Creating a Hardware Wallet
When you first generate a new wallet, the phrases that you write down on paper or in a steel wallet are called mnemonic words. Firstly Mnemonic words are a group of easy to remember words. This makes it easy for us to understand before they get converted into a binary format. Secondly Mnemonic words are specifically used from the BIP 39 dictionary. An industry standard English Wordlist, (2048 of them, starting from 1 – 2048) used for the generation of deterministic wallets. See here.
Master Seed Phrase
The master seed is the key to your cryptographic secret. This should be nearly impossible to guess (see probability below). Additionally your master seed is not like a password or a PIN that you normally use for access to your wallet after initialisation. For instance, the password or pin is normally used for access to your Software or Hardware platform on a day to day basis. Make sure you keep these safe too.
Secure in a safe place
The seed words that are generated, should always kept secret. These are the root master key phrases that you should never upload to the web, store in a draw, leave on a table, show people etc. See best practices or bad crypto ideas. You may only need these mnemonic words if you need to recover your wallet in the future (e.g new computer, re-install, duplicate wallet). The good thing about these mnemonic words are that they can be uniquely determined by typing the first 4 characters (sometimes less) of any word in the BIP 39 Dictionary. This is part one of the process.
The Clever Part
The second part of the process is to convert those mnemonic words into a binary seed. Moreover you do not need to worry about this part as it is completed automatically for you in the wallet. This seed can be later used to generate hierarchical deterministic wallets using BIP-0032 or similar methods.
BIP 39 is used by many hierarchical deterministic wallets, for instance some examples include Ledger Nano series, Trezor, Cool Wallet S. The seed phrases/words can vary from 12-24 mnemonic words depending on the device used. The more having a higher level of security.
In conclusion, what is the probability of your seed words getting hacked?
There are 2256 different possible 24-word mnemonic seeds. For comparison, the number of atoms on Earth is estimated to be around 2166. The chance of someone else being able to guess your seed is astronomically small, to say the least.
