Tools & Resources

Understanding Seed Phrases: The Key to Your Web3 Wallet

By The Fire Team
Image displaying a lock in front of a wallet
If you’re just getting started with a web3 wallet, you might be wondering why the setup is so weird: You don’t give anyone your name, email or a password, but you have to write down 12 words. If you’re used to creating bank accounts or non-crypto internet accounts, seed phrases can be confusing. But understanding seed phrases is an important part of staying safe in web3: Your seed phrase is the key to your crypto wallet. And just like the key to your house, losing it or handing it to the wrong person is bad news. In this article, you’ll learn all about how seed phrases work, how to keep yours safe and why there might be a future without them!

What is a Seed Phrase in Crypto?

In web3 a seed phrase, also known as your wallet’s recovery phrase or mnemonic phrase, is a list of words that act as a master key to your digital wallet. This 12 word seed phrase generates and provides access to your private keys. This means that anyone with the recovery phrase also controls your crypto assets.

I was invented as a way to make private keys more human readable. While seed phrases have reigned supreme over the past few years, MPC wallets are starting to change that. To learn more about an easier way to access your web3 wallet, find out more about multi-party compuation wallets.

Each phrase is unique and serves as a sophisticated and secure mechanism to restore your wallet if you lose access to it. Because you only need the 12 word seed phrase, it also means anyone else could restore your wallet if they have your seed phrase, giving them full control over your assets.

(Note: Seed phrases keep you safe, but can be clunky. We're building a wallet you don't need a seed phrase for. That way, you can't compromise your private keys and never end up losing access because you forgot your seed phrase. Join the waitlist today!)

That’s why safe seed phrase storage is so important.

What's the Safest Way to Store a Seed Phrase?

When it comes to seed phrase storage, safety is paramount. The perfect way to store a seed phrase doesn’t exist because everyone’s situation is so different. A lot of variables play into making the right decision, but there are a few rules that (almost) always apply:

Don’t store your seed phrase online

It’s convenient to copy-paste your seed phrase into a notes app so you have it ready at a moment’s notice. But that also means anyone who gains access to your notes also gains access to all your crypto assets.

This might sound paranoid, but seed phrase hacks happens more often than you might think:

News headlines showing seed phrase hacks based on Evernote exploits

Store your seed phrase in a secure, offline location.

Write it down on a piece of paper and store it in a safe or lockbox. For additional security, you can use a metal backup which can survive fires and floods because you etch the words into metal.

Seed Phrase vs. Private Key: What's the Difference?

The difference between private keys and seed phrases is small: They functionally do the same thing. And while your seed phrase technically generates your private keys, using them feels the same: They unlock your assets if you import them in any web3 wallet app.

If you want to know more details, this is how seed phrases work:

​​How Do Seed Phrases Work?

Seed phrases work based on a cryptographic algorithm known as a hash function, which converts your seed phrase - a set of simple, human-readable words - into a complex, unique hash value.

This hash value, in turn, is used to generate your wallet's private keys, which control access to your crypto assets. When you input your seed phrase into a wallet software like Metamask, the software performs the hash function to recreate the same unique hash value, thereby retrieving your private keys and granting access to your wallet. This is why your seed phrase can restore your wallet on any wallet dApp—whether that’s Metamask or another extension: Your seed phrase is like the secret recipe that, when followed correctly, always creates the exact same result - in this case, access to your crypto assets.

Importing Your Seed Phrase

Importing a seed phrase means inputting it into a wallet software to access the wallet associated with the phrase.

This is typically done when setting up a new wallet or recovering an old one. While Fire offers an easy-to-use interface, remember that importing a seed phrase should be done cautiously. The device you use for importing should be secure, as any malware or keylogger can pose a threat.

Note that you can’t recover a wallet without your seed phrase or private keys. It doesn’t matter whether you’re using Metamask, Trust Wallet, Phantom Wallet or any other wallet extension: When you lose your seed phrase, you lose your assets.

For safety reasons, wallet software doesn’t store your seed phrase (else it’d be on someone’s server, which would be a security risk). This also means that you can’t recover your seed phrase from inside your wallet.

Can I Use My Seed Phrase on Any Wallet?

