What Is a Seed Phrase and Why Should You Never Share It?

A seed phrase is a security feature consisting of random words that are generated by a crypto wallet.

What Is a Seed Phrase and Why Do Crypto Investors Care

If you’re new to cryptocurrency, chances are you’re probably overwhelmed with dozens of strange terms you’ve never heard before. In the crypto space, terms like private key, hardware wallet and recovery phrase get thrown around often. For your own security and the protection of your funds, it’s important that you learn what these words mean or you could lose access to your wallet. 

Fortunately, we’re here to help! While navigating the world of blockchain can seem complicated at first, you’ll soon realize that storing your crypto in a self-custody wallet is actually very simple.

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With over $3B worth of crypto stolen in hacks in 2022, there’s never been a better time to refresh on the basics. 

Without further ado, let’s dive into the misunderstood world of crypto wallet security and break down the basics of seed phrases.

What is a Seed Phrase?

A seed phrase, or secret recovery phrase, is a string of words generated at random that give the user access to a wallet. These random words act as a kind of master password that lets you restore your wallet and access your funds, even if you lose your phone or computer.

Whenever you make a new crypto wallet, you’ll be asked to create a seed phrase. A randomly generated 12 word seed phrase is the industry standard, however some wallet providers also offer a 24 word option. It’s good practice to write down your seed phrase and store it carefully somewhere safe. This is often called a paper wallet.

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What’s great about seed phrases is that wallet software generates words that are easily recognizable to the human eye. To give you a better idea of what a seed phrase looks like when it’s written down, here is an example:

czardom cellaret fulgent choker sallet raggedy reform shier codeine sesame sandman snuffle

Sounds like the perfect, secure backup for your crypto, right? 

Yes and no. Granted, it’s fantastic that you can use a seed phrase to recover your lost wallets and regain control of your crypto. However, like a password, if a hacker

Why are Seed Phrases so Important?

There are a number of reasons why seed phrases are crucially important for blockchain and cryptocurrency enthusiasts. Your seed, or recovery phrase, will allow you to access your wallets, no matter the circumstance. Here are multiple reasons why seed phrases could be useful:

  • They allow you to access and recover your cryptocurrency stored on the blockchain, even if you lose your devices
  • They are almost impossible to guess and help keep your assets safe
  • Your seed phrase lets you prove ownership of your cryptocurrency, no matter what happens 

How Do Seed Phrases Protect My Crypto?

Crypto wallets use a software specification called bip39 to generate a seed phrase’s random words. To successfully import a crypto wallet to your device, the user must know all the words in a phrase and the order they go in. Even one error will mean the recovery phrase isn’t recognized and the wallet won’t upload correctly.

The bip39 program selects 12 words out of a list of 2,048 to create a phrase, with millions of different possible input orders. According to nerdwallet.com, there are over a decillion possible phrases so the chances of someone correctly guessing your phrase would be almost zero. 

What’s the Difference between Seed Phrases and Private Keys?

While seed phrases and private keys are often mentioned together, they play quite different roles. A private key is a string of letters and numbers that lets you sign transactions and control your cryptocurrency on the blockchain.

Think of private keys like a password to your bank account. If someone has your password, they have access to your funds.

On the other hand, your seed phrase is almost like the secret recovery questions your bank will ask you if you forget your password. For example, even if you lose your password you can still recover your bank account by knowing the name of your first pet or the model of your first car.

At the end of the day, it’s still a good idea to keep both your private keys and seed phrase secure, or you might lose access to your crypto.

What Should I Do if I Lose My Seed Phrase or Recovery Phrase?

If you’ve lost your seed phrase, don’t panic! You can still access your cryptocurrency from your usual wallet. If you lose both your seed phrase and your wallet, then unfortunately you might not be able to get your crypto back. That’s why most users keep their seed phrase written down on a piece of paper.

Keeping your cryptocurrency safe should be your number one priority, so it’s recommended to create a new wallet and send all your cryptocurrency there immediately. Your seed phrase is like the master key to your wallet, so anyone can steal your crypto if your phrase is compromised.

How Do I Use a Seed Phrase to Restore a Wallet?

Using an old seed phrase or recovery phrase to generate a new wallet is simple. Whenever you start using a new wallet, you’ll be asked if you want to generate a new wallet or whether you’d prefer to backup using an existing seed phrase.

If you have your recovery phrase handy, you can import the wallet directly. All you need to do is write the words of your seed phrase into the fields provided.  

What’s the Best Way to Store My Seed Recovery Phrase?

Storing your seed phrase securely is a must if you want to keep your crypto safe. Generally, it’s not a great idea to store your seed phrase or private keys digitally on any device that’s connected to the internet. The age of the internet is filled with phishing and cyber hacks. One dodgy PDF file or email link could expose your wallets to a hacker.

While many crypto investors are happy with writing their words on a piece of paper, this strategy isn’t foolproof. For example, someone’s recovery phrase recently went viral when it was caught on a Policeman’s bodycam. If you are storing your seed phrase on a piece of paper, it’s recommended to keep it locked up somewhere secure.

In fact, there are some cryptocurrency investors who like to get their recovery phrase engraved on steel plates, instead of paper, and keep them stored in a bank’s deposit box. That way, even if they were to get robbed at home, their recovery phrase would be safe. 

Can Someone Else Hack My Seed Phrase?

If your seed phrase is stored digitally somewhere on your computer or your phone, there is always a risk that a hacker can get access. Having a durable hardware wallet is a great way to protect your private key, but even the best cold storage options don’t protect a compromised seed phrase.

Even so, you can never be too careful. The now infamous Slope wallet hack on the Solana blockchain resulted in over 8,000 wallets and millions of dollars worth of crypto being stolen. Hackers were able to gain access to Slope’s centralized servers and found users’ seed phrases and private keys stored in plain text files.

Phishing attacks aren’t limited to crypto newcomers alone. Even experienced users like NFT_GOD, a popular NFT influencer, can fall victim to cyber hacks and lose life-changing amounts of money.

While hacking a seed phrase is difficult, it isn’t impossible. That’s why you should never share your phrase with anyone, no matter the circumstance. 

Why Should I Care About Seed Phrases?

Your seed phrase is the golden ticket to your cryptocurrency. You can use your seed phrase to restore your wallet and access your crypto, even if you lose your devices.   

Keeping your seed phrase private and secure is crucial to your crypto journey. Whether you’re a web3 veteran or you’ve just generated your first wallet, it’s imperative that you take the necessary precautions to protect your seed phrase. Not only will it give you greater flexibility when managing your cryptocurrency, it might save you millions.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Finn Miller

Finn Miller is a New Zealand-based blockchain writer for DailyCoin who specializes in simplifying complex blockchain topics. He is experienced in crafting whitepapers, researching on-chain data, and advising emerging crypto projects, and uses his unconventional approach to learning and passion for knowledge to provide cornerstone educational content for readers of all levels. When not exploring the depths of DeFi, Finn can be found exploring his other passion, the great outdoors.