Passphrase and multisig: extra protection, extra risk

What the optional passphrase on top of the recovery words does, how multisig spreads control over several keys, what each risks, and what the Bybit theft showed.

Key points

A passphrase is an extra secret on top of the recovery words. Whoever finds only the words opens a different wallet; your coins sit in the one the passphrase opens.
If you forget the passphrase, those coins are gone for good. Ledger states that it does not store or back up passphrases.
Multisig needs several keys, held in different places, to approve a transfer. It does not help if every signer approves what a manipulated screen shows them, as the Bybit theft of 2025 showed.

The passphrase

The standard BIP39 allows an optional passphrase that is mixed into the recovery words. Every passphrase, even a wrong one, opens a valid wallet: the words with passphrase A lead to one wallet, the words with passphrase B to another, and the words alone to a third.

That gives you two protections:

Against a found phrase: someone who finds your words but not the passphrase sees only the wallet without passphrase.
Against pressure: you can keep a small amount in the wallet without passphrase and hand that over if you are forced to.

At Ledger, the passphrase can be up to 100 characters long, is case-sensitive, and can include numbers and symbols. It opens a separate set of accounts on the device.

The risk of the passphrase

The passphrase is a second secret you must never lose. Ledger states that if you forget it, “access to the associated hidden wallet is permanently lost,” because it does not store or back up passphrases. Write it down too, and keep it apart from the words. If both lie in one place, the passphrase protects nothing.

Multisig

Multisig, short for multi-signature, splits control over a wallet among several keys. A common setup is 2 of 3: three keys exist, held on different devices or by different people, and any two are needed for a transfer. One stolen or lost key is then not enough to steal or to lock the coins.

Multisig is more work to set up and to recover, and every signer needs to know what they approve.

What the Bybit theft showed

In February 2025, the exchange Bybit moved ether out of a cold wallet that needed several signers. The signers saw a manipulated interface and approved a transaction that handed the wallet to the attackers. The FBI put the loss at USD 1.5 billion. Several keys did not help, because every signer trusted the same manipulated screen. The guide Clear signing and blind signing explains what each signer should have checked.

What you can do

Use a passphrase only if you can keep a second secret as safely as the words, and in a different place.
Test the passphrase: open the wallet with it, send a small amount there, and open it again before you move more.
Consider multisig for large amounts, with keys on devices from different makers in different places.
Check every transfer on each device’s own screen, whatever the computer shows.

Next step

The guide Store your recovery phrase safely shows where to keep the words, and the same rules apply to the passphrase.

The figures in this guide come from the archive and change with every data update. As of November 13, 2026.

Passphrase and multisig: extra protection for larger amounts, and extra risk