How a seed phrase works
A seed phrase is a list of 12 or 24 words that is the master key to a crypto wallet. From these words, the wallet derives every private key and address it controls, so the phrase alone can restore your entire wallet on any device. It is not a password you can reset; it is the wallet. Whoever holds the seed phrase controls the funds, completely and irreversibly.
Worked example
You set up a self-custody wallet and it shows you 12 words. You write them on paper and store them offline. If your phone is lost or destroyed, you enter those 12 words into a new wallet and every coin reappears, because the phrase regenerates all the keys. But if someone else sees those words, they can do the same from anywhere and drain the wallet, with no bank to call and no way to reverse it.
Seed phrases and custody
The seed phrase is the heart of self-custody: total control paired with total responsibility. Never type it into a website, never store it in a photo or cloud note, and never share it; every crypto scam ultimately tries to obtain it. On Volity, trading crypto as spot or CFDs means the platform handles custody under a regulated framework, so there is no seed phrase for you to lose or expose.
Why it matters
The seed phrase is the single point of total failure in self-custody: lose it and the funds are gone forever, expose it and they are stolen instantly. Treat it as the most sensitive secret you own. Related: self-custody vs custodial and wallet address.
Learn more in our crypto trading guide.
