As a digital asset, Bitcoin’s ownership is not represented by a physical object. Owning Bitcoin or other digital assets means owning a private cryptographic key known as a private key. If the private key is lost, access to assets will be lost and cannot be recovered. The same applies to if someone gains access to the private key. They can control assets protected by said key.
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To secure the private key, many crypto wallets use a seed phrase—a string of 12 to 24 words that can back up a wallet and restore access to crypto assets if the private key is lost or compromised. On the flip side, seed phrases can be confusing and easily mismanaged. Additionally, seed phrases are not forgiving of mistakes.
The risks of seed phrase are one of crypto’s adoption hurdles. In an interview with TheStreet, Ballet CEO Bobby Lee explained the risks of seed phrases that people often overlook.
Seed phrases may be secure, but Lee warned that people, especially newcomers, can mishandle their seed phrases. “You either lose it, you unintentionally expose it to other people, or worse, hackers or thieves gain access to it. And when that happens, your Bitcoins can be gone.”
Early crypto wallets stored private keys in computers without encryption. As technology progressed, cold storage improved security by storing private keys offline.
Private keys can be recovered with the seed phrase. Lee called it a secure “digital fingerprint”, but it is still complicated.
He believes that seed phrases are too technical, while crypto needs to be intuitive to allow for wider general adoption. The math behind Bitcoin is complex and complicated, but the tools to protect Bitcoin needs to be simple enough to be understood by everyone.
