Mnemonic Phrases

AKA Seed Phrases

  • Crypto
Mnemonic Phrases
Mnemonic phrases are 12-24 word sequences that serve as master keys for cryptocurrency wallets, allowing users to securely access and recover their funds across multiple blockchain networks.

To comprehend the role of mnemonic phrases, it's important to understand the foundation of cryptographic keys in blockchain technology. This hierarchical structure ensures that a single mnemonic phrase can generate an extensive array of wallet accounts, always producing the same sequence when input.

  1. Mnemonic Phrase: The root of the hierarchy
  2. Private Keys: Derived from the mnemonic phrase
  3. Public Keys: Generated from private keys
  4. Wallet Addresses: Derived from public keys

BIP: Standardizing Mnemonic Phrases

The concept of mnemonic phrases was introduced and standardized through Bitcoin Improvement Proposals (BIPs), specifically BIP39. These proposals have had a lasting impact on the cryptocurrency ecosystem, with many other blockchain networks adopting similar standards, including Ethereum and Solana.

How Mnemonic Phrases Work

  1. Generation: A wallet creates a random sequence of words from a predefined list.
  2. Conversion: The phrase is converted into a binary seed through key stretching.
  3. Key Derivation: The seed generates the master private and subsequent child keys.
  4. Address Creation: Public keys and addresses are derived from these private keys.
  • Human-Readable: Easier to record and remember than long strings of characters.
  • Versatility: A single phrase can access multiple accounts across various cryptocurrencies.
  • Security: Properly stored phrases provide robust protection against unauthorized access.

Physical Storage: Write the phrase on paper or engrave it on metal; avoid digital storage. Multiple Copies: Store copies in different secure locations to prevent loss. Confidentiality: Never share your mnemonic phrase with anyone. Verification: Regularly verify the integrity and readability of your stored phrase.

Key Components

Private Keys

A private key is a unique code granting access to a digital wallet containing cryptocurrencies or NFTs. It's comparable to a safety deposit box key or email password. Access is typically through mnemonic phrases or keystore files.

Public Keys

Public keys are associated with blockchain accounts and digital wallets. They're used as addresses for receiving tokens, similar to email addresses for receiving messages.

Technical Implementation

The BIP-39 Process

Entropy – or randomness, is encoded in multiples of 32 bits. A bit is a single unit of information with a value of 1 or 0. The bits are split into groups and are then encoded with a number ranging from 0-2047. These numbers are cross-referenced with a word list, and a mnemonic sentence is born. This sentence is converted into a mnemonic seed phrase using the PBKDF2 hash function, which helps reduce the effectiveness of brute-force attacks. For a more detailed explanation of this process, refer to BIP-39's documentation.

BIP-32 & BIP-44

Using elliptic curve cryptography, one can calculate a public key without revealing the private key. The single private key can also generate a nearly infinite set of public keys, each accessible by various derivation paths required for a wallet to hold more than one token.

For most users, accessing more than a digital wallet's recommended derivation path is unnecessary. Most wallets' user interfaces either do not require a derivation specification or give users the option to choose which derivation path to access—often with the option to select a recommended path.

Each token has its derivation path. If users were required to access each asset in a multi-asset wallet individually, this could become cumbersome. Instead, BIP-32 introduced the ability of a single private key to unlock more than one public key.

BIP-44 defines the specific hierarchy to use as described by an algorithm detailed in BIP-32. This means that different derivations of a wallet will comply with the following format:

m/purpose'/coin_type'/account'/change/address_index

Hierarchical deterministic wallets are identified with the BIP-44 reference under purpose'.

For example, m/44'/60/' 0'/1’/8′ = The 9th address at change level 1 (addresses begin at 0).

Final Thoughts

Before BIP-32, burdensome tasks and financially insecure practices regarding digital wallets and derivation paths prevented many people who needed to be computer-savvy from participating.

Once BIP-32, 39, and 44 were widely implemented, users could access nearly a limitless number of digital assets (tokens and NFTs) from one user-friendly mnemonic device. Thank BIP-32, 39, and 44.

Further Reading

Core BIP Documentation