The crypto industry still feels trapped in outdated practices and perspectives, as exemplified by the seed phrase. These 12- to 24-word sequences, often written down on paper or engraved into metal, are essential for self-custody for millions of crypto users.
They’re meant to help recover wallets and protect digital assets, but their presence in an era of advanced technology sparks an important question: why do seed phrases still exist?
As more people adopt cryptocurrencies, relying on this old-fashioned backup method is becoming riskier, susceptible to loss, theft, and human mistakes.
Let’s examine why seed phrases are still so common and arguments against their continued use.
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The Origins and Purpose of Seed Phrases
Seed phrases, also known as recovery phrases or mnemonic phrases, emerged as a solution to a fundamental problem in cryptocurrency: how to securely back up a wallet’s private keys.
Introduced by the Bitcoin Improvement Proposal 39 (BIP-39) standard, seed phrases translate complex cryptographic keys into a human-readable sequence of words drawn from a predefined list of 2,048 terms. When a user sets up a crypto wallet, the software generates a seed phrase, typically instructing them to write it down on paper and store it securely. If their device fails, is lost, or is stolen, the seed phrase allows them to restore their wallet and access their funds on a new device.
The brilliance of seed phrases lies in their simplicity and universality. They’re easy to record (compared to a string of random characters), and their design includes error-correction features; words are chosen so that the first four letters uniquely identify each one, making them resilient to minor transcription errors.
Moreover, seed phrases work across compatible wallets, ensuring users aren’t locked into a single provider. They embody the ethos of self-custody: “Not your keys, not your crypto.” By giving users full control over their assets, seed phrases empower individuals to bypass centralized institutions like banks or exchanges.
But this empowerment comes at a cost. Seed phrases place an enormous burden on users, requiring them to safeguard a piece of information that, if lost or exposed, can lead to catastrophic financial loss. Despite their widespread use, the vulnerabilities of seed phrases are becoming harder to ignore as the crypto industry matures.
The Case Against Seed Phrases
The argument against seed phrases boils down to three core issues: vulnerability to loss, susceptibility to theft, and user-unfriendliness. These flaws make them a weak link in the quest for mainstream crypto adoption.
1. Vulnerability to Loss
Seed phrases are a single point of failure. If a user loses their seed phrase and no longer has access to their wallet (due to a lost device, for example), their funds are gone—permanently.
The crypto space is littered with horror stories of such losses. In 2013, James Howells famously discarded a hard drive containing the private keys to a wallet with 8,000 Bitcoin, worth nearly $860 million as of December 2024. Without a seed phrase, his fortune remains unrecoverable in a landfill. Similarly, countless users have lost access to their assets due to misplaced paper backups, forgotten phrases, or natural disasters like fires or floods that destroy physical records.
Paper, the most common medium for storing seed phrases, is particularly fragile. It’s susceptible to water damage, fading ink, and accidental destruction. Even more durable solutions, like metal seed plates, aren’t foolproof—they can still be lost, stolen, or damaged in extreme conditions. The reliance on physical backups feels archaic in an era of digital innovation, where cloud storage, biometrics, and multi-party computation (MPC) offer more robust alternatives.
2. Susceptibility to Theft
While seed phrases are designed to be kept offline to avoid cyber threats, their physical nature makes them vulnerable to real-world risks. Anyone who gains access to a user’s seed phrase through theft, phishing, or social engineering can drain their wallet with no recourse. High-profile cases underscore this danger. In 2022, Bo Shen, a founding partner of Fenbushi Capital, lost $42 million in cryptocurrency when his wallet’s seed phrase was compromised, likely through a security lapse.
Phishing attacks, malware, and insecure storage practices (like saving a seed phrase in a text file or cloud drive) further amplify the risk. A 2020 stunt by entrepreneur Alistair Milne demonstrated how easily seed phrases can be cracked: a software developer used brute-force techniques to decipher Milne’s Bitcoin wallet seed phrase after he shared partial clues online, claiming the 1 BTC prize. These incidents highlight a harsh reality: seed phrases are only as secure as the user’s ability to protect them, and most users aren’t security experts.
3. User-Unfriendliness
Seed phrases are a relic of crypto’s early days, designed for tech-savvy enthusiasts rather than the mainstream audience the industry now seeks to attract. Writing down, storing, and securing a 12—to 24-word phrase is intimidating and error-prone for the average person. Misspelling a word, recording the sequence incorrectly, or forgetting where the phrase is stored can render it useless.
The complexity doesn’t end with storage. Recovering a wallet using a seed phrase requires entering the words in the exact order, often on a new device or interface, which can be daunting for non-technical users. This friction undermines the goal of making cryptocurrency accessible to all, especially as the industry competes with user-friendly centralized platforms like PayPal or Venmo.
The Persistence of Seed Phrases
Despite these flaws, seed phrases remain the dominant backup method for several reasons. First, they’re deeply entrenched in the crypto ecosystem. The BIP-39 standard is widely adopted across wallets, ensuring interoperability and simplicity for developers.
Seed phrases are also cost-effective to implement. Wallet providers can instruct users to write down a phrase without needing to develop complex infrastructure. In a survey of 20 top wallets, 18 relied primarily on paper backups, with only two offering encrypted digital alternatives. This default to paper reflects both inertia and the lack of a universally accepted alternative.
The Rise of Seedless Wallets
The good news is that the crypto industry is beginning to explore alternatives to seed phrases, with seedless wallets leading the charge.
One standout example is Tangem, a hardware wallet that eliminates the need for traditional seed phrases by using a multi-card system for private key generation and storage. Tangem’s approach leverages multiple physical cards (typically two or three) that work together to secure and recover a user’s wallet. If a card is lost, the remaining cards can still restore access, reducing the single point of failure inherent in seed phrases.
Tangem’s technology is based on the Diffie-Hellman Key Exchange protocol, which securely copies private keys across multiple devices without exposure to intermediate devices. This makes it more secure and user-friendly than memorizing or storing a seed phrase.
If a user opts for a seed phrase, Tangem allows creating and importing one, but its default card-based system offers a compelling alternative for those seeking simplicity and security.
Other seedless solutions are also gaining traction. For example, wallets like those from Self Chain use MPC and threshold signature schemes (TSS) to create recoverable accounts without seed phrases, integrating with cloud backups for added convenience.
Account abstraction, a newer development, replaces seed phrases with smart contract-based accounts, allowing for more flexible recovery mechanisms like social recovery (where trusted contacts help restore access) or biometric authentication. These innovations point to a future where users can enjoy the benefits of self-custody without the anxiety of safeguarding a single string of words.
The Path Forward
As the industry evolves, solutions like Tangem’s multi-card system, MPC-based wallets, and account abstraction offer a glimpse of a seedless future. These technologies prioritize security and usability, addressing the pain points that have led to billions in lost or stolen crypto.
For now, users stuck with seed phrases must take extreme precautions: store multiple offline backups in secure locations (like fireproof safes), avoid digital storage, and consider advanced methods like Shamir’s Secret Sharing for splitting phrases across multiple locations.
But the real solution lies in moving beyond seed phrases entirely. As one X user stated, “It’s 2025—AI agents are managing funds, DeFi is getting more automated, yet losing a seed phrase means losing everything. The problem isn’t the innovations; it’s the outdated onboarding with seed-phrase-bound wallets.”