Ethereum co-founder Vitalik Buterin has emphasized the importance of having multiple “guardians” to maximize the safety of crypto-assets self-guarding through multisig and social recovery wallets.
Given the increasing rate of crypto fraud and hacking over the past few years, and several major crypto companies set to go bankrupt in 2022, self-custody and maintaining adequate wallet security procedures has never been more critical.
In a March 16 Reddit post in the r/ethereum community titled “How I think about selecting guardians for multisig and social recovery wallets,” Buterin provided details on how to approach wallet security.
Self-sustain is important. And social recovery and multisig is a great way to do it.
A quick reddit post on how I think about choosing trustees for social recovery and multisig wallets:https://t.co/FY1iyJ6BFC
— vitalik.eth (@VitalikButerin) March 17, 2023
While their structure is different, multisig and social recovery wallets rely on trustees, who act as external sources to recover funds or approve transactions. Generally, a trustee can be a set of external wallets owned by the same individual or an address controlled by another person or entity.
According to Buterin, it is important to decentralize the guardian’s wallet, as having more than one guardian gives a “difficult tradeoff: you can trust other people less, but you also concentrate more power on yourself, which can create a risk that you will be hacked, forced, or unable or dead.”
“My rule of thumb is that a reasonable trustee should be controlled by someone else if you lose it, there is another trustee left to recover your funds.”
Buterin then advises that others do not know each other, because this “greatly reduces the risk that they collude” to attack wallets and assets. However, they still need to be able to find each other if something happens to their wallet.
“If something happens, they can still find each other, because there is a clear standard protocol that is natural in people’s minds in such situations (for example, contact your family),” he wrote.
In addition, the co-founder of Ethereum suggested that people should “train the trustee to ask security questions” that only he and the trustee will know when confirming the operation – and only confirm when the correct answer is given.
related: DeFi sees biggest hack of 2023 as Euler loses $197M: Finance Redefined
For degen traders or those who do not make long-term hodl plays, the founder of Ethereum also emphasized that they should use guardians who can respond quickly to suit their immediate needs.
“If you do things related to on-chain contracts, you may need to act quickly: withdraw money if the contract finds a vulnerability, transfer money if you are close to liquidation, etc. If your needs include this, then you want to find a trustee who can act quickly.”
Finally, Buterin recommends testing each trustee at least once a year, as this will confirm that they “don’t forget or lose their accounts.”
Given the ever-growing rate of crypto scams and hacks over the past few years, and several crypto companies going bankrupt last year, maintaining adequate wallet security procedures has never been more important.