Learn All About Seed Phrases in 5 Minutes (2024)

What’s a seed phrase?

A seed phrase is a sequence of random words that stores the data required to access or recover cryptocurrency on blockchains or crypto wallets. Cryptocurrency wallets provide software that create seed phrases and encourage users to record them on paper for safekeeping. This helps during a hardware breakdown or file corruption. In such a scenario, the user can reinstall the required wallet software and regain access to their coins via their paper. Seed phrases are known by multiple other names like seed recovery phrases, backup seed phrases, or mnemonic phrases.

What’s the BIP39 standard?

BIP39 is a protocol that outlines how crypto wallets generate a string of words to create a mnemonic sentence. The crypto wallet converts these words into a binary seed, which then produces a set of keys that encrypt and decrypt crypto transactions. In short, BIP39 is divided into two components, i.e., mnemonic sentence and binary seed. The BIP39 design aims to convert the sentence into a binary seed.

How to generate a seed phrase

Now that we’ve defined what a seed phrase is and what it does, let’s understand how it generates. Here are four methods to generate a seed phrase:

Wallets

Most crypto wallets automatically generate a seed phrase when set up. There aren't many choices available for customizing the seed phrase's settings because the procedure is often mechanical. This strategy is appropriate for most users who accept the generated seed phrase once, never to change it again.

Apps

Some apps not only create a seed phrase but also help users generate an encrypted "vault" that holds their phrase and keeps all their digital assets secure within the vault. For example, Vault12 is an app that performs routine audits with automatic backups.

Calculators

Calculator-based seed phrase is another analog method for offline phrase generation. To generate a seed phrase, use a calculator with "random" functionality and create a seed phrase with a random sequence of characters. However, these come with security vulnerabilities, as this method requires two devices to function, i.e., a calculator and an air-gapped computer, which is isolated from unsecured networks.

Dice

Another analog method involves the use of dice. This approach requires dice, paper, pens, and a BIP39 word list. Using one die is optional; however, using multiple dice is preferable. Roll the dice and write down the random results on a piece of paper. After the required number of characters, you'll have generated a seed phrase.

Private and public keys

Seed phrases enable users to recover their private keys from the blockchain. They’re the private keys presented in a human readable format.

If you’ve locked your crypto somewhere for safekeeping, you’ll need a key to access it. Crypto wallets and blockchains function with the same logic and use private and public keys. A key is a long string of illegible, random characters. A private key is comparable to one's PIN or password in terms of security. Whereas, a public key is a number that users can publicly share if they want to receive cryptocurrencies or exchange assets with others.

Think of a public key as a bank account number; you can share this with anyone who wants to send you money. However, if you wish to access your own money, you'd need a PIN, which is your private key.

Keys encrypt user data using cryptography to maintain security. A private key is connected to every public key. A private key proves that a public key is owned by a verified individual, while the public key allows users to receive crypto from others. They work simultaneously to secure user data. Essentially, a seed phrase and a private key are two slices of the same pie. Think of seed phrases as private keys in a different form; both are managed differently.

Private keys are ultimately the main component of cryptographic ownership. A private key is linked to a blockchain, giving its user the ability to control all assets stored behind that key. The 24-, 18-, or 12-word seed phrase that makes up a sequence is created every time a user opens a new wallet. Seed phrases are connected to a user's entire crypto wallet, which contains all their private keys. Each private key, however, is linked to a single address.

How to use it

Think of a seed phrase as a master key for one's crypto assets. All the private keys stored on a crypto wallet can be recovered by entering a seed phrase into a different wallet, as long as they're in the proper sequence.

If a user loses access to their crypto wallets, a seed phrase can help recover their coins as the seed phrase is connected to the user's crypto accounts. As a result, the user simply has to log in using their seed phrase, and they can recover their crypto wallets. This means that if somebody steals your seed phrase, they gain access to your funds. We must, therefore, be exceptionally safe with our seed phrases!

How to be safe

Users often opt for crypto wallets to protect their private keys from hacks and cyberattacks. Crypto wallets are available as hardware wallets or software wallets, depending on the user’s needs and preferences. Since your seed phrase is your entire portfolio's master key, losing it could be detrimental. As a result, it's essential to store your seed phrase safely.

Here are some of the best practices to keep your seed phrase safely:

Don’t keep it online

Storing a seed phrase on linked devices negates the point of using a crypto wallet, as it makes it easier for hackers to target your seed phrase. As a result, keeping your seed phrase offline can prevent any form of cyberattack.

Write it down

Use a pen and paper to write down your seed phrase. However, remember that blockchains don’t offer any form of customer support. As a result, it's essential to maintain a recovery document in a secure location that’s safe from water and fire damage or other elements that could potentially damage your paper.

Hide it safely

Hide your seed phrase in a place that only you can access. Often, you won't need to use your seed phrase because your private keys are kept secure within your wallet and are available for crypto transactions. So consider your options carefully, and remember that secrecy, safety, and security are your main concerns while making a decision.

Main learnings

Let’s quickly recap what we’ve learned. Here are the key takeaways:

1. Seed phrases and private keys aren’t the same things. Seed phrases enable users to recover their private keys from the blockchain. They’re private keys in a readable format.
2. Users can create phrases automatically or manually. Those who want to generate a seed phrase can use a crypto wallet’s services, seed phrase-generating apps, or analog methods like calculators and dice.
3. Seed phrases can’t be recovered. Users need to store their seed phrases in dedicated safe deposit boxes with secure locks. Other safe methods to store seed phrases are keeping them offline, writing them down, and hiding them in a secure location only they can access.
4. Seed phrases should be stored securely. They should be stored offline and hidden in a safe location.

At Worldcoin, we’re not only committed to helping you keep your crypto safe by helping you understand the essentials of seed phrases. We also want to give away a free share of our cryptocurrency to every individual on the planet, all while maintaining our users’ anonymity and privacy. Sounds interesting? Subscribe to our blog for all the latest updates on all things crypto.