What are Mnemonic Phrases and Passwords? Complete Guide

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If you are looking for a way to secure your crypto funds on cryptocurrency exchange, crypto wallet, then you must use a Hierarchical Deterministic wallet or an HD wallet. These wallets use Mnemonic Phrases and Mnemonic Passphrases to create a safe and secure storage for your crypto coins. What’s more, HD wallets can help you recover your balance if the computer (system) hosting the wallet is down, hacked or goes offline. Let’s dive right in.

What are Mnemonic Phrases and Passphrases?

Mnemonic Phrases

In the earlier days of crypto, storing cryptocurrencies such as Bitcoin, Ethereum was an arduous task because users were required to memorize and store lengthy strings of private keys offline to ensure maximal security of their crypto holdings.

Ideally, users would write down them long strings of private keys on a hardware wallet and heave a huge sigh of relief. However, with the advent of Mnemonic Phrases in the crypto space, life has become much easier for crypto enthusiasts.

A mnemonic phrase, mnemonic recovery phrase or a mnemonic seed is a string of long words used in Hierarchical Deterministic wallets for recovering coins in case of any mishap. Most modern wallets used for storing a slew of crypto coins are HD wallets.

Notice that when you are initially setting up your crypto wallet, the wallet will ask you to note down or save a phrase of 12, 18, or 24 words that can be used to recover your funds in case of loss/damage to the wallet, or the device hosting the wallet itself.

How are Mnemonic Phrases generated?

Mnemonic phrases are randomly generated from a standard jargon of 2048 dictionary words at the time of wallet creation. The standard jargon is called BIP39 standard and the mnemonic phrases are derived from these words via permutation and combination.

Furthermore, these selected random words are then converted into numbers for creating a seed for recovering your crypto data/funds in case of wallet mishaps.

Mnemonic phrases have 132-bit security since a 12-word phrase can have a possible combination of 2048^12, which equals 2^132. However, users end up with 128-bit security since the phrases are not completely arbitrary. Interestingly, the 128-bit security matches a Bitcoin private passkey security.

What is a Mnemonic Passphrase?

Essentially, a mnemonic passphrase adds a secondary layer of security to the mnemonic phrase which is the default security key of of every crypto wallet. In other words, a mnemonic passphrase is like the additional password that cryptocurrency wallets ask their users to set for extra protection.

A mnemonic passphrase is specific to a mnemonic phrase. Please note that users can recover data from a lost wallet only if the they know both the mnemonic phrase and the mnemonic passphrase associated with it. Hence, you shouldn’t ignore it at the time of wallet setup.

Luckily, users have the sole discretion insofar as generating a mnemonic passphrase is concerned. However, it is recommended to select a passphrase that is hard to guess for others and easy for you to remember. Avoid using names, birthdates, residence address, etc. to avoid detection. Please note that if you do not provide a mnemonic passphrase at the time of wallet setup, an empty string is used.

How to Store Mnemonic Phrase and Passphrases?

Mnemonic phrases and passphrases are the only solution or key that can recover your valuable cryptocurrencies in the event of loss/damage of wallet,  or corruption of the data. However, please note that losing your secret Mnemonic phrases and passphrases can really make it next to impossible for you to recover crypto.

Hence, it is prudent to stash away both the Mnemonic phrases and passphrases in a secure and safe location that you can easily remember or get access to. Most wallet providers prescribe writing both mnemonic phrase and passphrases down on a piece of paper and securing it in a safe space. Why? Because if anyone gets access to these phrases, they can easily steal everything in your wallet without the need for your authorization.

Secondly, avoid creating any digital copies of your wallet’s mnemonic phrases in digital documents such as Word, Google Sheets, Excel, Cloud Drive, excel, etc. since they are vulnerable to loss of data.

Mnemonic Phrases: Summing it Up

The security of your cryptocurrency wallet is of paramount importance with an increase in adoption and soaring cryptocurrency prices all around the world. Incidents of hacking, phishing, spyware attacks, etc.  are pretty common and crypto investors and wallet holders can safely rely on Mnemonic phrases and passphrases to safeguard their crypto holdings and implement a tight security layer around them.

SEE ALSO: 6+ Best Crypto Trading Bots in 2021

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