Blockchain technology might seem super futuristic and hard to understand, and whilst that may be true to some extent, there are some basic concepts that are worth understanding to ensure you navigate this new and exciting space with care.
Private keys, recovery phrases, cold storage, blockchain address – there is a lot to learn! If you’ve found yourself questioning the difference between private keys & recovery phrases, this article is for you. Below, we’re getting into the nitty-gritty of private keys and recovery phrases and the differences between them.
BUT FIRST, WHY THE NEED FOR EITHER?
Well, if you want to ensure that you’re cryptocurrency is secure, the best option is to move it offline onto a cold-storage hardware wallet. A cold-storage hardware wallet is a physical device, similar to a USB stick, that holds your crypto offline, eliminating the risk of malware, keyloggers, computer viruses, or other risks that software wallets and exchanges are vulnerable to.
A cold-storage hardware wallet has both a public and private key. A public key, as it sounds, is a user's public wallet address. Similar to how your BSB and account number are used in traditional banking to identify an account (or wallet), public keys are used to identify a user's wallet, which then allows the transfer of Bitcoin or other alternative coins to it. A public key is something you share with your friends, family or whoever you wish to transact with so they can send you those crypto coins.
The private key, however, is something you want to keep private (just like your internet banking password or your credit card pin!). It is what authorises and signs transactions out of your crypto wallet. The safe generation and storage of your private key is the MOST important thing about owning cryptocurrencies, especially when the individual now becomes the sole responsibility in this new decentralised industry. If someone else has a copy or access to your private key, they also have the ability to move your funds, which is obviously not a good thing.
Similar to the public key, the private key is a string of numbers and letters. This can obviously be problematic when it comes to memorising or even storing safely and securely. This is where the recovery phrase comes in!
WHAT IS A RECOVERY PHRASE?
A recovery phrase, or seed phrase, is the 12/18/24 words generated by your wallet during the initial setup process. It is used to encrypt your private key into an easier-to-understand format (i.e. instead of a string of letters and numbers) which can then be used to identify, authenticate, and grant you access to the cryptocurrency in your wallet. Simply put, your recovery phrase is your private key in a different format.
But here is the most important thing to remember: anyone that has access to your recovery phrase can access and steal your cryptocurrency so it’s vital that you keep it private and secure. But what are the best ways in which to protect your recovery phrase?
HOW CAN YOU KEEP YOUR RECOVERY PHRASE SAFE?
First things first, you need to make sure you are correctly recording your recovery phrase when first setting up your hardware wallet. A change in just one letter can be enough to make you part ways with your cryptocurrencies, so make sure you double-check (or triple!) that you’ve got it right!
Secondly, you should NEVER store your recovery phrase on a device or application that is connected to the internet. Storing it offline is the safest option, where there is less chance of you being hacked.
There are also a few other things we recommend you DON’T do:
- Take a screenshot or mobile photo of your recovery phrase because someone can simply hack into your computer/mobile and copy it
- Store it on email or cloud services (eg password manager, iCloud storage)
- Rely on your memory alone to remember your recovery phrase
So what is the best option for storing your recovery phrase safely?
Of course, you could simply write down your recovery phrase on a piece of paper, but this isn’t the most durable option; paper can easily be destroyed or misplaced.
Luckily, there are companies such as Billfodl, who have created recovery phrase devices to store your recovery phrase safely. The Billfodl is constructed of 316 stainless steel, with a melting point of almost 1400 degrees celsius. It can withstand more than double the temperature of an average house fire and it’s impervious to any type of electrical hazard. Using a randomised set of character tiles, you simply recreate your recovery phrase in the steel unit, creating an almost indestructible backup.
The Billfodl is a much more permanent, solid, and dependable solution to storing your recovery phrase. Remember, your assets are safe if your 24-word recovery phrase is!
No matter what recovery phrase storage solution you decide to go with, it’s important to remember that offline is ALWAYS the safest option. But while paper does the job, steel devices like the Billfodl take your seed phrase’s security to the next level. Now, the choice is yours — steel-grade security or paper-grade security?