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-custody wallets. Buterin’s suggestion comes amid heightened expectations for the new Arbitrum token airdrop scheduled on March 23 and the upcoming Shanghai upgrade.
The recommendation makes sense given the increased cyber-related crimes in crypto, with hackers targeting a vulnerability in user wallets. The Ethereum co-founder suggested multi-signature and social recovery wallets so that users can hold self-custody of their funds.
Self-Custody Is Crucial In Crypto: Ethereum Creator
Social recovery wallets are smart-contract-powered wallets that allow users to recover access to their stolen funds even if they lose their private key. On the other hand, a multi-sig wallet requires two or more private keys to authorize a transaction or access funds.
In a tweet, Buterin noted that self-custody is crucial in the crypto ecosystem, especially with the last year’s event. The many hack exploitations in 2021 and 2022 with the FTX fiasco magnified the need for self-custody wallets.
Buterin suggests multi-sig wallets for long-term holdings and social recovery wallets for short-term day-to-day trading activities.
Following his recommendation, Buterin made a Reddit post that detailed his opinion on how users should choose guardians for social recovery and multi-sig wallets. In his Reddit post, the founder recommended multi-sig wallets like Gnosis Safe, an easy and reliable wallet to store funds.
Buterin explained that centralized organizations are trustworthy but pose risks of regulatory pressure, including system and human errors. Therefore he advised users not to trust centralized entities.
Further, he stated that social recovery wallets are easier to use than multi-sig wallets. The ERC-4337 account abstraction and newly built smart contract wallets like Soul Wallet bolsters wallet security.
Choice Of Wallets, Key Guardians Can Minimize Risks Of Assets Loss
In addition, Buterin suggested using social recovery for hot wallets that store smaller portions of funds and multi-sigs for cold wallets that store more funds. Also, he noted that selecting good guardians is crucial.
Good guardians improve the security of crypto funds by reducing the chances of losing keys, funds theft, and risks of sharing private keys with others. In the post, Buterin detailed how to choose a secure guardian.
One of the comments to Buterin’s post talked about the importance of having guardians that can use hardware wallets. It also noted that using guardians for hardware wallets is better than storing keys in Metamask or Google Drive.
While responding, Buterin said that hardware wallets are unnecessary due to issues that might arise with the issuing company. However, he agreed with the commenter that using Google Drive or Metamask to store keys are risky.
Buterin’s posts followed several wallet attacks that led to a loss of thousands of dollars. These include MyAlgo Wallet exploit, which saw massive amounts of money stolen from users’ accounts.
That is not Buterin’s first time recommending social recovery wallets. On January 11, 2021, Buterin posted a blog detailing the need for crypto investors to adopt recovery wallets. In the article, Buterin said multi-sig is his favorite of all wallet categories. He introduced recovery wallets as easy to use with high-level security.
Featured image from Pixabay and chart from Tradingview.com