Crypto wallets are where cryptocurrencies are kept and managed. Crypto wallets, as well as the assets they contain, are frequently the subject of various types of fraud and outright theft. They also lack a centralized authority in access management: To validate transactions and identities, distributed ledgers require everyone in the blockchain to agree. To govern access, a different, more robust means of identification is required for all these reasons. That’s where recovery phrases come in.
For day-to-day access, all wallets utilize the same login and password combination. However, if a forgotten password, a stolen wallet, asset import, or wallet syncing, something more than a password, if not multifactor authentication, is required, that is a recovery phrase. This article will discuss what a recovery phrase is, why and when they’re used, and how to keep it secured.
Overview of Recovery Phrase
A crypto recovery phrase (also known as a “seed phrase”) is a human-readable version of your wallet’s private key—the one-of-a-kind, secret passcode that authenticates and encrypts your wallet access. A recovery phrase is usually a set of 12 to 24 words that your crypto wallet generates randomly and gives to you in a certain order.
This phrase enables you to sign transactions and claim ownership of your wallet addresses. It also enables you to retrieve your wallet if it is lost or destroyed (in the case of hardware wallets) or if the device you use to access your wallet is lost, stolen, or otherwise inaccessible.
This isn’t to say that you’ll only see this phrase once during account signup and never see it again. So please make a note of it, take a screenshot, store it in a password manager, or find another way to keep it safe.
Importance of Recovery Phrases in Wallets
Recovery phrases are produced by the wallet software rather than the user. Hence, there’s no risk of password repetition. They are also random, making it far more difficult to crack, even with sophisticated computers, and aren’t kept on file by the company that makes or runs the wallet. Thus, there’s almost no risk of being hacked.
However, despite these advantages in account security, there is one huge drawback: recovery phrases are non-recoverable, which means that if you forget the recovery phrase, you’ll be locked out of your wallet (and any assets kept in it) for good.
The majority of people have bad passwords. This implies they use very simple passwords, reuse passwords across apps, or use subtle variations of the same password. This puts them at risk since hackers may easily access all other apps on a user’s device once one of their passwords has been compromised.
To combat this, crypto wallets will generate a one-of-a-kind recovery phrase for each user, which will be used when: signing transactions and claiming ownership of a wallet address; recovering a wallet if it is lost or damaged (in the case of hardware wallets); or recovering a wallet if the device you use to access your wallet is lost, stolen, or otherwise inaccessible (in case of software wallets). The randomization of these recovery phrases makes them nearly impossible to crack.
Recovery phrases, unlike passwords (which may be reset using a standardized reset sequence), are not recoverable. If you forget the recovery phrase you were given when you made your wallet, you’ll be locked out for good. Your wallet’s manufacturer is unable to restore it for you. They are theoretically unable to see it because it is not kept on their servers.
How To Keep Your Recovery Phrase Secure
1. Keep Your Recovery Phrase Safely Stored
To begin with, you should never type your recovery phrase into any smartphone, computer, or internet-connected device. Even if it’s only been entered once, someone may hack it and discover the key to all of your cryptocurrencies if it’s on your computer. Taking images of your recovery mantra is the same.
2. Do Not Share It With Others
A recovery phrase should never be disclosed to anyone and should be kept out of the reach of others. It would be best to find a safe, secret location that only you know about and can access.
3. Be Ready For Everything
A safe area does not have to be out of sight. It’s also a good idea to keep your recovery phrase somewhere that isn’t exposed to the weather. If you’re writing your 24 words on a piece of paper, for example, keeping it near water pipes could be a problem if there’s a leak.
