One of the revolutionary concepts behind Bitcoin and other cryptocurrencies is that you no longer need to rely on a bank to store your money safely. With crypto, you can be your own bank.
While it does empower you the individual, it also means taking on more responsibility. Instead of depending on a bank to keep your money safe, you are relying on yourself.
A seed phrase is essentially what allows you to be your own bank.
In this article I'll be using Trust Wallet as an example.
When you create a new crypto wallet, it will display a 12 (or 24) word phrase for you. These words are generated randomly by the app, so you don't have to think of them yourself.
You need to store these words safely for two reasons:
- If you ever lose your phone, you would need to input these words (in order) into your newly installed wallet to regain access to your crypto.
- If someone discovers your seed phrase it would be possible for them to steal all the crypto stored in your wallet!
In fact, one of the most common scams in crypto are people attempting to steal this passphrase from you by posing as technical support in apps like Telegram, Discord, or Twitter. So be sure to keep it to yourself, and perhaps one other person who you trust to keep a backup.
Most wallets these days will prompt you to write down a 12 word seed phrase, however some will generate a 24 word seed phrase, which is considered to be even more secure.
Be default, Trust Wallet creates a wallet for Bitcoin, Ethereum, BSC, and Polygon. Each of these wallets will have its own private/public key pair, and they are all derived from your seed phrase.
You can see the public key of your wallet by tapping the receive button. It will be displayed as both a QR code and a string of random digits and letters.
The private key is also stored in your phone, but it is only used when you want to send crypto to somebody else.
Wallet developers have learned that instructing users to write down a 12 word phrase and store it somewhere safe opens lots of room for error, so Trust Wallet now has an option for you to upload your seed phrase (encrypted with a password) to your iCloud or Google Drive.
This is fine if you are just getting started with crypto and dealing with smaller amounts. However if you plan to invest more in the future you may want to consider storing the seed phrase safely yourself.
In the future, our phones will likely generate the seed phrase in a very secure way. In fact, we have already seen the Solana Saga phone implement this feature for the first time. In the meantime, we will need to store our seed phrases carefully.
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References:
Cute seed: https://www.pinterest.com/pin/834432637204615566/