Everyone’s decentralized finance (DeFi) journey begins with a wallet and a seed phrase (also known as a recovery phrase). Since you’ll be using these elements every day, they need to be protected from the get-go, and their safety depends entirely on you. 

If you’re not familiar with seed phrases, we’ve written this article to clear up any confusion and to answer FAQs.  

A seed phrase is a long string of random words used to recover access to personal funds on the blockchain. Think of it as an impenetrable master key/password: It’s incredibly secure and impossible to crack using current technology. Because it’s human-readable (using words like “cricket”, “below”, and “globe''), it’s easy to write down by hand. That’s helpful, considering that this is the recommended, most secure method to save it. 

Modern wallets control the keys to multiple blockchain addresses. These keys are extremely long and can be represented in many different ways, including binary code. Seed phrases were introduced to solve the issue of writing down the keys to each of your accounts. They provide users with an easy and secure way to recover access to their funds, no matter what device they’re using. 

How Do Seed Phrases Work? 

Using cryptography, seed phrases can be used to consistently generate an infinite number of keys. A seed phrase can be used on different models of wallets and still generate the same set of keys. It’s a simple way to access your crypto from any wallet. 

Your wallet’s seed phrase is the master key to all of your wallet’s funds. Whoever has access to it has access to your crypto. If your master key falls into the hands of thieves or scammers, your funds can easily be stolen. For this reason, you need to keep it hidden. We’ll explain how to store your seed phase later in this article. 

No matter which company makes it, when creating a wallet, you’ll be prompted to write down the seed phrase during the setup process. Depending on the developer and wallet type, the words making up your seed phrase may be displayed one-by-one or shown all together on the screen. The phrase can also be longer (24 words) or shorter (12 words). No matter the length, both of these variants are incredibly secure. 

There’s nothing complicated or technical to it: Use a pen and paper to write down each word exactly as shown. 

There are three main rules to follow when storing your seed phrase: 

1. Store the Seed Phrase Offline

As a rule, your seed phrase should never be stored digitally – in any form. Never take a picture or screenshot to store it on your phone. Further, never copy and paste it into a device’s notes. 

If you’re storing anything on a computer or device that’s connected to the internet, anything that’s online can be exposed to the outside world. How many times have you heard about someone’s personal information, pictures, and emails getting leaked? It’s surprisingly easy for scammers to, say, access the contents of your cloud storage account through basic social engineering. 

Even if you believe you’ve got strong digital hygiene, it’s an extremely bad idea to put any sensitive information online, especially the password to your funds. Wallets often disable the ability to digitally copy a phrase in hopes that users will just manually write it down. And that’s precisely what you should do. 

2. Create Multiple Copies

While you shouldn’t be making digital copies of the seed phrase, physical (i.e. analog) copies can get damaged, destroyed, misplaced, lost, or stolen. 

For this reason, create multiple copies of the phrase on your medium of choice and store them in a few trusted locations. We advise against putting all copies under the same roof, as something like a house fire or natural disaster can destroy them. 

3. Don’t Share it With Anyone

In crypto, we say “never share your seed phrase” because, believe it or not, people fall for scams all the time. For example, scammers might present themselves as technical support for a project you’ve invested in, asking for your phrase in order to offer you a reward. 

Bad actors might acquire your seed phrase by tricking you into thinking you’re interacting with a legitimate website. This can easily be done by creating a webpage that imitates a popular decentralized exchange (DEX) and prompts you to “enter your seed phrase to complete a transaction.” Crypto newbies may not realize that you don’t need your phrase in order to use your wallet every day – and their funds could be stolen without them ever suspecting anything. 

It can happen quickly, too: Once a scammer has your secret recovery phrase, your funds can disappear in seconds. 

Seed phrases are used for recovering your wallet on another device. Luckily, they’re not used for daily access because modern wallets use a standard password. 

There’s a catch though: Because decentralized finance (DeFi) wallets are built with decentralization in mind, they don’t use any third-party storage (ie. cloud storage) to hold your data, including your password. The password is stored locally on the device itself. This means that every device where you’ve activated your wallet will use a different password.

In the event that you lose your seed phrase, your only other recovery option is to use a password on a specific device where you’ve already activated that wallet. For example, if you were using a browser-extension-based crypto wallet on your personal laptop and lost your seed phrase, you could use the password you’d already set up in order to access that wallet (and retrieve your funds). 

Can I Change My Seed Phrase? 

No, seed phrases are permanent. They’re used to consistently and reliably produce the same keys using cryptographic methods. These keys are what wallets use to authenticate you on the blockchain. In order to use your wallet on another device, you need a way to generate the exact same keys every single time. For this reason, the seed phrase needs to stay the same, otherwise, the keys it generates will be different (and you won’t be able to access your crypto). 

TLDR; If you want a new seed phrase, you’ll have to set up a new wallet.

When it comes to secure recovery seed phrase storage, the crypto space has some catching up to do.

Put simply, crypto is all about self-custody: owning and controlling access to your funds without relying on intermediaries. When it comes to storing recovery phrases, this places crypto holders in a precarious position. On one hand, they can take on the responsibility of storing them securely but they could never provide the same level of security as a bank or private vault. On the other hand, if they end up putting them in the hands of another party (like a bank), this defeats the purpose of self-custody. 