Generally, yes. Seed phrases follow a universal standard called BIP39, allowing cross-compatibility between different wallets. This means you can recover your assets on a different wallet using the same seed phrase.

Your Metamask seed phrase can import your wallet into Rainbow and vice versa. Your Phantom wallet seed phrase can import your wallet into Coinbase Wallet—and so on. Almost all non-custodial wallets are cross-compatible.

However, each wallet might handle tokens and addresses differently, so make sure you understand the wallet you’re using.

Seed Phrase Safety: Why Never to Give Anyone Your Seed Phrase

Your seed phrase is the master key to your digital assets, and it should be treated as such. Never disclose your seed phrase to anyone, even if they claim to be from support or security.

Scammers in the crypto space are always on the lookout for vulnerable people who will naively share their seed phrase. Providing your seed phrase to someone is like giving them full control of your assets. Always stay vigilant and protective of your seed phrase.

Fake Sushiswap seed phrase scam showing pop-up titled “Connect to Metamask” followed by prompt to input seed phrase.

This fake SushiSwap replica looks like the real decentralized exchange at first, but asks for your seed phrase to “connect your wallet”. This is a common seed phrase scam you should stay away from. Especially if you want to do more adventurous things like trading memecoins, you’ll likely encounter scammers trying to exploit your

Recovering Seed Phrases: Why Your Wallet is (Probably) Lost When You Lose Your Seed Phrase

Without sugarcoating it, if you lose your seed phrase and don't have a backup, your wallet is almost certainly lost. You can’t go into Metamask and restore your wallet without your seed phrase. Coinbase Wallet has no tech support that can reset your account.

The design of the seed phrase is such that it can't be recovered if lost, it's part of what makes the system secure but unforgiving.

Web3 relies on decentralized systems and puts you in charge of your data, identity and assets. While that’s awesome, it also comes with responsibility—and part of that is safe seed phrase storage.

While there are other options like Ledger Recover, those are controversial and create extra costs for you.

A Future Without Seed Phrases? The Promise of Account Abstraction and Smart Contract Wallets

Let’s be honest: Seed phrases keep you safe, but they’re painful to use. A new standard called ERC-4337 promises to get rid of the seed phrase for good. By giving each wallet the capability of a smart contract, we might see interesting new ways to keep a wallet secure.

The core mechanism behind this is called account abstraction. We’ll give a brief intro and skip highly abstract or technical details here, but we recommend the Ethereum Foundation’s page if you want to find out more.

Account abstraction gives wallets the powers of smart contracts. That means you’ll be able to customize how your Ethereum wallet works and give it powers a conventional wallet couldn’t have.

What does this look like in practice? An example of this is batching transactions.

If you’re yield farming, providing liquidity on Uniswap requires multiple transactions—two token approvals and then the swap for the liquidity provider NFT. With account abstraction, you can approve them all in one click. The same transactions happen in the background. But because your wallet is a smart contract, it can execute them without you having to do it all. As the Ethereum Foundation states it:

“In the end, with account abstraction, users can enjoy all the benefits of Ethereum without knowing or caring about the underlying technology.”

But transaction batching, account abstraction via ERC-4337 also enables web3 to leave the seed phrase behind with social recovery wallets.

Social Recovery Wallets

A social recovery wallet is a way to restore your wallet without a seed phrase. Because it’s a smart contract wallet, it allows you to set rules for how you’d like to be able to restore your crypto wallet.

A classic example of social recovery is naming 3 friends, family or other trusted people as signers for a multi-signature (multisig) wallet. Once 2 out of those 3 people then confirm your wallet as lost via a smart contract, you can restore it. In a technical sense, this works by giving each party a key, of which 2 of 3 are required to restore your private key (the same way your seed phrase does).

For additional wallet safety, you could also require additional signers for higher-value transactions while your signature is enough to initiate low-volume transactions.

With account abstraction and other ERC-4337 use cases, we’ll likely see other ways for seed phrase-less account recovery—which is a win for web3 because we believe that web3 gets safer when it gets simpler.

If you’re exploring Ethereum, check out Fire!

We’re a trusted chrome extension that simulates transactions before you sign any potentially malicious smart contract.
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