Private Key and Seed Phrase - What are they?

Team Cypherock
Team Cypherock
5 min read
Private Key and Seed Phrase - What are they?

To understand private keys and seed phrases it’s essential to know what a blockchain wallet refers to. A blockchain wallet is a digital wallet that allows users to manage their cryptocurrencies like Bitcoin, Ether, etc. The purpose of a blockchain wallet is actually not to store your crypto but rather, to secure your private keys. You generate a private key along with a corresponding public key any time you create a blockchain account. 

Each blockchain has a specific blockchain account that a user creates. For example, a Bitcoin account will be generated to manage BTC, similarly with ETH and so on. Blockchain addresses have private and public key pairs, and can be best understood as a public key to be like a bank A/C no and a private key to serve as a bank A/C password. For a particular blockchain address, a private key gives you unfettered control over the asset. In the case your private key is exposed to another entity, they can transfer your funds without your permission or knowledge. Therefore, it is very important to manage your private key responsibly and ensure nobody else can access it.  A blockchain wallet, secures multiple blockchain addresses with the same private and public key architecture. As mentioned previously, keeping the private key safe is of the utmost importance, but securing a private key in its natural form can be challenging, as it is not easily human readable.

Here is an example of a private key:

For the utmost security, the best method to secure the private key would be to write it somewhere offline. However, there may be errors in noting down the private key, especially if an individual chooses to remember the private key. Therefore, to simplify private key management, seed phrases were introduced.

A seed phrase is a set of 12, 18, or 24 random words generated each time a new wallet is created. It is meant to be a representative of the private key of the blockchain wallet, and is used as a standard across wallets to manage the funds secured by the blockchain wallet.

Here is an example of a 12 word seed phrase: 

skate plate tray pizza gate have team black link person reflect liberty

Private Keys 101

What is a Private Key?

Private Keys serve two crucial functions in relation to blockchain accounts: Private Keys prove ownership over a blockchain account and also serve as a verification stamp when a transaction occurs from a blockchain account.

What do Private Keys do?

Private keys serve as access passes for individual blockchain accounts. So, for each individual blockchain account, there will be one corresponding private key. In the case an individual wants to access their blockchain account, they can import the contents of the account by adding the private key to the respective interface that they are using.  Additionally, blockchain accounts facilitate transactions, and private keys play an important role in digitally signing a transaction. For a transaction to be complete on the blockchain, the transaction is encrypted using the public key, which can only be decrypted by the private key. Then, the transaction is signed using the private key to prove that there have been no modifications to the transaction. Once broadcasted to the rest of the blockchain network, the transaction can be verified as authentic using the public key. Therefore, the key pair helps prove the authenticity as well as ownership of the wallet.

Seed Phrase 101

What is a Seed Phrase?

A Seed Phrase is a cluster of random words generated by a blockchain wallet during the initialization of the wallet. A blockchain wallet is designed to store multiple blockchain accounts, and the seed phrase is a means of recovering all of the associated balances of the blockchain accounts associated with the wallet. Therefore, a seed phrase is considered a backup if you ever need to restore access to your funds for a particular blockchain wallet. Seed phrases are usually in the form of 12, 18, or 24 words and follow a standard called BIP39. The BIP39 standard was developed to ensure that the seed phrase created from one particular wallet will work with another wallet. For example, you create a wallet on Metamask with a seed phrase and you want to use the same wallet on another interface. By importing the seed phrase in a Cypherock X1 wallet, you will be able to see the exact same balances, and change interfaces.

How does a Seed Phrase work in a wallet?

When a wallet is initialized, a seed phrase is generated. The seed phrase is generated from a 2,048 word list outlined by the BIP39 standard. The words that make up a seed phrase correspond to a string of random digits called the seed. The seed is a representative of the master private key of the wallet, and is in turn used to generate multiple private keys for various blockchain accounts. So, when a seed phrase is added in a wallet, the wallet produces all the blockchain accounts for every cryptocurrency associated with the seed phrase.

Cypherock X1

Seed phrases have made wallet operations a lot simpler due to them being human readable, but still have their own set of risks. The main risk with seed phrases are that, they serve as single points of failure. In the case an attacker is able to acquire the seed phrase of your wallet, they will instantly be able to access your entire wallet and conduct transactions. Therefore, at Cypherock, we aimed to remove seed phrase backups as a whole.  Cypherock X1 is the World’s first seedless hardware wallet. Upon the initialization of the Cypherock X1 wallet, the private key of the wallet is generated and then is split into 5 shards using an algorithm called Shamir Secret Sharing. Each shard is unique in the way that no one shard can guess the contents of the others, and therefore compromising any one shard does not compromise the wallet.  The 5 shards are stored on individual hardware components - 1 on the X1 wallet and 4 on each of the X1 cards. A threshold system of 2/5 is used to recreate the private key for transaction signing. The hardware components interact with each other using encrypted NFC technology, therefore, to make a transaction you will only require any 1 of the X1 cards and the X1 wallet. Therefore, even if you are to lose the other 3 hardware components, your funds will still be safe. 


Private keys and seed phrases are crucial components in blockchain wallets. Private keys grant access to individual blockchain accounts, whereas seed phrases grant access to entire blockchain wallets that secure multiple blockchain accounts. Considering both private keys and seed phrases are crucial in granting access to accounts and wallets, keeping them secure is of the utmost importance.

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