- Vitalik Buterin proposes “multi-signature” to solve the seed phrase problem in hardware wallets.
- Shamir is another alternative for storing seed phrases, but Buterin ignored it.
Self-custodial wallets, especially hardware wallets, have grown in popularity as third-party risks have become apparent, as in the case of the FTX collapse.
Crypto Twitter clearly reminds users of these risks through prominent wording.
“Not your keys, not your cryptocurrency.”
However, users may be the biggest risk with hardware wallets. They could easily forget their stash of seeds, or worse, have them stolen.
Ethereum founder Buterin proposes “multi-sig” to address wallet risk.
but Ethereum (ETH) Vitalik Buterin proposed a solution to this hardware wallet problem and commented:
“The above is why I use multi-signature (secure) for over 90% of my personal funds. M-of-N, you hold some of the keys (not enough to block recovery), but others you trust hold the rest. Don’t reveal who others are, not even to each other. Decentralize security.”
“Multi-signature” means having multiple signers on a wallet to reduce single points of failure.
Alternatively, you can use Shamir backups, which typically split the recovery seed phrase into multiple pieces (shared) across multiple devices.
However, Buterin downplayed Shamir’s effectiveness and claimed:
“It’s much easier to screw up than multiple signatures.”
Vitalik weighed in on “multi-signature,” emphasizing:
“It depends on who holds Shamir’s shares! The question I think is: (i) “Trust your other devices” vs “Trust your friends” (ii) Shamir v. Multi-Signature; “They are orthogonal.”
that much market The hardware wallet market size is expected to grow from USD 350 million in 2024 to USD 1.56 billion in 2029.
While the above challenges are likely to drive growth, Shamir or “multi-signature” could be a possible solution based on the risk profile of users.