Passphrases have a little-known property: every passphrase opens a valid wallet, so there is no record of how many wallets exist. This advanced guide is part of our guide to the BIP39 passphrase, and it assumes that you know how passphrases work.
How it works
Under BIP39, the phrase and passphrase together create the seed. There is no list of valid passphrases, so a different one opens a different wallet. The standard itself notes this property, calling it plausible deniability.
A typical setup
| Wallet | How it is opened | Purpose |
|---|---|---|
| Standard | Words, no passphrase | Decoy with a modest balance |
| Hidden | Words and passphrase | Main savings |
| Others | Words and other passphrases | Separate purposes |
Why people do this
- Coercion. If forced to open your wallet, you can show a decoy. See physical threats.
- Burglary. Someone who finds your words sees only a small balance.
- Organization. You can separate funds for different uses.
Its limits
Be honest about what this can do:
- An attacker who suspects more may not stop at the decoy.
- If you are known to hold a lot, a small decoy may not convince anyone.
- Wallet apps can leave traces on your computer.
- Blockchain history can be linked to you. Exchange withdrawals can show that you hold more.
- The whole setup adds complexity, and more ways to make a mistake.
Your safety comes first. If you ever face violence, giving up funds is better than risking harm.
How to set one up carefully
- Start with a tested phrase backup.
- Choose a strong passphrase.
- Fund the standard wallet with a plausible amount.
- Use the hidden wallet for your savings.
- Make some small, normal transactions on the decoy.
- Back up the passphrase separately.
- Keep quiet about your holdings.
Keep it practical
Multiple hidden wallets get confusing. One decoy and one hidden wallet are enough for most people. Remember that if you forget the passphrase, the hidden wallet is gone, and typos look exactly like an empty wallet.
If your main concern is a single point of failure, a multisig setup may serve you better.