When using a blockchain wallet, it is crucial to understand several key terms to avoid potential loss of digital assets. These terms are: address, password, private key, mnemonic phrase, and keystore.
To better understand their roles, let’s compare them to elements of a traditional bank account:
Address = Bank account number
Password = Bank card PIN
Private key = Bank account number + Bank card PIN
Mnemonic phrase = Bank account number + Bank card PIN
Keystore + Password = Bank account number + Bank card PIN
Keystore ≠ Bank account number
What Is a Wallet Address?
A wallet address is similar to a bank account number.
How It's Generated
When you create a new wallet, a unique 42-character string starting with "0x" is generated. This is your wallet address. It remains the same for all tokens within that wallet and cannot be changed.
Common Uses
You can use your wallet address to receive funds or as proof of ownership when sending cryptocurrencies.
What Is a Wallet Password?
Your wallet password functions like your bank card PIN.
Setting a Password
During wallet creation, you’ll set a password that should be at least 8 characters long. For better security, use a complex and unique password. You can change this password later by entering the original one. If you forget the original password, you can reset it using your mnemonic phrase or private key.
Purpose of the Password
The password serves two main purposes: authorizing transactions and unlocking the wallet when using a keystore file for access.
Important Note
Unlike traditional banking, the same wallet can have different passwords on various devices. For example, if you set a password on Phone A and import the same wallet to Phone B with a new password, both passwords remain valid independently.
What Is a Private Key?
A private key is comparable to having both your bank account number and PIN.
How to Access It
After creating a wallet, you can export the private key by entering your password. It is a 64-character string in plain text. Each wallet has only one private key, which cannot be changed.
Why It Matters
Anyone with access to your private key can import your wallet, set a new password, and gain full control over your assets—including transferring them elsewhere.
What Is a Mnemonic Phrase?
A mnemonic phrase is another representation of your private key.
Backing It Up
When you create a wallet, you’ll have the option to back up a mnemonic phrase—usually 12 words separated by spaces. This phrase is unique to your wallet and cannot be modified.
How It’s Used
Like a private key, the mnemonic phrase can be used to restore your wallet. By entering the phrase and setting a new password, you regain full access to your assets.
Key Consideration
You can only view your mnemonic phrase once during the initial backup process. Make sure to write it down accurately and store it securely.
What Is a Keystore File?
A keystore file is an encrypted version of your private key.
Backing Up Keystore
You can back up the keystore via your wallet’s backup function. It consists of a long string of characters generated after entering your password.
Usage
To import a wallet using a keystore file, you’ll need both the file and the password used when it was created. Unlike with a private key or mnemonic phrase, you cannot reset the password during keystore import.
Important Feature
The keystore file is encrypted using your wallet password. If you change the password, the keystore file will also change. When importing via keystore, you must use the original password set during the backup.
Key Takeaways
In traditional banking, centralized entities like banks can help recover lost accounts or reset forgotten passwords. This is the advantage of centralization.
In the blockchain world, wallet ownership is decentralized. Only you control your assets—no one can take them without your keys. However, if you lose your wallet credentials, no one can recover them for you. This is the risk of decentralization.
What If You Forget Your Credentials?
Here’s what happens in different scenarios:
- If you forget your address, you can recover it using your private key, mnemonic phrase, or keystore + password.
- A forgotten password can be reset via your private key or mnemonic phrase.
- If you lose both your password and your private key/mnemonic backup, you lose access to your wallet permanently.
- Forgetting your password makes your keystore file unusable.
- A lost private key can be recovered if you still have wallet access and your password.
- You can also recover a lost private key using your mnemonic phrase or keystore + password.
- A forgotten mnemonic phrase can be re-backed up if you have your private key or keystore + password.
- If you lose your keystore file, you can create a new backup if you still have wallet access and your password.
- You can also regenerate your keystore using your private key or mnemonic phrase.
In short: as long as you have at least one of the following—private key, mnemonic phrase, or keystore + password—you can recover your wallet.
What If Your Credentials Are Leaked?
Protecting your wallet information is just as important as backing it up:
- A leaked address is not a risk.
- A leaked password alone is not a risk.
- A leaked address + password is safe as long as your device is secure.
- A leaked keystore file is safe without the password.
- If both keystore and password are leaked, someone can access your wallet and transfer funds.
- A leaked private key gives full wallet access to others.
- A leaked mnemonic phrase also grants full access.
If any of these critical elements are compromised, move your funds to a new wallet immediately.
Best Practices for Backing Up
Since your private key, mnemonic phrase, and keystore + password are so important, here’s how to store them safely:
Write them down on paper
Because keystore files are long, they are inconvenient to write down. It’s often sufficient to only back up your private key and mnemonic phrase. Remember:
- Make multiple copies and store them in different secure locations. Inform a trusted family member.
- Verify your backup by importing it into a wallet to ensure it works.
- Never store or transmit backup information through connected devices—avoid email, messaging apps, and cloud storage.
- Make sure your family understands how to use and restore the wallet if needed.
Frequently Asked Questions
What is a wallet address?
A wallet address is a unique identifier used to send and receive cryptocurrencies. It is publicly shareable and does not pose a security risk if exposed.
What is the difference between a private key and a mnemonic phrase?
A private key is a long string of characters that grants direct access to a wallet. A mnemonic phrase is a human-readable version of the private key, often consisting of 12 or 24 words. Both serve the same purpose.
Can I change my wallet password?
Yes, you can change your wallet password if you remember the current one. If you forget it, you will need your private key or mnemonic phrase to reset it.
Is it safe to store my keystore file digitally?
It is not recommended. Digital storage increases the risk of theft. Prefer offline methods like writing down your mnemonic or private key on paper.
What should I do if my mnemonic phrase is lost?
If you’ve lost your mnemonic phrase but still have access to your wallet via your password or private key, create a new backup immediately. If you’ve lost all credentials, you may lose access permanently.
Can someone steal my funds with just my wallet address?
No. The wallet address is public and used only for receiving funds. Without the private key, mnemonic, or keystore + password, no one can access your assets.
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