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Crypto & Safety: Need to know details about a wallet’s recovery phrase

Crypto & Safety: Need to know details about a wallet’s recovery phrase

Crypto & Safety: Need to know details about a wallet’s recovery phrase
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By CNBCTV18.com Jun 6, 2022 7:17:48 PM IST (Published)

There are two kinds of wallets — custodial and non-custodial. In the case of a custodial wallet, the platform that hosts the wallet has a copy of the private key, while in the latter, only you have access to the private key.

As you may know, cryptocurrencies are stored in digital wallets. These wallets can be accessed using a set of public and private keys. Public keys are like usernames, and private keys are like passwords. Both are a string of numbers and letters that allow investors to access their wallets and carry out crypto transactions.

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There are two kinds of wallets out there — custodial and non-custodial. In the case of a custodial wallet, the platform that hosts the wallet has a copy of the private key. Therefore, if you lose or forget the private key, you can contact the hosting platform and recover the account by providing a couple of additional details.
However, in the case of a non-custodial wallet, only you have access to the private key. This could be a problem if you lose or forget your private key. Therefore, non-custodial wallets have a second layer of security known as a recovery phrase. It is also known as a ‘seed phrase’ or a ‘mnemonic phrase’.
This article will discuss what a recovery phrase is and how you can protect it.
What is a crypto recovery phrase?
A recovery phrase is a string of 12 to 24 simple words. It is generated when you set up your wallet. This string of words is then used to create your public and private keys. The recovery phrase can be used to carry out transactions, claim ownership of your crypto holdings, and recover your wallet if it becomes inaccessible.
Every recovery phrase is derived from a fixed list of 2,048 simple words. This makes it possible for crypto to be interconvertible. If you ever want to change your crypto wallet, all you have to do is download the second wallet and insert your private key/recovery phrase. Simple words are used to lower the chance of human error when noting down the recovery phrase.
Here are some things to know about your recovery phrase:
As you may have guessed by now, your recovery phrase is extremely important. If you lose access to your wallet, a recovery phrase can work miracles in getting it back up and running. However, there are some things you should keep in mind about this string of simple words:
• You see this phrase only once during the account setup stage, so make sure you record it before moving to the next stage.
• Also, make sure you record it in the correct sequence as the order of words is very important.
• Never share your recovery phrase with anyone.
• You cannot access your account without your recovery phrase.
How to store recovery phrases?
If you lose access to your recovery phrase, it will be impossible for you to get back the control of your wallet. Therefore, safe storage of your recovery phrase is of paramount importance.
Let’s discuss all the easy ways one can use to store their recovery phrases:
• Write it somewhere, ensure you always have access to it and that other people do not come across it.
• Split the recovery phrase into parts and store them in multiple locations.
• Most wallets offer a feature to save the encrypted version of your recovery phrase on iCloud or Google Drive.
• You can also go for password managers.
• Many people go so far as to etch it on a metal slab and bury it.
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