4min read
Published on: Apr 15, 2024
#Blockchain
#Crypto 360
Though the world of cryptocurrency is over a decade old, it’s a realm still unexplored and misunderstood. To many, its new age jargon and lingo are beyond comprehension and there is still much explaining to do for a wider adoption of the DeFi economy.
One of such complicated terms fundamental to the Web3 ecosystem is “seed phrase.”
Sounds like seed fund? But nothing like it — it has a different kind of lock-up… 😄
Central to crypto security, a seed phrase is a series of random words generated by a crypto wallet that is crucial to recover crypto funds stored on the wallet when it gets lost.
Let’s understand the concept of seed phrase step-by-step.
In the TradFi economy, you access the bank details online through credentials such as username, password, one time password (OTP) etc.
In the DeFi economy, your crypto wallet is stored on a blockchain network. Being a part of the decentralised world, your wallet is not tied to your real identity.
Instead, a crypto wallet has two keys: a private key and a public key. You can store, manage, send, and receive your crypto funds on your wallet with the help of these keys.
But a crypto wallet also has a seed phrase that is the master password to that wallet. It is very crucial to keep your wallet’s seed phrase secure because if you accidently lose your crypto wallet, a seed phrase will help you recover it.
Recommended Read: What are MPC Wallets?
Since a seed phrase is so critical, it’s important to keep it private and secure.
If anyone finds your wallet’s seed phrase, they can access your crypto funds and even transfer those funds to other wallets in an unauthorised manner.
So, better be vigilant.
Remember that a crypto wallet isn’t like your bank’s internet banking credentials.
If you lose these credentials, you can go to your bank and request them to help you reset your internet banking system.
However, Web3 is an entirely different world.
Your device (laptop, tablet, or mobile phone) with the wallet may get lost or destroyed. Or your web browser with the wallet may get deleted forever. Or your wallet integrated with a trading exchange may become defunct.
In cases such as above, you cannot go to a central authority like a bank to recover your crypto wallet.
So, what do you do then?
In such circumstances, a seed phrase comes handy.
You can use the seed phrase to set up a new crypto wallet on a device, a web browser, or an exchange integrated wallet. This way, your crypto funds are not lost even if you accidently lose your wallet. The funds get readily available to you in the newly created wallet.
If you look at a seed phrase, it’s a long series of 12-24 simple words such as “mango,” “bottle,” “sky”, etc.
A seed phrase generates words that are simple and easy to note down and remember.
Though it may seem easy to imitate a seed phrase, it’s nearly impossible to do so, given such a large number of words that a phrase entails.
Not only should you keep your crypto wallet safe, but you should also keep its seed phrase secure to recover your wallet in case of a loss.
Once anyone comes to know of your wallet’s seed phrase, they can know both your private key and the public key. This way, they can create a copy of your wallet on their own device and exploit your crypto funds.
Oftentimes, a scammer pretends to be a representative of a wallet service provider and asks you to verify the ownership of your crypto wallet by submitting your seed phrase.
Remember that any wallet firm won’t ask you for your seed phrase. Anybody doing so is scamming you to gain unauthorised access to your wallet.
Always store your crypto wallet’s seed phrase physically such as on a paper or a piece of metal. Keep such items secure from physical damage from natural disaster or environmental effect. A lot of users store the items holding their seed phrases in a house or bank locker.
Trade safely! Store securely!
This article is for informational purposes only and not intended as investment or financial advice. It contains opinions and speculations that are subject to change without notice.
The author and publisher disclaim any liability for decisions made based on the content of this article. Readers are advised to conduct their own research and consult a financial advisor before making investment decisions.
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