Wallets are important assets in the web3 world because they have a capacity to hold funds just like normal wallets that hold money but the security of both wallets is important because it is related to money. Cryptography seed phrase also called mnemonic phrase is considered as key to a wallet just like a normal locker key which holds valuable assets. So mnemonic phrases are used in case of recovery when the password doesn’t work. Let’s explore in detail what it is how it works and its importance in wallet recovery.
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Seed phrase and its Working
A seed phrase is a series of words that is also known as the private key of a wallet in the form of 3-5 word pairs. The seed phrase comes in two variants 12 and 24 depending on the security and difficulty. A BIP 39 protocol provides this combination of phrases. The phrase is important if the key is lost or in the case of forgetting passwords that are used as recovery password to create new.
A BIP 32 wallet allows the generating of an unlimited wallet address from a seed. So by keeping the phrase saved somewhere later the user can recover the wallet and transactions related to that wallet.
Seed phrase uses a combination of cryptographic methods to make a human-readable word to a private key that the machine understands.
Cryptocurrency wallets use a random number generator (RNG) to produce a source of entropy, typically ranging from 128 to 256 bits. This randomness serves as the basis for creating a seed. Subsequently, during the mnemonic code generation process, the entropy is segmented and each segment is associated with a word from the BIP39 wordlist. For instance, 128 bits of entropy are transformed into a 12-word seed phrase.
Finally, in the private key derivation phase, the seed phrase undergoes hashing to produce a seed, which is then employed to derive the private and public keys essential for managing the cryptocurrency wallet addresses. the 12-word seed looks like the below image.
These words are easily remembered when compared with a private key which is a random illogical sequence of long characters. Without a seed phrase, there is no other option for wallet recovery if the password of the wallet is lost as well as there is also a missing seed phrase the funds in wallets are lost forever. So understanding the importance of seed phrases is necessary.
Role and importance of Seed Phrases for Wallet Recovery
As blockchain is decentralized in nature so as cryptocurrency because it has built on technology. Like if we take the example of a traditional bank we have support for every query related to financial transactions but in the case of cryptocurrency as the nature of it is decentralized there is no customer support for the wallet.
So storing key and wallet-related information in a safe way becomes an important task as it’s impossible to recover a wallet if both things get lost. Recovery of a wallet with the help of a seed phrase is the easiest task because users just need to enter the keyword as a prompt by system or machine. After entering the information correctly a wallet is recovered and it’s ready for new private key generation and normal use.
In case of loss, theft, damage, or software failure leading to the inaccessibility of a cryptocurrency wallet, users can use a seed phrase for recovery. Without a backup, this could lead to permanent loss of funds, as decentralized systems lack a central authority to aid in recovery.
To recover the wallet, users need to install a compatible wallet application, such as a hardware, mobile, or desktop wallet. Once the app is installed, the user can choose to restore the wallet from a seed phrase. By correctly entering the seed phrase, the wallet software re-derives the private keys, providing access to the wallet.
Upon successful entry of the seed phrase, the wallet reconstructs the exact sequence of private and public keys initially associated with the wallet. This ensures complete recovery, restoring all associated funds, transaction history, and wallet addresses. The seed phrase essentially recreates the original state of the wallet, as if it was never lost. In essence, the seed phrase is a valuable tool that enables users to fully recover their wallets in case of loss or damage.
However, it is crucial to securely store the seed phrase, as anyone with access to it can take control of the wallet and its funds. As shown in the figure below the user needs to enter 12 words which is a recovery phrase to recover the wallet.
Methods for preventing seed phrase
As seed phrases are essential for the security of wallet management storing them becomes necessary.
- Ensure the safety of your seed phrase by using an encrypted USB drive to store it in a secure location. A strong master password in a password manager can also securely save the seed phrase.
- Create several copies of your seed phrase and keep them in various secure locations. You may also consider sharing a copy with a trusted friend or family member.
- To minimize the risk of hacking, avoid storing your seed phrase in cloud services.
- For additional protection, consider using a fireproof and waterproof safe or a lockbox.
- Although there are risks, you can use mnemonic devices to memorize the seed phrase.
- Certain hardware wallets offer secure storage solutions for seed phrases.
- It is a method for storing the seed phrase offline because once you are connected to the internet the chances of hacking or theft if the user has stored their information in a cloud server or maybe some other storage service provider. So writing it down on paper is advisable and putting it in a safe place.
- Take multiple photocopies of them for backup if the original gets lost. Use metal engraving of your seed phrase on a metal plate to secure it.
Best practices for seed phrase management
- Avoid sharing the seed phrase
- Use trusted wallets
- Make use of a hardware wallet
- Take backup regularly
- Secure wallet from phishing attack
- Do not store seed phrases in the cloud environment
Conclusion
It is crucial to securely store your seed phrase in order to safeguard your cryptocurrency assets. You can reduce the risk of losing access to your funds by using a combination of physical backups, secure digital storage, and redundancy.
Implementing strong physical security measures and avoiding cloud storage further protects your seed phrase. Mnemonic techniques can aid in memorization, but they also come with their own risks. Lastly, having a plan for disaster recovery ensures that your assets can be accessed by your loved ones in case of emergencies. Following these best practices will allow you to navigate the world of cryptocurrency with increased confidence and security.
Also Read: How NCOG is Using Blockchain Beyond Cryptocurrency?