BIP39 Passphrase
BIP39 passphrase, also known as the 25th seed phrase word, though in reality it’s still a 24 word key, with an optional passphrase added on top.
The BIP-39 standard supports an optional passphrase which encrypts the seed words and creates a new wallet (master private key) for every possible passphrase.
The BIP39 passphrase option can be a very useful but also a dangerous feature for new users. The BIP39 is not your normal wallet password or PIN, and it’s only required when restoring. The extra BIP39 phrase is NOT shown anywhere in-app or in-wallet, and if one forgets it the wallet cannot be restored with just the normal recovery passphrase.
25th Word
Unlike the first 24 words, the 25th word does not come from the list of used words but is a custom passphrase, chosen by you. Hardware wallets such as Trezor and Ledger have the function of adding a 25th word. The purpose of adding this extra passphrase is to further encrypt your root seed. If your 24 words become compromised, the person holding those words will need the 25th word in order to access your root keys. Without this 25th word, your keys are still safe and the person holding the 24 words will have access to a “different” wallet.
Extra tip: for one recovery phrase you can have many “hidden” wallets, each one of them using a different BIP39 passphrase. You can have a single backup for your recovery phrase, and different BIP39 passphrases generating different and independent wallets.
Why Should I Use the BIP39 Passphrase (25th Word)
This enables another layer of secrecy and security, including should you ever be forced to reveal your seed phrase to an assailant under the threat of physical violence. If you are seen as a target because people believe your crypto assets to be worth a lot of money, you could potentially become a victim of a theft or ransom. By having a passphrase as your 25th word/phrase, you can choose to safely reveal the 24 words to the assailant, while keeping the passphrase secret. This will enable the attacker to access your “fake” or secondary wallet, while your primary wallet with the lion’s share of the assets remains hidden behind the passphrase they most likely won’t expect. As long as you make sure there is a certain amount of coins and traffic in the “fake” wallet in question to make it look legit, your assailant might not realize he’s been duped.
You could also use the account with the 25th word as a sort of a savings account (HODL). A true cold wallet, that you do not use for day to day transactions, while you would keep a smaller amount of assets for every day use and trading on your 24 word account. Using it like this would actually make the security example above more believable and an option to use, should a need arise.
Security vs Convenience
It is really no less convenient to store and input 25 words than it is 24. And while the 24 word form of encryption is already a strong and secure method of looking after your private keys, setting up a 25th “word” is exponentially safer and not just for the reasons stated above. Having that said, storing the 25th word in a safe but convenient manner is essential, as your passphrase becomes an essential part of your wallets security and should not be stored in the same place as the regular 24 words.
You should make sure your passphrase is written down at a secure location, and not count on your memory, in case you forget it over the years, lose memory to an accident, disease, or… die.
While you could memorize it, which would make your funds almost impossible to be compromised, this comes with the risk of you forgetting the phrase, and should be avoided. No matter how memorable the passphrase, memories do fade over time, especially if you don’t have to think of them for years.
Writing your 25th word down and storing it in a separate location would be the preferred way. A password alone is meaningless. And so is the 24 word seed phrase.
Be sure you know what you’re doing, the 24 word method in BIP39 was created by the smartest cryptographers, carefully finding the right balance between safety and inconvenience. Rather than taking extra steps of security into your own hands, it would be wise to follow the guidelines that the experts have already created.
More about seed phrases and ways to safely store them, so even fire cannot hurt them.
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CumRocket and the Power of Elon Musk Tweet
When Elon Musk tweeted “Canada, USA, Mexico”, spelling out an acronym “CUM”, many assumed he was referring to the “United States–Mexico–Canada Agreement” (former NAFTA), but with an Elon Musk twist. Because you know… it would make for a totally better acronym than what they came up with (USMCA).
Or maybe it was just me?
Low and behold, barely a day later Musk decides to bless us with yet another tweet, this time dispelling any doubts one might’ve had regarding the meaning of his previous tweet.
CumRocket To the Moon
Within literal minutes of his “Cum Rocket to the moon” tweet on June 5, CumRocket (CUMMIES) skyrocketed from $0.067 to $0.284 (+330% instant gain) before crushing back down to $0.114 some half hour later, and is currently trading at $0.1746 (+168.95% 24hr gain).
