Why you need a backup phraseThat's your private key which authorizes the ownership of the wallet and everything in it. It contains all the words to recover access to your portfolio at any time. Also, it may be necessary to verify your seed to confirm a transaction (which is a good practice in some cases). It depends mostly on the software of your wallet.
What are the main reasons to use a seed phrase:
- You prefer to recover the wallet on another device.
- It's necessary to confirm the access (ownership).
- If you don't keep the wallet installed on your device, and later you wish to access the funds from a new installation.
- You configure a wallet, receive the bitcoins, then delete the wallet (it's a common practice to avoid keeping the wallet on any device, also known as cold storage). After that, if you need to get access and you can do that only by using the backup phrase.
- The device with your wallet is damaged or lost. You need to grant your access to all funds. Then you can re-install the wallet on another device and recover it.
It doesn't matter what's the size of your bitcoin portfolio. It can be an empty wallet as well. The phrase works in the same way.
In a few words only - the phrase is known as a synonym of ownership when we talk about Bitcoin. That's how you prove who is the real holder. If someone has it, then he/she can use all BTC. It's equal to instant access to all your crypto coins in this wallet/address.
What types of recovery phrases we have? You can use a phrase with 12, 18 or 24 words. The longer the phrase is, the more secure your assets are. Some wallets give you a choice, but others generate directly 24 words.