While wallet security has been one of the most vital issues for crypto owners for a decade now, an emerging solution may be the best alternative on the table yet, proposed Vitalik Buterin.
The Ethereum (ETH) co-founder stated,
“Wallet security issues have been a thorn in the side of the blockchain ecosystem almost since the beginning.”
But there might be a better solution available now. There’s “an emerging better alternative: a newer type of smart contract wallet called a social recovery wallet,” claimed Buterin in his January 11 blog post.
The Problem
Buterin laid out cases to show how serious the security issue is in the Cryptoverse, providing examples of people losing their private keys and tens of thousands of Bitcoin (BTC) in hacks and theft be worth a billion dollars per today’s prices. Per an analysis, a whopping BTC 1,500 (USD 52.3m) may be lost every day, “over the years adding up to as much as 20% of the total supply,” he said.
The Existing Solutions
Over the years, wallet solutions like paper, hardware, and multisig have been created, but these were cumbersome or difficult to use, disrupting, and preventing adoption. Though “a significant improvement,” Hardware wallets are susceptible to supply chain attacks, and a single point of failure is still an issue.
The New Solution
What is needed is a wallet design that satisfies these three criteria:
- No single point of failure
- Maximum ease of transacting
- Not requiring users to learn strange habits or exert mental effort to follow specific patterns of behavior.
A social recovery system, said Buterin, has a single “signing key” that can be used to approve transactions and add/remove “guardians.” It has a set of at least three “guardians” of which a majority can cooperate to change the account’s signing key.
The social recovery wallet is used as a regular wallet, with users signing messages with their signing key and each transaction moving with a single confirmation click. The social recovery functionality would kick in if a user loses their signing key.
They can then reach out to their guardians via a website and ask them to sign a particular transaction to change the signing pubkey registered in the wallet contract to a new one.
This is not a betrayal of the blockchain and crypto industry’s values by going back to trusting people, argues Buterin, but rather “an expression of ‘crypto values'” by providing individuals more options instead of removing all trust.
Currently, Argent and Loopring are two popular wallets that have implemented social recovery.
Meanwhile, Bitcoin developer Udi Wertheimer commented that the post doesn’t present a new concept but “a good overview of the motivation and challenges.” He said he “like[s] that *some* of the benefits of hardware wallets are achieved without needing to get one,” but also argued that one thing bitcoiners seek to achieve with advanced multisig setups is skipped.
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