Crypto
Spaniards to Be Taxed on ‘Overseas’ Crypto Holdings
As reported by El Economista, the Spanish parliament has voted in favor of a controversial new law that will require Spanish citizens to report their overseas crypto holdings, as the government appears ready to impose more control and regulation over the growing crypto sector.
According to an official government release, the new law will require Spaniards “to report their holdings and operations with cryptocurrencies,” on crypto held both domestically and abroad if the transactions “affect Spanish taxpayers.”
According to the release, information will be required on the balances and holders of the coins, as well as on all types of operations that have been carried out with them.
“Due to their proliferation and popularity among investors and savers, it is necessary to take greater control over cryptocurrencies”
The new regulations will make it “mandatory to inform” the tax body on annual declarations of assets and property.
The bill, named the ‘Law on Prevention and Fight Against Tax Fraud’ (Ley de Medidas de Prevención y Lucha contra el Fraude Fiscal), also contains other provisions intended to fight tax avoidance, and will give tax bodies the power to conduct spot checks on “homes and businesses”.
The bill has been in the works since last year, when the Council of Ministers gave it the green light, and still needs to be ratified, now that the senate voted in favor in a majority vote.
Once ratified, it will see “overseas” crypto holdings integrated into the often criticized Modelo 720 system, which requires Spaniards to complete exhaustive declarations of their overseas real estate holdings.
Crypto
Charles Hoskinson Explains Why He Believes Cardano Is Superior to Ethereum 2.0
While Cardano (ADA) supporters like to refer to it as an Ethereum killer, Charles Hoskinson, founder of Cardano, said that Ethereum is actually “killing itself” by replacing the current proof of work (PoW) version with Ethereum 2.0, a new proof of stake (PoS) iteration.
When asked if Ethereum 2.0 could also be seen as a Cardano killer, now that it’s switching to PoS as well, Hoskinson said that he does not see it like that since Cardano is the market leader in PoS, implying hat their longer experience with PoS gives it an upper hand over Ethereum in PoS space:
“We are leading that fight. We were first to the market… Engine doesn’t make a BMW a BMW. It’s a part of it, but you need a whole ecosystem, a whole collection of things.”
CHARLES HOSKINSON, MAY 26, 2021
Subjective: Assigning such prominence to the fact that Cardano was the first to market with PoS over Ethereum sounds like a weak argument seeing as Ethereum, along with Bitcon is becoming a household name, whereas Cardano… well, is not yet. So this whole argument of “first to market” that is based solely on the validation protocol being used falls somewhat short and makes us seriously wonder why Mr. Hoskinson would spit in his own cup by implying that being first to market carries such weight, seeing as ETH is actually the grandfather of smart blockchain and the true pioneer of the said space.
Fun fact: The first cryptocurrency to adopt the PoS method was Peercoin. Next, Blackcoin, and ShadowCoin soon followed suit.
Governance, interoperability, and user bases
The creator of Cardano also touched the topic of governance, saying that Ethereum 2.0 has bowed out, which he said would make it hard for the ecosystem to evolve once its founders retire or lose prominence, whereas enabling on-chain governance is a vital part of Cardano’s roadmap.
He also compared Bitcoin (BTC), the largest cryptocurrency by market capitalization, and the grand father of all cryptocurrency, to a “wood-powered steam engine” due to its slow evolvement.
“You have those Bitcoin core developers who desperately want to evolve the system: even though core developers want to implement multiple improvements like smart contracts and side-chains, they can’t get anything done.”
CHARLES HOSKINSON, MAY 26, 2021
Hoskinson also pointed out that Ethereum is not as interoperable for now as some other similar blockchain projects such as Cardano, Cosmos and Polkadot (among others) that made sidechains available on their network.
And finally, he claims that Eth 2.0 and Cardano on top of different technologies and philosophies also have different user bases:
“We are bringing millions of people in Africa that simply Ethereum doesn’t seem to care about… outside of South Africa and a few well developed places in Africa.”
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