed phrase, which is a string of 12, 18, or 24 words when you establish a new wallet. A Seed Phrase is used in both hot and cold wallets.

The primary password and the recovery phrase are comparable. A wallet is similar to a cryptocurrency password manager. As long as the recovery phrase is available, it allows access to every cryptocurrency linked to the wallet that created the phrase—even if the wallet has been lost or erased. 

You need to be familiar with seed phrase examples to understand how recovery works and why keeping them safe is critical for protecting your assets.

Although crypto seed phrase is easier to write down and recall, these words are taken from your private key. You can then recover your wallet on any compatible device using the seed phrase to generate a new private key.

BIP39, or Bitcoin Improvement Proposal 39, is a commonly used protocol that specifies how seed phrases are created and utilized in cryptocurrency wallets. It describes how to create a mnemonic phrase, or seed phrase, as we call it in the industry. 

This standard guarantees that a seed phrase will work with a variety of wallets and systems by selecting words from a seed phrase word list of 2048 words. Wallets that follow BIP39 can produce a seed phrase that is safe and compatible with other wallet providers, enabling users to retrieve their money using any wallet that complies with the standard.

Creating a seed phrase is usually a simple procedure that occurs during the setup of a new digital currency wallet. The wallet program will automatically produce a seed phrase for you during the wallet construction process. 

Although closely related, the recovery phrase and private key serve different functions in securing cryptocurrency wallets. The recovery phrase acts as a backup password for the wallet, used to restore access if the owner forgets their password. 

In contrast, the private key is linked to a blockchain address and authorizes transactions. It proves ownership when conducting cryptocurrency transfers.

This phrase allows users to recover their digital money even if the physical wallet or hardware device is lost or damaged. The purpose is to ensure uninterrupted access and control over digital assets, regardless of hardware issues.

To protect your DeFi wallets, you must use several protection methods to secure your seed phrase.

Keeping your seed phrase online is a significant security risk that should be avoided. When stored online—whether in cloud storage, email, or even as a digital file on your computer—your seed phrase becomes vulnerable to hacking, phishing attacks, and malware.

Writing your seed phrase down on paper is one of the most secure methods to protect it. Unlike digital storage, a physical copy of your seed phrase is not susceptible to hacking or malware.

When writing it down, ensure that you double-check your Seed Phrase and each word is legible and in the correct order, as any mistakes could make it impossible to recover your wallet.

After writing down your seed phrase, place it securely in a fireproof, waterproof safe place or a safety deposit box. Consider making multiple copies and storing them in separate, secure places to safeguard against potential disasters like fire and flooding.

If you have already set up your wallet and haven’t written down the seed phrase, you may not be able to view it again within most wallets for security reasons. If available, some wallets have a backup option where you can view or re-confirm your seed phrase, but this typically requires entering your wallet password or passcode. 

Some wallets also ask you to write down some words from the Seed Phrase to confirm that you saved it correctly, other wallets have an option to write it down later. You can find it in your wallet's security settings.