Use Multi-Signature And Social Recovery Wallets To Achieve Self-Custody, Ethereum Creator Says
Ethereum co-founder Vitalik Buterin advised crypto investors to use social recovery and self-service wallets. Buterin’s proposal came amid heightened expectations for a new Arbitrum token issuance scheduled for March 23 and an upcoming upgrade in Shanghai.
The recommendation makes sense given the rise in crypto cybercrime, with hackers targeting a vulnerability in users’ wallets. The co-founder of Ethereum proposed multi-sig wallets with social recovery so that users can store their funds on their own.
Self-storage is critical in crypto: Ethereum Creator
Social recovery wallets are smart contract-based wallets that allow users to regain access to their stolen funds even if they lose their private key. On the other hand, a multi-signature wallet requires two or more private keys to authorize a transaction or access funds.
IN tweetButerin noted that self-storage is critical in the crypto ecosystem, especially with last year’s event. Multiple hacks in 2021 and 2022 related to the FTX fiasco increased the need for self-storage wallets.
Buterin offers multi-signature wallets for long-term holdings and social recovery wallets for short-term day-to-day trading activities.
On his recommendation, Buterin made Reddit post it details his views on how users should choose guardians for social recovery and multi-signature wallets. In his Reddit post, the founder recommended multi-signature wallets like Gnosis Safe, a simple and secure wallet for storing funds.
Buterin explained that centralized organizations are trustworthy but pose risks of regulatory pressure, including systemic and human error. Therefore, he advised users not to trust centralized entities.
Additionally, he stated that social recovery wallets are easier to use than multi-signature wallets. ERC-4337 account abstraction and newly created smart contract wallets such as Soul Wallet enhance wallet security.
Choice of wallets, key custodians can minimize the risks of losing assets
In addition, Buterin suggested using social recovery for hot wallets, which hold a smaller portion of funds, and multisig for cold wallets, which hold more funds. In addition, he noted that choosing good guardians is critical.
Good guardians increase the security of crypto funds by reducing the chance of key loss, theft of funds, and the risk of private keys being shared with others. In the post, Buterin detailed how to choose a reliable guardian.
One of the comments on Buterin’s post talked about the importance of having guardians who can use hardware wallets. It has also been noted that using custodians for hardware wallets is better than storing keys in Metamask or Google Drive.
In response, Buterin said that hardware wallets are not needed due to issues that the issuing company might have. However, he agreed with the commenter that using Google Drive or Metamask to store keys is risky.
Buterin’s posts followed several attacks on wallets that resulted in the loss of thousands of dollars. These include MyAlgo wallet exploitduring which huge amounts of money were stolen from users’ accounts.
This isn’t the first time Buterin has recommended social recovery wallets. January 11, 2021 Buterin posted a blog detailing the need for crypto investors to use recovery wallets. In the article, Buterin said that multisig is his favorite of all wallet categories. He presented recovery wallets as easy to use with a high level of security.
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