Seed Phrase, Private Keys and your funds
A Seed Phrase is basically the Master Key to your Crypto. It should therefore be guarded as such! Hackers and scammers want it as they can control (steal) your funds once they have your key.
A seed phrase is typically a collection of 12 or 24 words, which are all taken from the BIP-39 list of 2048 words. If you check out that list closely, you’ll see that actually already the first 4 letters are different for each word. This includes a space at the end for 3-letter words, so “act ” is a different word from “action”, “can” vs “canal” etc.
So it would be enough to remember just the first 4 letters but to make it easier to remember, common English words were used in the list.
Check out this short video the Ease TikTok team made about this subject and follow the channel for more useful Crypto info!
@easedefi #crypto 101: Seed Phrase #safety #fyp #learnontiktok #cryptocurrency ♬ original sound – EaseDeFi
Seed Phrase vs Private Key
Every crypto wallet has a private key, with which you can sign off transactions. Therefore it controls your funds and it should never be shared with anyone! No legitimate Binance employee, Coinbase “HelpDesk” assistant or MetaMask “support agent” has any reason to ask for it. If they do, then you are 100% being scammed, so GTFO.
A seed phrase is a master key and actually normally controls more wallets. Said differently, with one seed phrase, you can generate many different wallets, each with its own Secret Key.
If you have ever experienced the MetaMask White Screen of Death, you will know that you need to restore your MetaMask. If you had securely noted and guarded the Seed Phrase when you first installed and opened MetaMask, you could now use that same phrase to recover all the accounts that you had in your MM wallet.
The same is true for Ledgers and other hardware wallets. Your hardware can crash, melt, fall in a lake during an unfortunate boating accident, or simply get stolen. Your Seed Phrase can be used by anyone that has (a copy of) it to restore all wallets/accounts that were controlled by that hardware wallet. If you lose your seed phrase and the inevitable happens one day, you are out of luck. You will have lost access to your funds forever.
Therefore it is even more important that you guard it closely and have backups for yourself.
Your wallet doesn’t actually hold any funds, just keys.
A common misconception about crypto and blockchain is that your coins, tokens and NFTs etc live inside your wallet, on your laptop or mobile or even on your hardware wallet. This is wrong, as only the keys to access your tokens are in those locations. The actual tokens don’t really exist, the blockchain is ‘just’ a giant historical ledger of token balances.
If you transfer 1 Eth to someone else, your balance will be lowered and the balance of the recipient will be increased. In order to do so, you will need to sign off on that using your private key. This could be located in MetaMask, your hardware wallet etc. Without some kind of wallet which contains your key, you can’t update the ledger on the blockchain.
Hackers want your Seed Phrase & Private Key
So Hackers want the keys to your funds and preferably your seed phrase.
- Unsuspected victims kind of understand what is meant by it (“yes, Sir, I did write down 24 words”. “Great! Then I can help you to restore your funds!” (-> Scam! Don’t fall for that).
- And once the hacker/scammer has your seed phrase, they have access to all wallets/accounts that you generated with it.