Passphrase

A passphrase is an optional, user-chosen secret that’s combined with your mnemonic seed phrase to derive an entirely separate Bitcoin wallet.

Hardware wallet manufacturers sometimes describe it as a “25th word” or “extra word”, but that undersells what it actually does. In cryptographic terms it’s a salt that’s mixed with your mnemonic to produce a wallet seed, from which all your addresses and keys are derived. Change the passphrase and you get a completely different seed - and therefore a completely different wallet.

Generate a mnemonic and try typing anything into the passphrase field. The seed re-derives instantly. Each passphrase produces its own unique wallet, meaning a single mnemonic can back an effectively infinite number of “hidden” wallets - with the empty-passphrase wallet acting as the default.

A few things worth clarifying:

• It is not a wallet password or PIN. Your wallet software may also have a password for unlocking the app - that’s a separate, non-cryptographic thing. Forgetting the app password is annoying. Forgetting your BIP39 passphrase is catastrophic - there is no recovery process, and the funds are permanently unreachable.
• The base wallet still exists. Some people use this for “plausible deniability” - keeping a token amount in the empty passphrase wallet so they have something to reveal under coercion. Whether that’s a realistic threat model for you is a separate question.
• Don’t store your passphrase with your seed words. That defeats the whole point. The passphrase is precisely the thing a thief doesn’t have, even if they’ve found your seed.
• Don’t rely on memory alone. Memorise it by all means, but treat the passphrase with the same respect as your seed phrase: write it down, back it up, and ensure your heirs know how to retrieve it.

For a deeper look at when a passphrase is the right tool - and when multisig might serve you better - Unchained’s comparison of singlesig with passphrase vs. multisig is worth reading.