Understanding Seed Phrases in Cryptocurrency

5 Nov 2023 by Harry Newman 4 min read

As a cryptocurrency user, understanding seed phrases is essential to secure your assets, seed phrases are vital security measures when operating on a trustless and decentralised model.

Seed phrases typically consist of 12,18 or 24 random words that serve as the backup and recovery mechanism for a cryptocurrency wallet.

Without a seed phrase, you cannot access a crypto wallet.

What is a Seed Phrase

A seed phrase is a sequence of either 12,18, 24 and sometimes more randomly generated words that serve as the password to your crypto wallet.

When setting up a new crypto wallet you will generate a seed phrase, which can be seen as the master password that grants access to all the crypto linked to that wallet.

Typically when setting up a wallet you can still set up the usual username and password, which serves as the everyday login method.

If a user lost this wallet or it was deleted from the computer or device, you can easily create a new wallet with the seed phrase, acting as a backup to help recover the cryptocurrencies held in that wallet.

Anyone can send transactions to a wallet address but not everyone can access these funds. A seed phrase is required to unlock those funds and prove you are the owner of that crypto wallet.

The total number of words on a seed phrase is from a list of 2048 words, the full list can be found here.

Bitcoin Improvement Proposal 39 (BIP39) introduced in 2013 is the industry standard used to generate seed phrases, initially just for Bitcoin wallets, it has now become the standard across the board.

An example of a 12-word seed phrase can be seen below:

Planet	4. Happy	7. Alternative	10. Feel
Typical	5. Never	8. Blade	11. Garlic
Difficult	6. Loose	9. Bronze	12. Rent

Pros and Cons of Seed Phrases

Seed phrases are an important part of the system to offer full control over the security and accessibility of crypto assets.

Despite seed phrase security, this creates a single point of failure, losing a seed phrase is the last thing you want to do.

Below are some pros and cons of seed phrases:

Pros

If you lose access to your wallet due to theft or your device has failed you, your seed phrase remains the only option to recover your funds.
Seed phrases can be stored offline, when setting up a wallet you must write the seed phrase down on paper and store it in a safe space, this protects your wallet from any hacks or other attacks online.
Seed phrases are compatible with different wallet software, making it easy to switch between wallet types.

Cons

The paper you have recorded your seed phrase on can be damaged over time, lost or even stolen, it is important to make sure it is kept safe and secure, it is the key to your crypto.
Storing a digital copy of your seed phrase on a computer can put you at greater risk if your device is compromised by malware or a hack.
When writing down your seed phrase, human error can lead to mistakes recording, if you lose access to that account it can result in permanent loss of your cryptocurrency.

Ways to Keep Your Seed Phrase Safe

The wrong hands on your crypto seed phrase can cause a lot of damage, compromising your funds, so it is important to make sure you keep your seed phrase in a safe place that only you have access to, such as a safety deposit box in a bank or secure area in your home.

It is advised to not share your seed phrase with anyone, if an unwanted person has access to your seed phrase, they will be able to access the wallet, controlling all funds held in the wallet.

Taking photos of your seed phrase is not advised.

Storing on a device increases the risk of exposure to online threats, even if your device is not connected to the internet, your seed phrase can still be compromised.

If possible memorise your seed phrase, however, relying solely on memory is risky.

Making more than one copy of your seed phrase, and storing them in separate secure locations can help safeguard against loss or damage to a single copy. Increasing your security, as long as they are in a safe location.

Final Thoughts

Seed phrases provide a new way to secure your assets, acting as a master password to your crypto wallet.

Keeping the seed phrase safe and secure, preferably written down on paper, is an essential best practice.

Being able to have self-custody of your assets is important, banks and other institutions cannot be trusted to keep your funds safe, and the countless financial crisis’ we have experienced in the past shows that.

If you do not have a wallet with a seed phrase, and only use an exchange, well, not your keys, not your crypto.

Want More Cutting-Edge Crypto News?