Categories: Blockchain Investments
Topics: Cryptocurrency

Unlocking Bitcoin: Understanding and Safeguarding Your Seed Phrase

BitcoinWordLIst

What you’re looking at in this graphic is a full list of every word that is used in a standard mnemonic Bitcoin wallet password…otherwise known as the BIP39 Wordlist. 

If you can guess the correct combination of 12 of these words, then you can gain access to a crypto wallet. The problem is…it’s theoretically impossible. This is a huge part of crypto’s security and it’s called a “seed phrase.” 

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What is a seed phrase?

A seed phrase consists of randomly chosen words that store the necessary data for accessing or recovering cryptocurrency on blockchains or crypto wallets. 

Cryptocurrency wallets offer software to generate seed phrases, advising users to record them on paper for safekeeping, especially in cases of hardware failure or file corruption. Reinstallation of the wallet software using the recorded seed phrase allows users to regain access to their coins. Seed phrases are also known by other names like seed recovery phrases, backup seed phrases, or mnemonic phrases.

A seed phrase, also known as a seed recovery phrase or backup seed phrase, is a set of words that contains all the necessary information to recover Bitcoin funds on the blockchain. Typically, wallet software generates this seed phrase and advises users to record it on paper. In the event of computer failure or a corrupted hard drive, users can reinstall the same wallet software and use the paper backup to regain access to their bitcoins.
 
It is crucial to keep the seed phrase secure, as anyone who discovers it can potentially steal your Bitcoins. Therefore, it should be treated with the same level of caution as valuable items like jewels or cash and should not be entered into any website.

BIP39

BIP39 is the most common standard for seed phrases. 

The English-language wordlist for the BIP39 standard comprises 2048 words. If a 12-word random phrase were used, there would be 2048^12 = 2^132 possible combinations, providing 132 bits of security. 

However, some data in a BIP39 phrase is not entirely random, leading to an actual security level of 128 bits for a 12-word BIP39 seed phrase. This is deemed sufficiently secure by most experts, and it is strongly discouraged to invent one's seed phrase due to human limitations in generating randomness.

One notable advantage of seed phrases is their excellent error correction, as they use natural language words. Even if written with bad handwriting or missing a letter or two, the words can often still be deciphered. The carefully chosen word list ensures that the first four letters of each word are enough to uniquely identify it, providing robust error resilience compared to raw private keys.

How to generate a seed phrase

Understanding what a seed phrase is and its purpose, there are four methods to generate a seed phrase:

  1. Wallets: Most crypto wallets automatically generate a seed phrase during setup, with limited options for customization, suitable for users who accept the generated seed phrase without modification.
  2. Apps: Some apps not only create seed phrases but also generate an encrypted "vault" to secure digital assets. For instance, Vault12 is an app with routine audits and automatic backups.
  3. Calculators: This analog method involves using a calculator with "random" functionality to create a seed phrase with a random sequence of characters. However, it has security vulnerabilities, requiring two devices – a calculator and an air-gapped computer.
  4. Dice: Another analog method involves using dice, paper, pens, and a BIP39 word list. Rolling dice and recording the results on paper generates a seed phrase. 

Unlocking Bitcoin: Understanding and Safeguarding Your Seed Phrase

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Private and public keys

Seed phrases enable users to recover their private keys in a human-readable format from the blockchain. Private keys are likened to a PIN or password, ensuring security, while public keys act as shareable numbers for receiving cryptocurrencies.

Using a seed phrase as a master key, entering it into a different wallet can recover all private keys stored on a crypto wallet. Losing access to crypto wallets can be mitigated by using the seed phrase to recover coins, emphasizing the need for secure storage to prevent unauthorized access.

How to be safe

To safeguard seed phrases:

  • Don't keep it online: Storing seed phrases on linked devices exposes them to potential cyberattacks, emphasizing the importance of offline storage.
  • Write it down: Use pen and paper to record the seed phrase, maintaining a recovery document in a secure location safe from damage.
  • Hide it safely: Store the seed phrase in a location accessible only to the user, considering options carefully to ensure secrecy, safety, and security.

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Chris Curl

Chris Curl
Editor, Daily Profit Cycle