How Does Hardware Wallet Recovery Work? (Beginner’s Guide)

Are you wondering how to recover a hardware wallet using a recovery phrase? Look no further because we have all the answers to your questions below.

In this article you will learn:

How Does Hardware Wallet Recovery Work?

Hardware wallets use a recovery seed phrase to grant users access to their wallets and any funds within. All hardware wallets generate a 12, 18, or 24-word seed phrase during wallet setup. This phrase is required to access a wallet or recover a lost or broken wallet.

Most crypto wallets today utilize what’s called the Bitcoin Improvement Proposal (BIP39). In simple terms, this is a list of 2,042 easy-to-remember words that most blockchain-based wallets use to generate their seed phrase.

When you set up a new hardware wallet, a recovery phrase is automatically generated for you. This phrase is yours and is unknown to anyone else, including the wallet company. This is to ensure your wallet remains safe.

Since your wallet and any assets kept in it are stored on the blockchain, a recovery phrase and crypto wallet only act as a way to access your funds on the blockchain—your funds aren’t actually stored in your wallet.

That’s why you can use a single recovery phrase on multiple hardware wallets. Your wallet simply acts as a barrier to your blockchain account—it’s not the account itself per se.

And the recovery phrase is used to access your wallet to access your funds on the blockchain. 

Hopefully, that makes sense.

How to Recover a Hardware Wallet Using the Recovery Phrase

Most hardware wallets like Ledger and Trezor have a similar recovery process. Follow the steps below to recover your hardware wallet using the secret recovery phrase.

1. Power on your hardware wallet

Select the option to recover your wallet using the recovery phrase. This is usually found in the settings or options menu of your wallet or is presented to you instantly upon startup.

2. Enter the recovery phrase 

Enter the recovery phrase in the correct order as it appears on the piece of paper you wrote it down on. 

Most wallets will prompt you to enter one word at a time, so take your time and make sure you enter each word correctly.

3. Set a new PIN and password (if applicable): 

Once you’ve entered the recovery phrase, you’ll typically be prompted to set a new PIN and password (if applicable). Choose a secure PIN and password that you’ll remember but that’s hard to guess.

From there your wallet should be recovered instantly.

4. Verify the recovery

Once you’ve recovered your hardware wallet, verify that your wallet and its contents are restored correctly. Check your transaction history and make sure your balances are correct.

If you are recovering your wallet on a new hardware device, you will likely need to re-install certain apps to view your account balances. You should know which apps you need to install as these are the networks that you use your wallet for (i.e., Ethereum, Bitcoin, Solana, etc.).

When to Use A Recovery Phrase

Your recovery phrase is required anytime you need to access or recover your crypto wallet. If your wallet is lost, damaged, stolen, or you simply signed out, you’ll need your recovery phrase to regain access to your wallet.

Let’s say you bought a Ledger hardware wallet to store your crypto. You set it up and wrote down the recovery phrase on a piece of paper, then stored it in a safe place as any wise person would do.

A few weeks later, you accidentally drop your Ledger wallet into a pool. Great, now you lost all your crypto, right?

Wrong!

Although you can’t use that particular hardware wallet anymore, you can restore it using the recovery phrase on a new device, such as another Ledger wallet or a different wallet that supports the same recovery phrase standards.

It’s important to note that the recovery phrase isn’t only used for recovering lost, stolen, or damaged wallets, it’s also used to regain access if you sign out of your device. 

For instance, if you sign out of your Ledger wallet and forget your PIN, you can still regain access to your wallet using the seed phrase.

I don’t know about you, but when I first learned this, it was a huge relief.

Can Multiple Hardware Wallets Use the Same Recovery Phrase?

Yes, you can enter your recovery phrase into as many hardware wallets as you want to access your funds. If you enter the same seed phrase into multiple wallets, each wallet will grant you access to the same funds.

That also goes for different hardware wallet brands. As long as a wallet uses the same BIP39 list, you can recover your wallet on that device.

A good example of this is Ledger and Trezor. Since both wallets generate seed phrases via BIP39, you can recover your Ledger wallet on a Trezor wallet.

Now, just because you can use your recovery phrase on multiple wallets doesn’t mean you should. At least, not at the same time.

It wouldn’t be wise to sign into multiple wallets using the same recovery phrase in case someone were to get ahold of one.

You should either just use different recovery phrases or have an extra wallet ready to sign into in case your wallet is lost, stolen, or damaged. That way you can quickly access it using your other wallet and handle your funds accordingly.

Can Hardware Wallets Generate Unlimited Recovery Phrases?

Yes, hardware wallets can generate an unlimited number of recovery phrases. By creating a ‘new device’ using your hardware wallet, it will automatically create a new secret phrase with its own address. If your hardware wallet is ever compromised, you should immediately create a new phrase.

When you create a new recovery phrase, you essentially create a new wallet. But, your assets won’t appear on your new wallet. You’ll have to transfer them. 

Once you transfer all your assets to your new wallet with the new seed phrase, you should never use your old seed phrase again as it will remain compromised.

How to Store Your Recovery Phrase Safely

Below are several options for safely storing your wallet’s recovery phrase safely.

Stamp it onto a metal seed plate

We all know that storing your wallet’s recovery phrase on a device like your phone or computer is a big no-no as it defeats the purpose of using a hardware wallet in the first place.

The more common practice is to write your seed phrase on a piece of paper. In fact, most hardware wallets come with a numbered paper card to write it on.

But, is this the best solution? I don’t think so.

If you want to ensure your recovery phrase remains secure even in a freak accident, like a fire or flood, it’s best to engrave it onto a metal seed storage plate. 

For only $50, it’s more than worth knowing your seed phrase will remain intact regardless of what happens.

Split up your recovery phrase

It’s true. Splitting up a recovery phrase and storing each chunk in separate locations is a tactic used by many to keep their recovery phrases safe.

How do you do this?

Basically, you write down a portion of your seed phrase on separate pieces of paper (preferably metal). For example, words 1-8 are on one piece, 9-16 on another, and 17-24 also on another.

This way, if someone finds one portion of your seed phrase they won’t be able to access your wallet. Of course, this is also true for you.

Although I’m not a fan of this method myself, it’s undoubtedly a proven way to ensure no one can find your recovery phrase. Just realize this requires some serious responsibility from you as a wallet owner since you have to keep track of each portion of your seed phrase.

Keep it in a safe

Storing your seed phrase in a fireproof safe or lockbox is a great option for securing your phrase. Especially when combined with the metal seed phase plate, you’ve got yourself a nearly indestructible phrase.

If you go this route, I recommend getting a safe that is either heavy and difficult to carry or one that can be bolted to your floor. This way you know no one is going to get away with it.

Frequently Asked Questions