Can social recovery wallets come in handy when crypto assets are lost for nothing, even more so than plummeting huge losses?

Most accounts created on the ethereum network are of the EOA (externally owned accounts) type, which are protected with a private key and usually converted into a 12-word (or 24-word) “helper word” for the user.

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Not long ago, a blogger said on a social media platform that a friend passed away due to a sudden illness and “did not have time to give his private key to his family”, and his family did not know the concept of private keys and wallets of cryptocurrencies, so it was basically impossible to retrieve the corresponding assets, which is a real-life case that exposes how important the issues of “storage and emergency disposal of private keys” are.

If private key forgetting and loss due to personal reasons can be tolerated, then it seems to be worthwhile to find new solutions to problems such as asset inheritance (which will undoubtedly become more and more prominent in the future) in unexpected situations like the above.

01
What is a social recovery wallet?

Over the years, paper wallets, brain wallets, hardware wallets and other solutions have emerged one after another in the industry, but they are essentially traditional private key forms that cannot fundamentally solve the above-mentioned problems, and in this context the new concept of social recovery wallets seems to offer a new possibility.

In fact, V God started to promote the idea of social recovery mechanism as early as 2014, and published a blog post “Why we need wide adoption of social recovery wallets” on January 11, 2021 to elaborate on it.

To date, most accounts created on the ethereum network are of the EOA (externally owned accounts) type, which are protected with a private key, usually converted into a 12-word (or 24-word) “helper word” for the user.

This is one of the most distinctive features of cryptocurrency security, i.e., “private keys are assets” and each person is responsible for their own assets. If a user loses their private key or token, the assets in their account are lost forever, and this “decentralized” nature ensures absolute security while losing enough flexibility.

The social recovery wallet is not an ordinary EOA address, the core functions are defined and implemented through smart contracts, essentially creating a smart contract on ethereum, and its working principle is divided into two main parts.

Only one signing key can be used to approve a transaction (which exists when the wallet is generated, unless the wallet is deleted or the corresponding device is lost).

There are at least 3 (or more) guardians, most of whom can cooperate in changing the signature key of the account.

This means that in social wallets, there is absolutely no concept of private keys or helper words, and we ordinary users do not have to memorize the corresponding characters and worry about losing them or leaking them.

Under normal circumstances, users can simply use their social recovery wallets as normal wallets, signing messages with their signature keys so that each transaction signed can be completed quickly with a single confirmation, just like in a “traditional” wallet such as Metamask.

And how do you recover in case of an accident? Quite simply, if a user loses their signature key (typically by deleting the wallet or losing the device that contains it), then the social recovery feature kicks in – the user can contact their guardian directly and ask them to sign a special transaction to change the signature public key registered in the wallet contract to a new signature, thus restoring the wallet .

Take Loopring’s smart wallet as an example, it provides for a guardian (also known as “guardian” concept) mechanism through a smart contract – a guardian is a personally selected ethereum address that can provide a signature, and the consensus of a majority of guardians has more say than the wallet owner and can collectively decide the final ownership of the wallet, such as wallet restoration.

In theory, as long as more than half of the guardians are trustworthy, then our smart wallet is absolutely safe, because only if more than half of the guardians approve (meaning that if the wallet has N guardians, the transaction needs to be approved by at least N/2+1 guardians), the wallet can be restored.

Generally one guardian is officially provided free of charge, which relies on the verification code sent from the phone to verify the identity, while other guardians can add other users of the social wallet or any ethereal address (including their own EOA address).

02
Advantages of Social Recovery Wallet?

EOA (externally owned accounts) type of account achieves asset security assurance at the expense of convenience and flexibility, but it cannot cope with the needs of recovery and inheritance scenarios in extreme situations, so many times private keys and helper words alone are not enough.

The above social recovery mechanism can solve these problems because it is essentially “multiple signatures” – each participant has some influence on the ability to accept or reject transactions, but no one can unilaterally move funds.

