What is a seed phrase?

A seed phrase, commonly referred to as a mnemonic seed or recovery phrase, is a series of words generated by a cryptocurrency wallet that serves as a human-readable representation of a user's private keys. This set of words enables users to recover their wallets and all associated funds in the event of data loss, theft, or hardware failure.

The seed phrase typically consists of 12 to 24 words, which must be kept secure and private, as anyone with access to it can regain control over the wallet and the funds contained within. The use of a seed phrase simplifies the complex nature of private keys, making it easier for individuals to back up and restore their wallets without dealing with difficult strings of alphanumeric characters.

In contexts relating to cryptocurrency, the other options do not pertain directly to the concept of a seed phrase. While a unique code for each transaction may relate to how transactions are identified on the blockchain, it does not serve the recovery function of a seed phrase. Encryption keys are essential for securing data, but they operate differently than a seed phrase, which specifically addresses wallet access recovery. Lastly, a document outlining transaction fees is important for understanding the costs involved in transactions but is not relevant to the concept of recovering a wallet using a seed phrase.