CRYPTO WALLETS 101: PART-2: Difference between private-key and seed-phrase, and explaining the statement 'Your Seed-Phrase is your wallet'

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Hello people. In the wake of FTX contagion, a lot of people are opting to have a control of their own crypto. They want to use a crypto wallet, but they are confused about its functioning, and security threats.

So, I decided to write a series of posts regarding these topics. This post is part-2 of the series. I would emphasize to go through part-1 too, for getting a clear idea in this post. I will link it down here for your convenience.

A lot of people seem confused about the difference between private key and seed phrase.

I will try to explain both of these terms in detail, and finally explain the term ‘YOUR SEED PHRASE IS YOUR WALLET’.

Private Key:

A private key gives you the ability to prove ownership or spend the funds associated with your public address. Public-key cryptography (PKC) is a technology often used to validate the authenticity of data using asymmetric encryption. A public key allows you to receive crypto-currency transactions. It’s a cryptographic code that’s paired to a private key. Private keys are the central element of crypto ownership. Blockchain is a digital storage network, and having the private key for a given blockchain address means that you control everything at that address.

So, you can think of private key as a password that allows you to access and manage your crypto funds stored on a blockchain. You can think of the private key as a password that unlocks the virtual vault that holds your money. As long as you — and only you — have access to your private key, your funds are safe and can be managed anywhere in the world with an internet connection.

There will be a separate private key for every different blockchain. So, if you have BTC, ETH and ADA in your wallet, you will have three separate private keys.

Now, we will be moving towards seed phrase.

Seed-phrase (recovery phrase):

The recovery phrase – sometimes called the seed phrase or mnemonic phrase – is a 12, 18, or 24-word pattern generated each time a new wallet is created. Unlike your private key, which relates to just one blockchain address, the recovery phrase is a derivative of your entire wallet, and all private keys stored there.

Basically, in layman’s terms, a recover phrase is the “master key” for all of your crypto accounts – it is your private keys in mnemonic form. These words, when entered into another crypto wallet (in the correct order) will recover all of the private keys you were storing on your original wallet.

You can visualize the difference between seed phrase and private key by simply considering this example.

Consider a home which has three rooms. Each room has 1 crypto coin inside it. We will consider BTC, ETH and ADA. So, room1 has BTC, room2 has ETH and room3 has ADA. Now, you can enter the rooms and manage your coins using a key. So, you must have three keys for accessing all the coins. The problem with these keys is, they are too big to carry, and there are chances that you may lose them.

Now, you can either have these 3 keys along with you, or you can create a vault, in which you can store these keys. This vault is secured by a separate key, which is small to carry and single key ensures that you don’t have multiple keys to carry.

Now, in this example, the home represents your wallet. The number of rooms represents the number of different coins (on different blockchain) you have in your wallet. The individual big keys represent the private keys, while the master key (vault key) represents the seed phrase.

AT THIS POINT, IT BEGS TO MENTION. DON’T GIVE YOUR SEED PHRASE TO ANYONE. KEEP IT OFFLINE. Seed-phrase are more riskier than private key, as in, if someone has your private key, you only lose funds of that blockchain; but if someone has access to your seed-phrase, you will lose all your funds from every blockchain.

Private keys are long and complicated. It is a string of 256 alphanumeric characters. So, it’s difficult to remember and handle. The seed phrase, on the other hand is made out of 2048 words (explained ahead) and hence, it becomes easy to handle.


A lot of people fail to understand the above sentence completely. As explained in the part-1 of the post series, we understood that crypto wallets, unlike regular FIAT wallets, don’t hold your coins or funds. Your wallet only holds the private keys (as explained in the example above).

The vault in the above example doesn’t hold your coins, but it rather holds the keys that will give access to your coins in the rooms.

Now, if you have lost your wallet, or you want to move from one wallet to another, you can simply import your old wallet into new one by using recovery (seed phrase).

A Bitcoin Improvement Proposal (BIP) is a formal proposal to change Bitcoin. BIP39 is a standard that proposed utilizing a mnemonic phrase -- a group of easy to remember words -- to serve as a back up to recover your wallet and coins in the event your wallet becomes lost or destroyed. This is also known as a seed phrase, recovery phrase, wallet back up, etc.

So, the usage of seed phrase to back up and recover your wallet was done in BIP39. Seed phrase serve as a recovery method in the event your wallet breaks or stops working.

So, you can import an existing wallet into new one. The only thing to make sure is, your new wallet should support same BIP standards as the existing wallet.

In addition, you should also write down the BIP standards that your wallet supports when storing your coins. These standards are called derivation paths and are a "map" telling your wallet where to find your coins. They are described in BIP44, BIP49, and BIP84.

Your 12-24 phrase can be entered into any other wallet using the same structure/format standard (BIP39), derivation path, and coin support to access your coins (by you or anyone else). The words in your mnemonic phrase aren't just any random words. They are pulled from a specific list of 2048 words known as the BIP39 word-list. Upon start up, wallets that utilize the BIP39 standard will provide you a 12-24 word phrase randomly chosen from the standard BIP39 word-list.

What constitutes a "good wallet" is one that has clear, easy to access documentation on supported BIP standards, derivation paths, and recovery processes. This allows the user to successfully recover their funds on a different wallet in the event of discontinued support or become obsolete.

This website has provided the list of wallets and their supporting BIP standards:

Mostly, all well-known wallets like Trezor, Ledger, Metamask, Exodus, Trust wallet etc support all the above mentioned BIP standards, and hence, you can always import from one wallet to another.

So, you may think that: If you are recovering an existing wallet, the wallet's software will ask you if you have an existing phrase or have the option to import one. You'll enter in your existing mnemonic seed phrase and bang, your coins are recovered, right?

Mostly yes, but only if the following conditions are met:

  1. Both (new and existing) wallets should support BIP39
  2. Both wallets should support the same derivation path (any one from BIP44, BIP49 or BIP84)
  3. New wallet should support the coins from old wallet.

Regarding point 1 and 2, all the mentioned standards are supported by all well-known wallets. So, that shouldn’t be the issue. Regarding 3, your coins won’t get lost anywhere, but they won’t show in the new wallet.

I wrote this post, as I have seen a lot of people got confused between seed-phrase and private keys.

Be safe. Take control of your funds. Not Your Keys, Not Your Cheese. The offline key is the only key.

Thank you. You can ask me if you have any difficulties regarding the topic.

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