Questions and answers to various crypto topics.
This FAQ section covers a variety of topics for navigating the crypto ecosystem. If you find there's a term you don't know, check this page out for an answer. Other guides within the Chorus One Knowledge Base will often link back here for a refresher on certain concepts.
A seed phrase, also known as a mnemonic phrase, recovery phrase, or 12, 18, or 24-word phrase, is a set of words generated by your cryptocurrency wallet to serve as a master key to access your funds.
This phrase is a human-readable representation of the cryptographic private keys tied to your wallet.
Seed phrases are typically 12, 18, or 24 words long, derived from a predetermined list of .
They act as the root access (or "master key") for your wallet, allowing you to recover your funds on any compatible wallet if your original device is lost, stolen, or damaged.
Importantly, the order of the words in the seed phrase is critical; even a slight deviation renders the phrase invalid. The words will always be in lower case.
Regardless of the terminology, keeping your seed phrase secure and private is essential.
Anyone with access to it can take full control of your funds.
Storing it offline, in a secure location, is strongly recommended to prevent unauthorized access or theft.
Having a backup copy in a geographically dispersed location is also advisable.
A brief overview of different ways your crypto can be stored.
The key difference between custodial and non-custodial wallets lies in who controls the private keys. Custodial wallets are managed by a third party (e.g., qualified custodians or exchanges), which hold your private keys and secure your funds. Self-custodial wallets give you full control of your private keys and assets, making you solely responsible for their security.
While that might make self-custodial wallets sound intimidating with proper security measures you can rest assured your funds are safe.
A custodial wallet is a type of cryptocurrency wallet where a third party, such as an exchange or service provider, or qualified custodian manages the private keys on your behalf.
This means the provider holds full control over your funds, and you rely on them to secure your assets and enable transactions. Users typically access custodial wallets via a username, password, and potentially additional security measures like two-factor authentication (2FA).
Ease of Use: Custodial wallets are beginner-friendly and offer integrated services like buying, selling, and trading directly within the platform.
No Private Key Management: You don’t need to manage private keys, reducing complexity but requiring trust in the custodian.
Centralized Control: The custodian has control over your funds and can freeze accounts or impose withdrawal limits under suspicious circumstances.
Regulatory Compliance: Your business needs may require the use of a qualified custodian.
A self-custodial wallet gives users full control of their private keys and, by extension, their funds.
These wallets do not involve a third party, meaning you are solely responsible for managing and securing your keys. Self-custodial wallets can be software-based (mobile or desktop apps) or hardware devices (known as hardware wallets) designed to store private keys offline.
Full Control: You are the sole custodian of your funds, with no reliance on third parties.
Private Key Ownership: The wallet generates and stores private keys locally, often represented by a seed phrase for backup.
Decentralized: Self-custodial wallets align with the principles of decentralization, granting autonomy to users.
Integration with dApps: While often possible with custodial solutions, self-custodial wallets are often more readily able to interface with dApps (decentralized applications) in the Web3 ecosystem.
Ownership: Custodial wallets involve a third party holding your keys; self-custodial wallets grant you full ownership of your keys.
Risk Profiles: Custodial wallets carry the risk of hacks or freezes due to centralized management. Self-custodial wallets place the responsibility of security on the user.
Regulatory Compliance: Custodial wallets are sometimes required for regulatory compliance based on your unique business needs.
An quick dive into the most important aspect of non-custodial wallets.
A seed phrase, also known as a mnemonic phrase, recovery phrase, or 12, 18, or 24-word phrase, is a set of words generated by your non-custodial cryptocurrency wallet to serve as a master key to access your funds.
This phrase is a human-readable representation of the cryptographic private keys tied to your wallet.
Seed phrases are typically 12, 18, or 24 words long, derived from a predetermined list of .
The order of the words in the seed phrase is critical; even a slight deviation renders the phrase invalid. Here's a few quick tips:
Regardless of the terminology, keeping your seed phrase secure and private is essential.
Anyone with access to it can take full control of your funds.
