What Is a Seed Phrase and Why Does It Matter?

Discover what a seed phrase is and how it is used in the cryptocurrency world.

In the world of crypto, there are plenty of confusing names. Not to mention multiple names for the same thing. Take the term “seed phrase,” for example. Is it the same thing as a private key? A recovery phrase?

In this article, we’ll take you through just what a seed phrase is and isn’t. We’ll also explain when you need one and how to keep it safe once you have it.

But first, it helps to understand why seed phrases exist at all.

Securing Your Crypto: Why You Need a Seed Phrase in the First Place

Cryptocurrencies exist online as cryptographic codes that reside in a distributed ledger known as a blockchain. They require no third-party intermediaries or oversight, as blockchain technology ensures the validation and immutability of transactions.

Public and private “keys” (or encryptions) facilitate the buying, selling, and trading of a cryptocurrency. They make use of a special, one-way math function that can only be solved in one direction.

How does this help? First, let’s look at the public key.

A public key is a kind of address that allows buyers and sellers to find one another. It is easily generated cryptographically from the private key (a very long number). You can share public keys freely because it’s virtually impossible to reverse engineer the private key from it.

A private key, on the other hand, is known only to the person authorizing the transaction. Transactions cannot proceed without the private key making guarding your private key as essential as guarding the crypto itself.

But where do you store these all-important private keys?

While they can be held by the trading platform you use, the primary attraction of crypto is that you remain in control without needing an intermediary to store or manage your assets.

To obtain optimum control of your crypto and its security, a digital crypto wallet, also known as a “self-custodial wallet”, is recommended  This includes either a software app or a hardware device that keeps the private keys safe and avoids having them in someone else’s possession.

This is where seed phrases come in.

When you set up a crypto wallet, you’ll need to secure access to it. Just as you wouldn’t leave a wallet full of cash lying around, you need to prevent unwanted hackers and the like from finding a way into your crypto wallet. How?

Most crypto wallets are password protected. But what happens if you lose the phone your crypto wallet app is on or your hardware wallet breaks? How can you regain access to your wallet — and all your crypto? The answer: your seed phrase.

But what exactly is this magical phrase?

What Is a Seed Phrase?

A seed phrase looks innocent enough: a slew of random words that make little sense. But together they unlock your wallet and, by extension, all the keys stored in it for your cryptocurrency.

Initially, it may seem like a private key and a seed phrase are the same thing. After all, they are both a kind of encrypted password guarding access to your crypto. But if the private keys are like passwords, the seed phrase is like an ultimate password that sits over all the others.

That means your seed phrase is as valuable as your crypto investment itself. Lose it, and you may lose access to your entire investment. Also, one seed phrase can work across many crypto types and across wallets, in essence guarding your entire portfolio.

How Does a Seed Phrase Work?

When you first set up your crypto wallet, the application creates a seed or recovery phrase by randomly pulling 12-24 words from a list of over 2,000. In order, they read like nonsense, but each word separately is legible.

This is the reason words are used instead of a long string of numbers.

The possible combinations required to guess a seed phrase are mind-numbingly large. And, in practice, it’s considered impossible to guess someone’s seed phrase — at least in one lifetime.

The application then takes this list of simple words to algorithmically generate private keys for your crypto transactions. So not only is your seed phrase the protector of all your keys, in a sense, it’s the source of them too.

Seed phrases are immensely important and should be treated with great care. Here’s how to keep them safe.

How to Keep Your Seed Phrase Safe

There’s a good reason seed phrases use words instead of a combination of characters and numbers. The reason? You.

If you had to rewrite a string of 176 or so random numbers, chances are you’d make a mistake. But give you a list of 20 common eight-letter words, and you’d have a much better chance at getting them right.

As we mentioned earlier, seed phrases can be easily read and understood. And even if a single character gets smudged or written incorrectly, because it’s part of a word you’d recognize, the character can be easily deduced.

However, just because a seed phrase is made up of words doesn’t mean it’s easy to memorize. Remember, they may be between 12 and 24 randomly picked words and make no sense in the order they’re given.

But these phrases were meant to be written or in some way recorded.

Here are some dos and don’ts for recording your seed phrase:

  • Do record it and keep that record safe. (Paper is OK if it’s securely stored and protected from anything that could degrade it).
  • Do consider using an encryption method to make it more difficult for a thief to decipher.
  • Do consider storing it in a safety deposit box.
  • Do consider etching it on metal or some other material more impervious to the elements.
  • Don’t record it anywhere online.
  • Don’t send it to yourself via email.
  • Don’t record it digitally.
  • Don’t enter it into any application unless you trust the app or platform requesting it.
  • Don’t give it to anyone calling from a company asking for it (you’re being phished).
  • Don’t give it to anyone else for “safekeeping.”
  • And, finally, don’t lose it.

You can even buy products designed to help you safely store your seed phrases. Some have water- and tear-proof pages. Others are made of stainless steel and are encapsulated.

No matter what you choose to store your unique phrase in, the bottom line is this: Keep it safe.

What if You Lose Your Seed Phrase?

What if you lose your seed phrase? Well… it depends.

If you still have access to the wallet on your device, you may be in luck. But it will take a little work. You’ll need to move all of your crypto to an exchange or platform you’ve got an account with.

Once you verify it’s all safely there, you’ll need to reset your device and start over by launching a new wallet with a new seed phrase. Once that is done and tested, you can move your crypto back to your wallet.

On the other hand, if you don’t have access to your wallet device or app, you’re stuck. There is simply no way to recover it without the seed phrase. So be forewarned: Guard your seed phrase and never lose it!

Other Options Instead of Using a Seed Phrase

Basically, if you’re going to use a crypto wallet, you’ll need a seed phrase. But it is possible to use something called a “custodial wallet” where the crypto exchange or platform you’re using holds your private keys in a wallet-type app on their system.

They become responsible for your crypto’s security and for helping you recover passwords. But, as we mentioned earlier, they also then control your crypto. Some services even place limits on how and when you can use it.

Check carefully before going down the custodial wallet path.

Crypto Security Begins with the Right Partner

Crypto wallets and seed phrases are a critical part of securing your crypto investment — but only a part. You need to pick a trading platform partner you can trust and that takes steps to keep your crypto and personal information safe.

For example, Binance.US uses multifactor authentication to protect your cryptocurrency. We even have our Trust Wallet to make storing crypto easy, safe, and secure.

No matter what your goal is with cryptocurrency, choose a platform that has a clear fee structure, a range of crypto offered, educational materials, and relative ease of use.

You’ll be thankful you did your homework on the front end and found the right partner.

To begin your crypto journey today, visit Binance.US.

Download the Binance.US app to trade on the go: iOS | Android

Legal disclaimer: This material has been prepared for general informational purposes only and should NOT be: (1) considered an individualized recommendation or advice; and (2) relied upon for any investment activities. All information is provided on an as-is basis and is subject to change without notice, we make no representation or warranty of any kind, express or implied, regarding the accuracy, validity, reliability, availability or completeness of any such information. Binance.US does NOT provide investment, legal, or tax advice in any manner or form. The ownership of any investment decision(s) exclusively vests with you after analyzing all possible risk factors and by exercising your own independent discretion. Binance.US shall not be liable for any consequences thereof.

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