This is far safer than having a single person or key unilaterally control the funds, and has obvious advantages for the current growth in popularity of the crypto world, as V-God mentions in his corresponding blog post on the need for a social recovery mechanism.

There is no single point of failure. The possibility of making it impossible for an attacker to access funds through a single point of attack, while having sufficient reaction time to freeze.

Low brain power consumption. Minimizing the need for users to learn unfamiliar new habits or to expend brain power to remember certain specific patterns of behavior.

Maximize simplicity of transactions. Most normal activities should take no more effort than using a normal wallet (e.g., Metamask).

In short, it is not only secure enough and able to handle the needs of wallet recovery, asset inheritance, etc., but more critically, it is user-friendly and simple enough to be extremely easy to understand for the huge incremental users outside the crypto world.

After all, it is difficult to achieve mainstream popularity in the form of private keys and helper words, while the form of social recovery has long been adopted by WeChat and others, so there is no difficulty in understanding it – if you lose your WeChat password, you can select a few friends in your address book to verify your identity.

Take Loopring’s smart wallet mentioned above as an example, if I set up 3 “guardians”, then if the wallet containing the “signature key” is deleted by me by mistake or the corresponding device is lost, or even the sudden death of an individual in an accident, and my family wants to recover my wallet, it can be achieved through the guardians.

For example, in my wallet at present, in addition to the “Roadmark official guardian”, but also set a relative and a friend, which means that only two of the guardians approved, you can restore the wallet.

If my cell phone number is still working and the “official guardian of Roadmark” can approve it, I just need to find any one of the remaining two friends and relatives and ask them to approve the verification transaction with their own wallets, and then I can restore the wallet.

In this process, my friends and relatives do not have to involve the concept of private keys, helper words, but only rely on social mechanisms to achieve recovery, that is, only to report to friends and relatives who you need to call in the event of an accident, but the security is no less than the private keys, helper words.

After all, at least three guardians need to be set up, the more the stronger the ability to resist single point of risk, while the guardians set up can include their own EOA address (or even more than one) to achieve the security effect of multiple signatures, while other guardians set up can not let each other know.

In fact, this “trust-minimizing multi-signature effect” is far more secure than having one person protect the wallet with a private key.

03
Social recovery wallets are on the rise

Currently, there are Argent wallet (MYKEY) and Loopring smart wallet (Guardian), MYKEY (emergency contact) and so on, which have implemented social recovery function.

Among them, Argent wallet registration requires cell phone number and email address for user identity verification, and at the account management level users cannot export private keys, which are strictly bound to the device and allowed to migrate to new devices.

At the same time, Argent users set friends and family, hardware wallets or Argent Guard as “guardian” to achieve account recovery – more than half of the guardians can assist users to complete the locking, unlocking and recovery of the wallet.

MYKEY is based on the KEY ID protocol, which allows users to export their private key (recovery code), while the operational private key is not allowed to be exported, but can be synchronized to a new device.

However, these wallets all suffer from two major problems: reliance on relays to resolve transactions, and high transaction fees. The most immediate is that because they are smart contract wallets, they require relatively complex contracts to be invoked in the process of creation and use, so Gas fees are often higher compared to regular wallets.

For example, when the cost of Ethernet Gas was high in the first few months, it could cost tens or even hundreds of dollars to create a new wallet using a smart wallet like Loopring.

For this reason, smart wallets like Loopring have been developed to migrate based on layer 2 (such as ZK-Rollup), which allows for ultra-low fees and scalable ethereum.

In 2021, along with the development of the incremental market of crypto, especially the accelerated maturity of Layer 2 application, we can keep watching whether the social recovery wallet can gradually take root and gain further recognition in the market.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/can-social-recovery-wallets-come-in-handy-when-crypto-assets-are-lost-for-nothing-even-more-so-than-plummeting-huge-losses/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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