Until a technology comes along that reliably secures seed phrases without requiring intermediaries, there will be tradeoffs between security and sovereignty. However, there are a number of options: 

1. Home Safe

If you’re convinced complete self-custody is the way to go, there’s no better option than a fireproof safe for your home. The good ones aren’t cheap but they’re built to last a lifetime. You’ll have to consider how much you value your crypto’s safety and how much you’re willing to spend in order to protect it.

Be wary though: Safes are usually the first thing that burglars target, and with enough time and the proper equipment, any safe can be broken into. Their purpose is to be so prohibitively difficult that burglars give up and leave before they crack it (or the police arrive).  

Those that withstand such attacks from an experienced professional can be more expensive. Unless you’re keeping hundreds of thousands of dollars worth of crypto in your wallet, there are probably better options out there.  

If you do end up using safes, never put all your eggs in one basket. Some people choose to make multiple copies and spread them out in a few different secure locations.

Always make copies of your seed phrase and see if you can install another safe at the home of a family member or trusted friend. You should still be the only one with the ability to access that safe, so don’t share the keys or password combination to it. 

2. Safety Deposit Box

While a safety deposit box is one of the safest options to store your seed phrase, you’d need to go through a bank or private vault to retrieve your phrase. This takes away the immediate ability to access your funds.

It’s important to remember that your bank can deny this access to a safety deposit box for any number of reasons (e.g. debt, overdrafts, suspicion of illegal activity). Most banks can also hand the contents of your deposit box over to government agencies with relatively few legal hurdles. 

3. Private Vaults

The safer option would be to use a private vault operator. These companies only require a few documents (e.g. ID, proof of address), everything stored there is entirely your personal property, and only you can access the contents held within the deposit box. Due to the nature of their business, most of these companies take client privacy very seriously and tend to feature better security than most banks.

If you go this route, we recommend keeping more than one safety deposit box for storing multiple copies of your seed phrase. For obvious reasons, be sure they’re from different banks/companies. 

4. Trusted Family Member

For small sums, hiding a seed phrase in your home and in the home of a family member is a fairly secure method. These people really need to be trustworthy though. Many folks don’t understand crypto basics so you’ll need to clearly explain the best methods for keeping your seed phrase safe. 

Estate Planning & Sharing Wallet Custody

Reliable estate planning solutions are still under development in crypto. If something were to happen to you, perhaps you’d want your partner or children to have access to your funds. You might want to consider sharing your seed phrase with the single most trusted person in your life. 

Unfortunately, unhappy situations like these are rarely discussed. Sonar believes that people need to know how to protect themselves and be realistic about the current limitations of this incredible technology. 

Though there are numerous ways to record your seed phrase, paper is the most popular format. Creative methods include fire-resistant capsules for storing paper notes and using invisible ink pens. Skip products made for novelty purposes and opt for secure options.

Out of all of the choices on the market, stainless steel cards are the most sensible option for long-term storage (they’re more durable and fireproof than paper). They can be stamped, laser engraved, or arranged with metal letters. Use a kit that lets you input the phrase yourself and never send it to someone else to engrave or stamp for you. 

Crypto was created to provide people with access to better opportunities and freedom of choice, but that freedom comes with responsibilities. When using decentralized wallets, you effectively become your own bank and are the only person in charge of your money’s safety. 

Carefully consider the seed phrase storage solution(s) that works best for you and your particular situation. 

What Are Your Location and Living Conditions?

Your place of residence may be a defining factor in how you protect your crypto funds. If your neighborhood regularly experiences theft and burglary, keeping anything really valuable in your home isn’t the best idea. 

Should you have the chance, use a bank or private vault. As we stated earlier, you may run into access issues with bank-owned safety deposit boxes. A private vault option might be the better option, though it may not be cheap. 

What Are Your Personal Needs and Limitations?

You might be living a dynamic life, traveling from place to place. Perhaps your financial situation doesn’t allow for extra expenses (like home safes or safety deposit boxes). Maybe you live with many people under one roof and options for hiding your seed phrase are limited. 

Carefully consider these elements before pouring substantial sums into crypto, specifically DeFi. 

Are There Dangers From Natural Disasters?

If you live in an area that’s often struck by natural disasters (i.e. hurricanes, earthquakes, forest fires, floods), these extreme scenarios need to be considered when determining seed phrase storage. 

Choose options that can withstand serious damage. Additionally, in the event of an evacuation, you’ll need a clear plan to act quickly and grab your seed phrase. 

Web3 is breaking down barriers by creating a safer and more open digital future. DeFi plays a massive part in this movement by providing easy access to trustless, private, and secure transactions that make the decentralized web possible. 

However, it’s a little ironic that, after all these improvements to digital security, the best crypto seed storage is offline. Web3 developers – including Sonar – are working towards bettering self-custody, but the road ahead is filled with unknowns. We’re confident that a solution will come along, but until then, keep your seed phrase safe and your wallet should serve you well for years to come.