While the crypto industry grapples with the threat of hacking and theft following the recent $1.5 billion Bybit breach, Ethereum co-founder Vitalik Buterin calls attention to another significant risk: accidental loss due to user errors. In a post on February 28, Buterin highlighted several ways individuals unintentionally lose substantial amounts of crypto, including software bugs, forgotten passwords, misplaced devices, accidental deletion, and failure to back up data during hardware upgrades.
Citing the reticence of victims to discuss their losses due to the absence of an identifiable perpetrator, Buterin underscored the need for wallet security solutions that address all forms of loss, not just those related to cyberattacks. To address these risks, Buterin has been a vocal advocate for social recovery solutions, a more secure, user-friendly approach to wallet access restoration.
Buterin’s social recovery framework combines personal and automated elements. He recommends using a smart contract wallet where users can assign any addresses as guardians, without any expectation that these addresses utilize the same wallet. Despite advancements in security practices, risks like hardware destruction still exist, necessitating additional protective measures.
Social recovery provides a way for users to regain access without solely depending on seed phrases, which can easily be misplaced or forgotten. It involves a network of trusted individuals, or “guardians,” who can assist in recovery efforts should the owner misplace their private key. An example of this is Argent Wallet, which uses smart contracts to allow users to appoint guardians for recovery.
Following Buterin’s recent comments, Nani Wallet, a startup, showcased its product as the first crypto-access wallet with full social recovery. The company maintains that this feature enables users to recover lost accounts through trusted friends or backup devices while retaining control over their original private key.
The repercussions of accidental crypto loss can be devastating. A case in point is that of James Howells, who lost 8,000 Bitcoin, now worth hundreds of millions of pounds, in 2013 when his ex-partner accidentally discarded his hard drive containing the Bitcoins. Despite his legal efforts and a proposed $13 million excavation of the landfill where the device is believed to be buried, Howells has been unable to recover the lost cryptocurrency. Thus, Buterin’s call for more robust security measures against accidental loss resonates more than ever.
