With the amount of losses incurred in the crypto space, serious measures and changes need to be implemented. As much as DeFi protocols need to be made more secure, crypto wallets have accounted for a large portion of unreported hacks. This is why Vitalik Buterin, founder of Ethereum, thinks we need to have Social Recovery wallets.
Let’s dive in.
Social Recovery Wallets
Social recovery wallets provide a way to use blockchain protocols without worrying about losing your assets. They are smart contract-enabled wallets that allow the users to get back access to their solen assets even if they lose their keys.
With social wallets, the level of wallet security is bound to increase significantly. In addition to this, wallet usability will also improve. With smart contract code running the wallets, you can approve addresses, change transfer limits, and freeze your wallet at will when you suspect fraudulent activity.
How They Work
A social recovery wallet works quite differently from the normal wallets we use now. With a social recovery wallet, you would need a single ‘signing’ key which can be used to approve transactions. For more security, you can choose to set up at least 3 keys necessary for signing transactions. The additional keys are called ‘guardians’
If the guardian keys work together, they can change the signing key of the wallet. Therefore, if the signing key is stolen, the three guardians can promptly change to another one, making the previous signing key useless.
The signing key also has the power to remove and add guardians. However, there is a 3-day delay to avoid a hacker removing the guardians immediately. The delay is important because it allows the guardians to come together and change the signing key, revoking its access to approve transactions.
The guardians are chosen from different social circles such as workmates, friends, relatives, etc. The guardians do not have to know each other – a measure that prevents collusion by them from stealing from you.
There are already some smart contract wallets in use. The most popular and safest one is Argent.
“To me, the goal of crypto was never to remove the need for all trust. Rather, the goal of crypto is to give people access to cryptographic and economic building blocks that give people more choice in whom to trust, and furthermore allow people to build more constrained forms of trust: giving someone the power to do some things on your behalf without giving them the power to do everything.”