Ethereum co-founder, Vitalik Buterin, has emphasized the importance of self-custody of funds through Multisig wallets and Social Recovery wallets in a recent blog post on Reddit. He urged individuals to use these wallets to ensure the safety of funds, instead of relying on centralized entities.
Self-custody is important. And social recovery and multisig is a great way to do it.
— vitalik.eth (@VitalikButerin) March 17, 2023
A quick reddit post on how I think about choosing guardians for social recovery and multisig wallets:https://t.co/FY1iyJ6BFC
Buterin’s statement comes amidst the ongoing devastation in crypto-friendly banks, such as Silicon Valley Bank and Signature Bank, and the collapse of centralized crypto firms, including FTX and Voyager Digital. He recommends using social recovery for hot wallets that store a small portion of a person or organization’s funds and multisigs for cold wallets that store savings.
Multisig wallets require the approval of all authorized members to sign transactions through a signature, meaning no single owner can access the funds. On the other hand, funds locked in social recovery wallets can be recovered by a group of keys held by other people if the main key is lost.
Both types of wallets rely on guardians, individuals, or entities holding keys that can approve transactions or recover funds. Buterin suggested that guardians should be chosen carefully, and he provided guidance to choose them, including ensuring that they don’t have correlations to reduce the risk that they collude and instructing them to ask a security question before confirming transactions.
Per his blog, Buterin uses a multisig wallet personally to store the bulk of his funds, as does the Ethereum Foundation. He suggests that social recovery wallets are more user-friendly than multisigs with the rise of ERC-4337 account abstraction and upcoming wallets like Soul Wallet.
