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Understanding Seed Phrases

The primary and most important issue regarding our Bitcoin security is understanding the “Seed Phrase” and why we must guard it so jealously.

“The Seed Phrase IS your Bitcoin”

When you first set up a Bitcoin wallet, you are provided with a sequence of 12/24 words called a “Seed Phrase”. This is an encoded form of a rather complex random number expressed in simple, readable words that a human can easily understand because otherwise, it would be impossible for someone to remember or even write them down correctly without making mistakes.

From this long number, transformed into easy words, all the private and public keys are then derived and will allow you to receive, send and protect your bitcoins. That is why we call them “Seed Phrases” because all the keys that you will use from now on “grow” from those. And that is why we say that these words ARE your bitcoins since the security and ability to move your funds depends on them.

If someone gains access to these words, they will immediately be able to access your Bitcoin. Therefore, keeping them secret and safe from any damage is critical and primal to protect your funds.

But where do those words come from, and how are they chosen?

The seed phrases generated by modern wallets that follow the latest Bitcoin standards are drawn from a list of 2,048 unique words established as part of Bitcoin Improvement Proposal 39 (BIP39). Each word represents a series of bits of the long random number before it becomes a seed phrase.

2048 words may not seem like much at first glance, and it is often difficult to understand how this string of words could be all it takes to protect your funds, but it is. If you think it might be easy to guess the sequence of words that make up a seed phrase, think again. Achieving this is practically IMPOSSIBLE! There are as many possible word combinations for a seed phrase as there are atoms in the universe! Go figure!

Can I use the seed phrase generated in my wallet to access my funds in another one?

Yes, your seed phrase is fully interoperable between any Bitcoin wallet manufacturer (software or hardware) that implements the BIP39 standard. This means that once your seed phrase is secured, you can even remove your wallet from the device where you had it installed, and your BTC will remain safe. And later, when you need to make a transaction, you will restore that or any other wallet on the device you have available, import your seed, and voila, you will still have your balance, and you will be able to send and receive BTC as usual.

All of this also applies, of course, to the hardware wallets.

Although this is perfectly doable, it is not recommended to import your seed phrase many times in different wallets and devices for basic security reasons.

Very good, but… how do I safely store a Seed Phrase?

Another critical point!

As we already know, if by some unfortunate circumstance we lose the seed phrase or the medium where we had it saved is destroyed accidentally, we will have definitely and permanently lost our funds!

That is why we must be extra careful when choosing the medium to protect our seed phrase.

Never trust your memory! Today we can believe that we will remember our words forever, but the passage of time, an accident, any physical or mental illness can trigger a disaster!

The best option will always be to host the seed phrase in a physical environment as unalterable as possible, especially resistant to inclement weather, the elements (water, fire, corrosion, etc.), or even animals! No jokes, since there has been a case when a cat ate a piece of paper with a seed phrase written on it!

Never store your seed in digital format! Even less so if the device you use for storage remains somehow connected to the Internet.

It’s not even a good idea to do it on an encrypted pen drive. Sometimes adding additional layers of security can result in locking ourselves out of our data over time, for example losing the device’s encryption key.

Hard and strong as steel

The most recommended backup method is the use of a steel plate or a series of nickel-plated or stainless steel washers in which each of the words and their order number in the sequence of the seed phrase are engraved with punches.

Steel is a noble enough material to withstand the ravages of the elements over time, including the high temperatures of fire.

There are several video tutorials on the Internet that will help you make this type of metal guard, either with materials custom-designed for this purpose or with standard stuff that you can get at any hardware store.

Once the metal backup is made, where do we keep it?

Storing your seed phrase outdoors, in a drawer, a closet, on a shelf, in your bag, or at your workplace is generally NOT recommended. If it is within your means, you can use a safe deposit box in a bank. If this is not the case, but you have one in your home or office, that would be an appropriate place to store it. You can also consider a home of a highly trusted family member or close friend.

Taking security one step further

If you believe that your holdings are worth raising the level of security even further, and of course, you already acquired the knowledge necessary to do it, consider a multi-signature arrangement, which implies that your funds cannot be moved with just a single key, but with two or more instead, the same way escrow addresses on Hodl Hodl work.

In multi-signature schemes, at least 2 keys will be required to move the funds, so you will have to create an additional backup seed phrase and take it with the same care discussed earlier. When it comes to storage, it will be important to place this new seed backup in a physically different location from the first one, thus ensuring that your funds can not be accessed even when one of those is discovered by someone else.

Hodl Hodl ensures that you always operate with the highest security standards. Still, an essential component of the operation relies on your side in the proper use and safekeeping of your wallets and recovery seed phrases. That is why you must pay special attention to those parts at your charge.

If you have any questions regarding the operation of our platforms, do not hesitate to contact our support channels.

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