Storing it offline, in a secure location, is strongly recommended to prevent unauthorized access or theft.
Having a backup copy in a geographically dispersed location is also advisable.
Now that we've covered the importance of seed phrases non-custodial wallets, please feel free to read on to the next guide on best security practices when navigating the crypto ecosystem. Whether you're using a custodial or non-custodial solution these practices can help ensure your funds are secure.
If you think you may have misspelled a word or written it down incorrectly, you can cross-reference against the BIP-39 Master List.
Your seed phrase acts as the root access (or "master key") for your wallet, allowing you to recover your funds on any compatible wallet if your original device is lost, stolen, or damaged.
For a deeper dive, please see : Hierarchical Deterministic (HD) Wallet Paths
An overview of some best practices to keep your funds safe no matter how you store them.
Maintaining strong crypto security requires diligence across both custodial and non-custodial wallet storage methods. Below we will cover some good general practices to follow and then dive into aspects unique to both non-custodial and custodial platforms.
Feel free to jump ahead to the sections that are most relevant to you.
Enable Two-Factor Authentication (2FA)
Always activate 2FA (authenticator apps or hardware keys) for added account security when supported. Application or hardware based 2FA is more secure than SMS (text message) 2FA.
Use Strong, Unique Passwords
Create complex passwords that are unique to your wallet or account. Store them securely in a password manager.
Beware of Phishing Scams
Double-check URLs and avoid clicking on suspicious links or downloading unverified software. Only interact with trusted wallet providers.
If in doubt, run a link or file through before clicking or opening it.
Secure Your Devices
Keep your smartphone, computer, or hardware wallet updated with the latest security patches and antivirus software.
Avoid Public Wi-Fi Whenever Possible
If you must use public Wi-Fi, ensure you are connected through a reliable VPN to encrypt your connection.
Be Mindful of Social Engineering Attacks
Scammers may impersonate wallet providers or support staff. Never share sensitive details, especially your seed phrase or private keys.
When in doubt, contact the person or company through their official communication channels to verify authenticity.
Verify Transactions Carefully
Double-check wallet addresses and amounts before confirming any transaction, as blockchain transactions are irreversible.
Protect Your Seed Phrase
Write your seed phrase on paper (not stored digitally) and keep copies in separate, secure locations. Avoid taking pictures or saving it online. There are even options to store your seed phrase on steel plates.
See also:
Use Hardware Wallets for Long-Term Storage
For significant holdings, a hardware wallet provides the highest level of security by keeping private keys offline.
Multi-Sig setups are also an option in some cases, however, please contact us if you are using a Multi-Sig solution for your staking needs to ensure compatibility with the intended network.
Backups Are Critical
It is ideal to keep multiple copies of your seed phrase secured physically (i.e. never stored as a screenshot or digital file) and kept in geographically dispersed locations if possible.
If you're new to crypto, try creating a new empty wallet and restoring it to get a sense for how wallet recovery works via the wallet's seed phrase.
Separate Wallets for Different Uses
Depending on your use cases and unique situation, it can sometimes be strategic to use a hot wallet for daily transactions and a cold wallet (offline and/or a hardware wallet) for long-term storage.
Verify Wallet Authenticity
Download wallet software only from official sources to avoid malware or counterfeit apps.
This also applies to buying hardware wallets directly from the manufacturer. It is not advisable to purchase a used hardware wallet.
Choose a Reputable Provider
Use custodial wallets or exchanges with a strong security track record, regulatory compliance, and robust features that fits your needs.
Monitor Account Activity
Regularly review login attempts and transaction history for any suspicious activity.
If applicable, consult with your custodial account manager to set up their own best security practices for your account.
Enable Withdrawal Whitelisting
Some custodial wallets let you whitelist addresses, ensuring funds can only be withdrawn to specific, trusted addresses.
Stay Updated on Platform Changes
Be aware of announcements from your custodial wallet provider about updates, security breaches, or policy changes.
Feel free to reach out to our Support Team if you would like any clarification or if you encounter anyone or anything impersonating Chorus One.
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