Non-custodial wallets and the seed phrase

A non-custodial wallet is a wallet whose user keeps his private keys and funds on his own.

Let’s figure out what a private and public key is and how it works. A cryptocurrency wallet is a device, physical carrier, program or service that stores public (open) and/or private (closed) keys for cryptocurrency transactions.

A public or open key is an encrypted string, visible for other users, consisting of a set of letters and symbols. A public key is associated with an address and is used for sending cryptocurrencies to another address. The address is like a bank card number, but only this number is visible to everyone on the blockchain.

A private or closed key is a security key consisting of a series of random numbers and letters generated cryptographically that are practically impossible to match. It is used to sign transactions, make transfers, or interact with smart contracts. An analogy can be drawn here with a bank card PIN, but it is much more secure.

It is very complicated for the average user, isn’t it? The market recognized this, and services began to appear — cryptocurrency wallets, designed to simplify user interaction with the blockchain.

It is very important to understand that wallets do not store your funds «inside themselves». Your funds are stored in the blockchain, and the wallet is just a convenient interface to interact with it. This allows you to use one private key with different services.

Cryptocurrency wallets translate a private key into a SEED phrase format. A SEED phrase («mnemonic code») is a group of words consisting of 12, 18 or 24 words of the BIP39 standard, which is generated when a new wallet is created. The BIP39 standard contains a dictionary of 2048 words. This is extremely secure. For example, to hack a 12-word SEED phrase, you need to look through 2048 variants in the 12th power, and the more words in the SEED phrase, the harder it is to match.