Decoding the elements of a crypto wallet
Of CNBCTV18.com IST (published)
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The long and complex login details – namely the seed phrase, the private key and the public address – can be tedious to deal with. Each of these items is a randomly generated string of words, letters or numbers, making them difficult to remember. To make matters worse, forgetting any of these login details can also lead to significant financial losses.
Compared to an everyday physical wallet, using a crypto wallet can be a bit confusing, especially for beginners. One of the reasons for this may be the many security layers these storage solutions use. The long and complex login details – namely the seed phrase, the private key and the public address – can be tedious to deal with.
Each of these items is a randomly generated string of words, letters or numbers, making them difficult to remember. To make matters worse, forgetting any of these login details can also lead to significant financial losses. With this in mind, we will quickly go over the crucial elements of a crypto wallet and explain their role in keeping your digital assets safe and secure.
What are public and private keys?
Every crypto wallet has two sets of keys – a private key and a public key. The private key acts as a password and the public key acts as a username. You use a private key when you want to log into your wallet, and you can give your public key to anyone who intends to send you crypto. It is important to note that you can extract a public key if you know a private key, but not vice versa. So it is always advisable to be very careful with your private key.
What is a seed set?
Some wallets may contain multiple private-public key pairs, one for each cryptocurrency you hold. A seed sentence acts as a master code for these holdings. It is a combination of 12 to 24 simple words such as bottle, cross, army, energy, opera, trash, etc. These words are taken from a standard list of 2048 common English words. The seed phrase is generated when you create a wallet, and it is important to store this string of words in the exact order you receive in a safe and secure manner.
Seed sentences use regular English words because they are easier to remember, at least compared to a string of alphanumeric characters. The main purpose of a seed set is to enable the recovery of all private-public key pairs stored in a wallet. Therefore, if your mobile wallet is lost or your hardware wallet is broken, you can use the seed phrase to set up a new wallet and regain full access to your crypto holdings.
The seed set also allows interoperability of crypto-wallets. If you wish to switch wallet providers, simply enter the seed phrase in the new wallet and your private-public key pairs will be transferred immediately. However, this feature can also be used by fraudsters. If such bad actors uncover your seed phrase, they can transfer all your assets to a wallet they own and control.
Passphrases are known by various names, such as passwords, recovery or mnemonic phrases. But regardless of the term used by the wallet provider, this string of words plays the same role – providing a master key to your wallet.
Seed phrases cannot be altered or changed, nor can you contact a wallet holder to recreate this string of words if you lose/forget it. Therefore, it is important to keep this phrase safe. As a security protocol, always ensure there is an air gap from the internet when saving the seed phrase. This ensures that if your devices get hacked, you won’t lose your crypto holdings.
Keep it physically written or printed in a safe place so that it is only available to you. Some individuals have even been known to inscribe the string of words on a piece of metal and store it in a vault or bank locker.
Conclusion
Every element of a crypto wallet plays a role in keeping your digital assets safe and under control. Knowing their roles and the importance of each one allows you to use and store them efficiently and safely.
