What is a Seedphrase?

A Bitcoin seed phrase, also known as a recovery phrase, is a sequence of 12 or 24 words that allows users to recover their Bitcoin wallets. This phrase is crucial for regaining access to one’s bitcoin if the wallet is lost, damaged, or otherwise compromised. Since it contains all the information needed to recreate the wallet’s private keys, the seed phrase should be stored offline and never shared with anyone.

Creating a new Wallet in Sparrow

Why are Seed Phrases important for Self-Custody?

For self-custody of Bitcoin, seed phrases are essential because they empower users to regain access to their funds without relying on a third party. When you self-custody, you are responsible for your own security, including keeping your seed phrase safe. Seed phrases enable the full control that self-custody offers, helping you be “your own bank.” However, they also demand careful handling, as losing your seed phrase means losing access to your bitcoin permanently.

Different Types of Seed Phrases

There are several types of seed phrases, with BIP 39 phrases being the most common, using 12, 18, or 24 words from a predefined list of 2,048 English words. Electrum wallet phrases use a different format, while some advanced wallets use the Shamir’s Secret Sharing method to split the seed phrase into multiple parts for added security. Each format has trade-offs, with BIP 39 providing compatibility across most wallets, and Shamir’s Backup adding extra security but requiring more careful management.

A Bitcoin Backup card to write down the Seedphrase

How to create a Seed Phrase + Backup

1. Choose a Wallet: Select a wallet provider, like a hardware wallet or a software wallet.
2. Generate a new Wallet: Create a new wallet. This process will automatically generate a seed phrase.
3. Write down the Seed Phrase: Write down each word of the seed phrase exactly as it appears. This is crucial. Don’t take pictures or screenshots.
4. Double-Check: Delete your Wallet and try to recover it with the seed phrase. This step is optional but brings peace of mind.
5. For extra Security: Create a Steel backup that is resistent to Fire, Water and Corrosion. You can find a detailed tutorial of how to create a steel backup with Plebstyle: Steel Wallet Guide. How to Recover a Bitcoin Wallet using a Seed Phrase

Recovering a Bitcoin wallet with a seed phrase is simple but requires accuracy. To restore a wallet:

1. Set up a new wallet (either Hardware or Software Wallet).
2. Choose the “recover” or “import” option.
3. Input your seed phrase in the correct order.
4. Create a new password or PIN.
5. Let the wallet sync with the blockchain to get your balances and transaction history. Where should you store your Seed Phrase?

For secure storage, keep your seed phrase offline in a physical format, such as on paper or engraved/ stamped on metal. Never store it online or in a cloud service. Some people create multiple copies and store them in secure locations, like safes. Engraving the phrase on a metal plate provides added durability against fire and water damage.

The Risks of Seed Phrases

While seed phrases are a powerful self-custody tool, mishandling them can lead to loss. If you lose or misplace your seed phrase, you lose access to your bitcoin. Never share your seed phrase with anyone. Handle your seed phrase with care and confidentiality, and consider transferring your bitcoin to a new wallet if you suspect your seed phrase is compromised.

Final Thoughts

• Seed phrases are crucial for regaining access to Bitcoin wallets
• Proper storage and security of seed phrases are essential. Store them offline and secure.
• Loss or mishandling of seed phrases can result in irreversible loss of bitcoin. Keep seed phrases confidential, secure, and carefully managed.