A private key is a massive 256-bit number that is difficult to remember or input without errors. To simplify this process, Bitcoin uses a mnemonic phrase or "seed," which is a list of plain English words derived from the private key (details in BIP-39).
In some cases your Bitcoin wallet will offer an additional pin (like in Blockstream Green) or password (like in BlueWallet) to be attached, which can be added for extra security.
Though the process sounds complex, you will only need to focus on the word list and the optional pin/password. Understanding the basics helps avoid mistakes that can be hard to fix, such as incorrect word order or password capitalization. It's essential to know that you need both the seed and the password.
For those less technical, you can think of the seed phrase as your private key. Technically, it is not, but everything can be derived from the seed. Just remember that the seed words must be in the correct order!
To store your bitcoin safely, follow these steps:
- Use a reliable source of randomness (entropy) to create a secure private key. A signing device or "hardware wallet" is recommended for this purpose, as they are optimized for generating seeds. Set a PIN code or password for the device and remember it or write it down.
- When the device generates a new wallet, it will display the seed words in sequence. Write these seed words down manually on paper or, ideally, on a metal plate. Ensure you write them in the correct order and avoid using any electronic devices during this process. Never type the seed words into a computer, take photos or screenshots, or expose them to others or cameras.
- If you are confident with passwords (or a pin) and do not forget or misplace them, consider adding one to your seed when you login. This allows you to store the seed and password/pin separately, increasing security. With the same seed words and different passwords, you can also create separate wallets for various purposes, such as separate "accounts" for hot and cold storage or a honeypot account to protect your funds. Passwords are powerful tools, but do not lose them!
Please be cognizant of the fact that due to its digital nature and inherent value, Bitcoin can potentially be a magnet for attackers. As a best practice, avoid storing your seed phrases electronically, as malicious actors may try to access them. Implementing these safety measures cannot be overstated, as they serve as crucial defenses in protecting and storing your coins.
TL;DR: A private key is a large 256-bit number that is hard to remember and input accurately. To simplify, Bitcoin uses a mnemonic phrase or "seed" derived from the private key. To store your bitcoin safely, use a signing device to generate a seed, write the seed words down in the correct order on a durable material, and consider adding a password or pin for extra security. Avoid using electronic devices to store or expose seed words, as they may be vulnerable to attacks. Understanding the basics of private keys and seeds helps avoid costly mistakes.