The Trezor hardware wallet adheres strictly to the **BIP39 (Bitcoin Improvement Proposal 39)** standard for generating the Recovery Seed (Mnemonic Phrase). This seed, whether 12 or 24 words, is derived from a 128-bit or 256-bit entropy source generated by the device’s internal True Random Number Generator (TRNG). The words are selected from a standardized list of 2048 words, carefully chosen for low overlap and high distinctiveness to minimize human error during transcription. This master seed, often referred to as 'M,' is the absolute root of all cryptographic data. From this master seed, all subsequent keys (for Bitcoin, Ethereum, etc.) are derived using the **BIP32 (Hierarchical Deterministic Wallets)** standard. This hierarchical structure means that you only need to back up the single, written seed phrase, and all future and existing cryptocurrency addresses can be mathematically recreated. The introduction of a **Passphrase (BIP39 standard extension)** adds an additional layer of security by making the final cryptographic seed 'M' become $M_{passphrase}$. The passphrase itself is never stored on the device, ensuring that if a thief bypasses the PIN and physically extracts the stored 12 or 24 words, they still cannot access the funds without knowing the user-defined passphrase. This two-factor approach ($M_{seed} + M_{passphrase}$) is a critical security enhancement.
The PIN feature is designed to combat two primary attack vectors: **Keylogging** and **Shoulder Surfing**. When you connect the Trezor, the device screen displays a 3x3 grid of nine positions. Each position corresponds to a digit (1 through 9), but the digits are randomly reassigned to these positions for every login attempt. The Trezor Suite software displays a generic 3x3 grid of dots or empty boxes. The user must look at the Trezor screen, see the location of the numbers, and then click the corresponding *position* on the computer screen. Since the numbers' positions on the computer screen are static, but the numbers they represent are dynamic (on the Trezor screen), a keylogger can only record the *position* clicked (e.g., 'top-left,' 'middle-center'), not the actual PIN digit (e.g., '5' or '7'). This effectively renders a keylogged or screen-recorded session useless to an attacker. The PIN is used to decrypt the device's internal memory containing the encrypted BIP39 seed, temporarily loading it into the Trezor's Secure Storage for the duration of the session.
Trezor places extreme emphasis on **Supply Chain Security**. The first action a user performs is the firmware installation, which doubles as an authenticity check. Since the device is shipped without pre-installed firmware, it cannot have been tampered with or replaced by a malicious version prior to reaching the user. The firmware file is cryptographically signed by SatoshiLabs (Trezor's parent company) using a verified private key. When the Trezor Suite software downloads the firmware, it validates this signature. The device itself contains a public key hardcoded into its bootloader. Before the device executes the new firmware, it performs a final, on-device signature check against the stored public key. If the signature is invalid, the firmware will not run. This multilayered verification process (software check, then hardware check) is the final confirmation that the user is running 100% legitimate, official code, protecting against both remote software compromise and physical modification of the device during transit.
The Trezor is an **air-gapped signer**. While physically connected via USB, its core function is to isolate the private key from the internet-connected host computer. When you initiate a transaction via Trezor Suite, the software constructs the raw, unsigned transaction data. This data is transmitted to the Trezor hardware device. Crucially, the final, irreversible action—the **signing**—occurs entirely within the isolated environment of the hardware wallet. The result of this process is the signed transaction, which is then transmitted back to the Trezor Suite software, whose only job is to broadcast the signed data to the cryptocurrency network. This separation of duties—**Computer for Preparation** and **Trezor for Signing**—is the foundational principle of hardware wallet security. The user's role, through the PIN/Passphrase, is the critical human authorization gatekeeper in this air-gapped process.