Bitcoin Improvement Proposal (BIP) 39

BIP-39 is a protocol used to generate a secure, human-readable backup of private keys for cryptocurrency wallets.

Instead of long, complex strings of numbers and letters that form a private key, BIP-39 generates a list of 12 to 24 simple English words called a mnemonic seed phrase.

This phrase can then be used to regenerate the wallet’s private keys, providing a secure and convenient way to recover a wallet if it’s lost or damaged.

Features

  • Mnemonic Phrases: BIP-39 replaces cryptographic complexity with a list of simple words, making it easier for users to back up and restore their wallets.
  • Human-Readability: The use of words makes BIP-39 both accessible to users and resilient to transcription errors. Seed phrases can be generated in any language such as English, Mandarin, Spanish, Hindi, German and Japanese.
  • Deterministic Key Generation: A single seed phrase can regenerate multiple private keys, simplifying wallet management for users and developers. This is how multi-token wallets like Trust Wallet work.

Working

To understand BIP-39’s functionality, let’s break down the process into technical steps:

Step 1: Entropy Generation

When creating a new wallet, BIP-39 starts by generating a random number, called entropy, which typically contains 128, 160, 192, 224, or 256 bits of randomness. This entropy is the foundation for the security of the generated seed phrase.

Step 2: Adding a Checksum

The entropy is then hashed with SHA-256 to generate a checksum, which is a short binary sequence added to the entropy. This checksum verifies the integrity of the mnemonic phrase, protecting it against transcription errors. For example, a 128-bit entropy will yield a checksum of 4 bits, while a 256-bit entropy yields an 8-bit checksum.

Step 3: Converting Entropy to Words

Next, the entropy plus checksum is split into 11-bit sections, each representing a word in the standardized BIP-39 wordlist. This results in 12, 18, or 24 words for the mnemonic seed phrase.

Step 4: Converting the Mnemonic Phrase to a Seed

The mnemonic phrase can then be converted into a 512-bit seed using the PBKDF2 (Password-Based Key Derivation Function 2) algorithm with HMAC-SHA512. This seed can be used to generate a master private key for a hierarchical deterministic (HD) wallet, which can then create multiple private and public key pairs.

Step 5: Hierarchical Deterministic (HD) Wallets

The 512-bit seed is compatible with HD wallets, allowing the seed phrase to generate many keys and addresses from one mnemonic. This makes it easy to organize funds under a single phrase, where each new private key or address can be derived from the master key without creating new backups.

Importance

  • Backup and Recovery: BIP-39 seed phrases simplify wallet recovery, providing a backup method that even new crypto users can understand.
  • Cross-Wallet Compatibility: The BIP-39 standard ensures compatibility across multiple wallet providers, allowing users to restore wallets on any BIP-39-compliant application.
  • Security: By using entropy and cryptographic checksums, BIP-39 creates a high level of randomness and security, making it highly resistant to hacking attempts.

Drawbacks and Concerns

While BIP-39 is widely adopted, there are some considerations users should keep in mind:

  • Mnemonic Vulnerability: If a seed phrase is discovered or compromised, anyone can recreate the wallet and access its funds.
  • Physical and Digital Security: Users need to ensure that seed phrases are stored securely, away from prying eyes or insecure devices, ideally offline and in multiple physical locations.
  • Non-Unique Recovery Phrases: Not all wallets handle BIP-39 compatibility in the same way, so a mnemonic phrase in one wallet may not work perfectly in another without specific parameters.

Best Practices for Storing and Using Seed Phrases

To maximize the security of BIP-39 seed phrases, follow these best practices:

  • Store Offline: Never store a seed phrase in digital form or on any connected device. Write it down and keep it in a secure, fireproof, and waterproof location.
  • Consider Redundancy: For additional security, consider creating multiple copies of the seed phrase, stored in separate locations.
  • Beware of Phishing and Fake Wallets: Only enter seed phrases into trusted, BIP-39-compliant wallets to avoid phishing attacks.

Dhirendra Das

Dhirendra Das

Dhirendra is a seasoned SEO expert specializing in crypto, blockchain, and Web3, with a strong background as a trader and investor since 2015. He holds a B.Tech and dual MBAs in Finance and Marketing, bringing both technical and financial insights to his work. Dhirendra has written thousands of articles for leading crypto media outlets, establishing a respected voice in crypto and blockchain technology. His deep industry knowledge and practical experience empower readers with reliable, up-to-date content that fosters informed decision-making in rapidly evolving digital asset markets.

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