BIP-39 (Bitcoin Improvement Proposal 39) defines a standard for generating human-readable mnemonic phrases from cryptographic entropy. The entropy is randomly generated (128–256 bits), a checksum is appended, and the resulting bit string is split into 11-bit groups — each mapping to a word in a fixed 2048-word dictionary. The phrase can then reconstruct the original entropy deterministically.

A passphrase (also called the "25th word") can optionally be added as extra protection. The mnemonic + passphrase are run through PBKDF2-HMAC-SHA512 (2048 iterations) to derive a 512-bit binary seed, which HD wallets use to derive all child keys via BIP-32.