Seed Phrase vs Private Key
If you're self-custodying your cryptocurrency and savvy with your private keys, but unsure how a seed phrase fits in: the seed phrase is the back-up for the whole wallet. The seed generates the master key, and the master key produces any number of private keys through BIP32 derived path. While a single private key controls only one address, the same 12-word or 24-word mnemonic phrase regains access to the entire wallet. That includes every key and address the wallet can generate from its internal derivation path.
Private key versus recovery phrase
Your wallet's master key controls the whole system. The master key is generated by BIP32, not by the mnemonic phrase alone.
BIP39 defines how entropy can be converted to a human-readable recovery phrase. It uses a 2,048-word English phrasebook. The phrase is hashed with a chosen passphrase, if provided, to generate a 512-bit key for BIP32. That's the master seed, not the private key itself.
So the mnemonic phrase you read when importing the wallet isn't the private key directly. Instead, it regenerates the master key and any derived keys.
How one seed becomes many keys
The 512-bit master seed is compatible with BIP32.
The resulting keys depend on the mnemonic phrase, the provided passphrase and a chosen derivation path. A single mnemonic partnered with a master path can recreate any number of private keys and addresses.
The derived keys cascade from the extended master down the chosen derivation path. The full derivation key for each address along the path includes the key's own index digit.
So while the 12, 18, or 24 phrase might produce the same address tree, each individual key along the path depends on a branch of derivation code as well.
What the passphrase changes
When you establish a passphrase to accompany the mnemonic, it alters the resulting seed and every corresponding key from it.
The algorithms used in BIP39 create a 512-bit seed by taking 2,048 iterations of PBKDF2 through the SHA512 hash function. The literal seed phrase strings the provided passphrase onto the literal string "mnemonic", and that concatenated string is used as the salt to derive the seed.
So setting a passphrase protects the wallet non-trivially. With the same mnemonic, different passphrase strings partnered with it yield new, independent and fully separate private key sets. The mnemonic is the base and the passphrase is the seal.
How to store them safely
The specifics of a secure backup depend heavily on the specific wallet you're using.
At minimum, if you have recorded a passphrase, you have your phrase and your passphrase to safekeep. Most BIP39-compatible wallets ask whether a passphrase will be appended, and default to a no-passphrase import if you enter just the phrase on its own.
A very simple ideal ends with a 12-word, 24-word paper phrase tucked into a lockbox, and a passphrase preserved off-format on a password manager or inside the vault of one's cryptographic mind.
What to do first
If you're still finding your bearings and don't yet take for granted whether you have carefully recorded the secret token which modifies your entire seed, look directly to the back-up mechanism your wallet provider prefers.
Hence: start with whether the wallet was secured by a passphrase, then preserve the phrase and any associated passphrase durably, as-possible and across formats. And all of this, according to the wallet documentation.
General information, not financial, investment or tax advice. Rules, fees and allowances change: check the figure with HMRC, the FCA or the service itself before you act.
