Why you need a mnemonic seed phrase from a cryptocurrency wallet

Principle of operation

Seed-phrase is a set of numbers encoded through words. Several dictionary standards are used to compose it. Popular ones are given in the table:

BIPs are suggestions for improving the Bitcoin network.

Popular cryptocurrency wallets provide the ability to recover keys with a mnemonic phrase. You can access your funds using any storage regardless of its type (support for a specific version of BIP is required).

Steps to generate:

1. Creating random numbers – entropy.
2. Translating them into words.
3. Creating mnemonics from code.

Creating random numbers

The source for the mnemonics is entropy. This is a large value that no one has yet created and will not be able to do so in the future.

Entropy requirements:

• Multiplicity of 32 – for further division into parts and conversion into words.
• Length – between 128 and 256 bits. No one else will be able to generate the same number.

A random value generator is used to create entropy.

Conversion of numbers into words

The resulting entropy can be converted into mnemonics. A control number needs to be added to reduce errors. This is done by hashing, the SHA256 algorithm is used.

At the end of the unique number, 1 hash bit is added for every 32 bits of entropy. The resulting value is split into groups of 11 bits each, represented in decimal form, and used for secret word matching.

There are 2048 positions in the BIP39 list. A number of 11 bits in decimal format can be in the range 0-2047.

A mnemonic phrase is created from the code

The conversion of the numeric expression is performed by the PBKDF2 function. The hashing of the set of numbers is repeated several times until the required result (256 bits). A mnemonic phrase is created, which can be used for data recovery.

Each word has a unique first 4 letters, not repeated anywhere else in the list.

How to recover when lost

When restoring access to your assets when you lose your key, you need a mnemonic phrase for your cryptocurrency wallet. It will generate all passwords.

With the help of a seed-phrase it will be possible to use cryptocurrency anywhere. To do this, it is necessary:

• Remember the set of words that encoded the main master key.
• Have access to the Internet.
• Use any wallet with support for BIP of a suitable type.

It is virtually impossible to pick up the secret words. The computing power of the most productive computers will allow to do it after many years. There is not a single case of restoring access by matching.

How to secure a mnemonic phrase for a wallet from loss

Secret words are used to access cryptocurrency. Their loss means a complete lack of control over their digital coins. There are known cases when a person mistakenly put the cid phrase for storing Bitcoin on public display, and in a few minutes the assets disappeared.

For storage, you can use:

• Paper – write down the information on a sheet, store it in a dark place with constant temperature and humidity.
• Metal – special plates made of steel are used. By the method of engraving, the first 4 unique letters of each word are applied to them.
• Hardware cryptocurrency wallets. There is a risk of losing the device or its breakage.
• Encrypted USB drives.

Several options can be used at once, thanks to which the security of the secret key increases.

What’s best not to do with a seed phrase

Dangerous storage methods that are best not to use:

• Email, messengers. There are known cases when users lost money in this way.
• Cloud storage.
• Online cryptocurrency wallets. Seed-phrase is stored on servers that can be hacked and gain access to users’ coins.

It is not possible to memorize the words, as human memory is capable of surprising, including in an unpleasant way. The security of storing Bitcoin and other cryptocurrency is in the hands of users.

Frequently Asked Questions