While we’ve already covered what a Hardware Wallet is, today we’re going to dive much deeper into the many different advanced hardware wallet security features that are available. Sure it’s great to have a PIN that protects your funds, but these devices have a powerful computer at their core, they can do much, much more!
Passphrases & Hidden Wallets
A Passphrase (BIP-0039) is an extra, magic word (the 13th or 25th) that’s added onto the end of your 12/24 word seed phrase. They are one of the most commonly supported advanced hardware wallet security features and are supported on over 35 of the 45 different Crypto Wallets we track.
Entering in your Passphrase – which can be any word at all – generates an entirely new wallet. This wallet is totally separate to the wallet generated with just the 12/24 seed words.
The brilliance of this feature is that this Passphrase wallet remains entirely hidden until you enter in the correct Passphrase. Even if an attacker gets your seed phrase, it’s useless without your Passphrase. In essence, it’s similar to a 2-of-2 Multisig Wallet, as you must ensure you never forget either the seed phrase or your Passphrase.
If you do decide to use this feature, always make sure you craft your Passphrase to be at least 20 characters long and utterly random. This is to ensure that an attacker cannot brute force it simply by using a computer that guesses millions of combinations each second.
You should also ensure you have multiple backups of the Passphrase (as well as your seed phrase) and that at least one copy is kept off site. The seed phrase and Passphrase should also always be stored in different physical locations too.
One clever use of Passphrases is to set up a decoy wallet alongside your hidden wallet. The decoy wallet is simply the wallet generated using the normal seed phrase. This decoy wallet should have a plausible amount of funds in it, so that if an attacker forces you to open it, they can steal those funds and not think twice.
Meanwhile, your real wallet (the hidden wallet) is generated using the same seed phrase + your Passphrase. This is where you store your actual wealth, safe and sound, even if an attacker forces you to unlock your hardware wallet.
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