So you have popped your crypto cherry. Bought Bitcoins, kept them in your own super secret wallet that no one else knows about. Your watchlist is bookmarked, your wallet app slowly tracks your stock as it rises in value.
Everything has been fine for years. Until your phone/computer/hardware wallet is gone.
No problem. Your recovery phrase is saved, just as you were taught when you discovered cryptographic security.
But then it doesn’t work. You enter and re-enter the sentence, word by word, triple checking the spelling and order. But the “Next” button of your new wallet remains greyed out.
If this has ever happened to you, you are not alone. A quick search of the popular Bitcoin forum Bitcointalk and Bitcoin subReddits reveals more than a handful of people with the same problem.
Like you, they’ve just discovered the awful truth about backing up Bitcoin wallets – simply relying on your recovery phrase isn’t enough.
If you’re not new to Learn Crypto, you’re probably wondering why this article suddenly claims that storing a secret recovery phrase isn’t enough as a crypto wallet backup.
In truth, the recovery phrase is all you need as a backup (and we recommend keeping them in separate secure locations, maybe even in a safe). For most people and in most cases they should be able to restore access with just the phrase.
However, there are cases where other information is also important to ensure a smooth recovery process – as demonstrated by the cases mentioned earlier in the article, where people found they could lose access to their crypto wallets by failing to use their carefully-stored secret recovery phrase.
Today, a recovery passphrase can consist of 12, 15, 18, 21, or 24 words. Of these, 12 and 24 are the most common – so count the individual words and make sure they match.
The sequence is important, so make sure you write the secret recovery phrase in the correct order. If you mix them for safety, make sure you know how to derive the correct order.
Spelling matters too, and some words may sound alike if not carefully recorded. In one of the examples we shared above, the user’s problem was ultimately resolved when it was discovered that their secret recovery phrase was spelled incorrectly. The confusion? The word “annual” with “animal”.
When creating a wallet, you are usually asked to re-enter the recovery phrase. Do it manually by typing every word from your written backup, instead of copying and pasting from a digital copy. This ensures that you have written them correctly.
You might even want to attempt a recovery before using your new crypto wallet – restoring it to a new device just to see if the phrase works.
Now, a major problem with crypto wallets is that there are so many of them.
The good news is that most wallet software developers have attempted to adhere to common standards. This means that most wallets understand how to use a seed phrase the right way.
A wallet’s ability to do this is defined in a type of documentation called “Bitcoin Improvement Proposals” or BIPs.
BIPs describe how everything works in Bitcoin.
A version of how a seed phrase works is described in the documentation designated by BIP39. This is also currently the most commonly adopted way to derive a seed phrase. Wallets using this version are expected to use a BIP39 bypass path.
Under the hood, a BIP39 wallet can translate your 12-24 word seed phrase into the actual seed it understands.
It is therefore very important that you register the derivation path of your wallet when registering your seed phrase. This way you can use a wallet that includes your seed phrase when restoring it.
d. Find out the name and version of your wallet and crypto
This all ties into the above, but it’s also important to note the name of your wallet, as well as the version you’re using and the type of crypto you’re using.
This is because some crypto wallets no longer work with older versions or do not support the same coins on a different version.
So, for example, if you’re using Electrum, you might want to save not just your seed phrase, but:
- The version number (currently 4.4.3 in May 2023)
- The device you’re installing on (Android, Windows, or Mac?)
- The crypto you use (Bitcoin)
Ouch, we know. We had to use so many technical terms in this article because that’s how the documentation for crypto wallets will refer to them, and that’s how you’ll locate them, if they’re available.
Now that you know this, it is worth mentioning that not all crypto wallets make this information readily available, if at all. It is best to avoid wallets that do not even publish this information in case they stop developing and your new device in the future does not support the wallet.
Luckily, there is a helpful website called WalletRecovery that publishes a current list of top crypto wallets, along with this information: https://walletsrecovery.org/.
This is a good place to go if you ever find yourself locked out of all your funds because your seed phrase didn’t work.
Just to rule this out, you might come across multiple terms, depending on the wallet, that really refer to the same thing.
We use the term secret recovery phrase here to refer to the fact that this is a phrase that you will use to recover a wallet.
They are also called seed phrases, because the phrase acts as a seed for your wallet, from which the other components are derived – private keys and public keys.
Some wallets call them passphrases because… they’re supposed to be a phrase known only to the owner.
Finally, you may also come across the term “mnemonic” phrase. Mnemonic means “easy to remember”. The phrase is so called because of the shape of the modern seed: a readable collection of words that is easier to remember than a long string of random characters…that is, if you understand the language !
They all refer to the same thing.
Another point of confusion with crypto wallets is the relationship between private keys and seed phrases. We will therefore end this article with a brief review of these two components of a crypto wallet, their relationship and their interaction.
You know that popular mantra about “Not your keys, not your crypto”? It is often suggested that you only need your private key to control your crypto. And that’s not wrong – your private key is what gives you access to crypto on the blockchain.
The private key is and always has been the central element of cryptography. Each time you create a blockchain address, you generate a private key as well as a corresponding public key.
The public key is the visible crypto address that you can share, which is how people can send you crypto. The private key allows you to unlock this address, to access what it contains and to send the cryptography.
Now, this private key itself poses a bit of a problem for the user because it’s a very, very long string of random alphabets and numbers. Technically, the private key is a 256-bit number, usually represented by a line of 64 characters.
Now imagine having to enter a 64-character password every time you use crypto! Easy to make mistakes and completely impractical to use, right?
In the early days of cryptography, wallets actually generated a set of private keys and public keys. Each time you needed new addresses, the wallet had to generate a new set of keys. You will need to back up the different wallet files for all of these different sets.
Later wallets implemented a “master seed” system which created a unique seed for each wallet. This seed would suffice as a backup, as all future keys generated from this wallet could be determined from this same seed.
Hence the term “deterministic wallets”, wallets that first used a single seed as a backup.
The most advanced form of deterministic wallets organizes everything in a tree structure, starting with the seed. The seed can produce parent keys, parent keys can produce child keys, and so on… in a hierarchy.
This is where the term hierarchical deterministic (HD) wallets comes from – you might see it used to describe many popular wallets today, including Electrum, Trezor, Ledger and MetaMask.
Seed phrases, however, were always made up of quite a long string, so the next generation of wallets improved the seed technique, making it a readable way for people to use a number of words.
Thus was formed the term “mnemonic phrase” or “recovery passphrase” that we now use.
So the recovery phrase is what you might say is the other side of the coin. To put it another way, the passphrase is, in fact, all of your private keys – just in a different format that’s easier for you to understand.
So this is it. A complete guide on how to properly create a backup of your crypto wallet by storing the secret recovery phrase, along with any identifiable information from your wallet.
This way, you’ll be more confident and better equipped not to lose access to all of your funds just because you didn’t store your seed phrase properly.