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What is a Seed Phrase? – Why Is It Important?

Article By Jess Lin / Image By Lena Wu / March 17, 2023

Written by: Jess Lin
Contributor: James Huang

A seed phrase, recovery phrase, or recovery words are terms that are often associated with a cryptocurrency wallet. Regardless of which term you hear, they’re all the same thing and are often used interchangeably. It doesn’t matter if you have a hardware wallet or a software wallet, you will have one. What is a seed phrase, why does it matter and how does it protect your assets? Let’s find out.

What is a Seed Phrase? – Why Is It Important?

Seed Phrases Explained

A seed phrase or recovery phrase is typically 12 to 24 random words generated by your crypto wallet from a list of 2,048 terms. The randomness of the words within seed phrases makes guesswork more difficult for hackers.

Look at a seed phrase like a master key of your crypto wallet. The string of randomized words can help you regain access to your wallet if you break, lose or delete it, you can use the recovery phrase to set up a new one and get back inside.

Anyone with your recovery phrase can gain access to your crypto, so keeping it safe is of the utmost importance. Of course, you can choose to memorize it (but it’ll be tough).

A great way to keep your seed phrase is to etch it onto a fire and waterproof aluminum stainless steel card like those in our XSEED line.

Seed Phrase VS Private Key

You may have heard of the term “private key” as well. Both a recovery phrase and a private key give you access to the contents of your wallet, so what’s the difference?

First off, they look different. While a seed phrase is a string of words, private keys are typically a string of numbers. You need your private keys to conduct transactions with your wallets, but the recovery phrase is the one that rescues you when something happens and you can no longer access your assets.

Why Is a Recovery Phrase Important?

With traditional wallets, it’s a big deal when you lose them. Gone are the contents including cash, your ID, credit cards, and the sentimental picture you may keep within the slots. With crypto wallets, however, the contents are safe as long as you still have your seed phrase saved somewhere secure.

If you lose your seed phrase, then all bets are off. No one but you should know your recovery phrase (unless you choose to put your trust in another person).

Holding onto a seed phrase and keeping it safe feels like a lot of pressure, and if it’s indeed too much for you, there is another option. You can choose to use a custodial wallet.

A custodial wallet is issued by a centralized exchange such as Binance and Kraken. There is a lot less responsibility for the user to keep track of private keys, but it is easier and more convenient. As you can imagine, this adds a layer of risk to your cryptocurrency investments because you are trusting and tasking a third party to keep things secure.

If the exchange is hacked or goes down (unfortunately like FTX), your funds are locked up and inaccessible. This is why we support non-custodial wallets, ones that give the wallet owner full control.

One of the foundational pillars of cryptocurrency and blockchain technology is self-sovereignty. Cryptocurrency wallets are the number one way to store your digital assets without having to rely on a third party (in this case, traditional banking institutions).

How to Safely Store Seed Phrases to Protect Crypto Assets

We now understand the crucial need to keep your seed phrase safe. A lost seed phrase means bidding farewell to your crypto investments.
What are some of the best and most assured ways to keep your seed phrase safe?

Our XSEED line can guarantee your seed phrase is forever engraved or stamped on a durable and robust piece of metal. All you have to do is store it safely.
Split up your seed phrase into various parts and store them separately. No one can gain access to your crypto if they only get one part of the recovery phrase. Even if they manage to get all parts, the order they enter them has to be correct.
Keep your seed phrase offline. Don’t email it to yourself, note it down on Google docs, or anything of the sort because anything online can be hacked.
NEVER give out your recovery words. Unless you are entrusting it to a family member or friend as a contingency in case something happens to you.

Conclusion

If you lose your seed phrase and you opted for a non-custodial wallet, then unfortunately, you will lose access to your crypto. Don’t think of it as a drawback but as a benefit, because this means that you have complete control to not lose it. It also signifies that the protection is so airtight on your wallet and that a way around losing a recovery phrase is actually a breach of security.