Private keys and recovery phrases: the cornerstones of wallet security

Private keys and recovery phrases are the essential credentials that define ownership in self-custody wallets.

In self-custody, the biggest risk isn’t always volatility, it’s losing access to funds. There’s no bank to call and no password reset. Control of wallet access rests with the holder and depends on two things: the private key and the recovery phrase. These are the credentials for importing or migrating a wallet across devices and the recovery method if access is lost.

By contrast, in centralized finance (CeFi), private keys are held by custodians such as exchanges. Users don’t manage them directly, which makes access easier but also means they rely on the security and policies of the provider. 

This article focuses on self-custody, where private keys and recovery phrases are in the user’s hands.

What are private keys?

A wallet doesn’t literally “store” coins. Instead, it acts as a tool for interacting with the blockchain, where all balances and transactions are permanently recorded. Access to those funds relies on a pair of cryptographic keys:

• Public key: Generated from the private key, it creates the public address that others use when sending funds.
• Private key: A confidential cryptographic string that proves control over funds and is used to sign transactions associated with a wallet address.

When a transaction is made, the wallet prepares it locally (amount, fee, destination/contract and any required data). After confirmation, the wallet uses the private key to sign the transaction and then broadcasts it to the network. Nodes verify the signature with the public key and, if valid, include it in a block. A transaction won’t be signed or accepted without the private key.

What is a recovery phrase?

To make private keys easier to manage, wallets generate a recovery phrase, also known as a seed or mnemonic. This is a set of 12, 18 or 24 random words generated by the wallet that can recreate all derived private keys in compatible wallets or devices. 

The recovery phrase is both an access credential and a backup. It allows a wallet to be imported into another compatible app or device and serves as the fallback to restore access if the original app is removed, the device is lost, or hardware stops working.

Because the recovery phrase is the blueprint for all private keys, it must be protected with the same level of caution. Whoever obtains it controls the wallet.

Best practices for keeping them safe

1. Never share your private key or recovery phrase. No legitimate service or support team will ever ask for them.
2. Use offline storage. Write the recovery phrase down on paper or use a secure hardware medium rather than storing it in plain text on an internet-connected device.
3. Avoid screenshots. Digital backups can be compromised if accounts or devices are breached.
4. Create multiple backups. Store them in safe, separate locations to reduce the risk of total loss from theft, fire or damage.
5. Use secure wallet backups. For example, 1inch Wallet offers flexible options, including encrypted cloud storage (Google Drive for Android and iCloud Snapshots for iOS) and file backup. These solutions make it easy to restore access on a new device while ensuring that neither 1inch nor the storage providers can read your encrypted wallet data.

Why they matter

Private keys and recovery phrases are more than technical details, they define ownership in crypto. They give individuals full control of their assets without intermediaries, but they also bring full responsibility. Once lost, they cannot be reset or restored. Safeguarding them is therefore the most important practice for anyone using crypto wallets.  

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