Cryptocurrency has been gaining traction in the past few years, with more people worldwide taking advantage of its potential. One of the most popular cryptocurrencies is Monero, which is known for its privacy-focused features. One of the key security measures implemented by Monero is its wallet structure, which protects users’ funds from malicious actors. Getting an XMR Wallet is essential to buy, sell, trade, or mine XMR. Wallets, non-custodial ones in particular, are ideal to keep your digital assets secure; not just for your XMR, but for all of your crypto holdings.
Do not underestimate the importance of a secure crypto wallet. In 2022 alone, $3.8 billion worth of crypto were stolen from DeFi (Decentralized Finance) and cross-bridge protocols, as well as hackers who target crypto wallets. Hardware and multisig (multi-signature) wallets and mnemonic phrases to access wallets were developed to improve security, but as safety features of wallets are stepped up, so do the efforts of bad actors.
Crypto losses also happen when owners forget their wallets’ passwords or seed phrases. A 2021 cryptovantage.com survey shows almost 40% of users have lost or forgotten their passwords. $24 billion worth of Bitcoin alone has been lost or considered unrecoverable. Because of these challenges, the co-founder of Ethereum Vitalik Buterin proposed social recovery as a method to secure and recover from a crypto wallet.
What is social recovery?
Social recovery allows users to recover their funds if their wallet is lost or stolen. This feature protects users’ funds in case of an emergency, such as if their device is stolen or if their private keys are compromised. The way social recovery works is that users can designate a set of trusted contacts called “guardians” who can help them recover their funds if needed. Based on a smart contract, these guardians may reassign control of the designated wallet. When you lose access to your wallet, you can call upon these guardians and “ask them to sign a special transaction to change the signing pubkey (public key) registered in the wallet contract to a new one.” (Vitalik Buterin) If more than half of your guardians sign the transaction, you could then recover your wallet.
Buterin states the most common choices for guardians are other devices (or paper mnemonics) owned by the wallet holder, friends, family members, and institutions. Guardians do not need to know each other, nor do they need to download the same wallet you have. He recommends adding seven or more guardians for increased security.
Social recovery wallets protect users from theft by using a multi-signature system. This system requires multiple people to sign off on a transaction before it can be completed, making it difficult for someone to steal funds without access to multiple wallets. Social recovery wallets often have additional security features, such as two-factor authentication and biometric authentication, to make it even harder for someone to access your wallet without authorization.
Social recovery is a great way for users to keep their funds secure in case of an emergency. It’s also a great way to ensure that you don’t lose access to your funds if your wallet is stolen or your private keys are jeopardized. However, it’s important to note that social recovery is not a perfect solution. It’s possible that malicious actors could try to access your funds by obtaining your recovery phrase. If your contacts are not trustworthy, they could also try to access your funds by providing the recovery phrase. Therefore, it’s important for users to take extra steps to protect their recovery phrase and only share it with trustworthy contacts.
Social recovery for Monero
At the time of this writing, social recovery is used in Ethereum wallets only. Other wallet developers are still exploring how social recovery looks like in practice and if it will work in different blockchains. It may even take longer for Monero because of its built-in privacy features. Aside from your existing XMR wallets, Monero owners can complement these with other crypto security solutions. There are platforms that mimic the concept of social recovery and guardians not just for Ethereum, but for XMR and other coins, NFTs, and seed phrases. Some even have systems in place where you can designate a beneficiary in case of your death.
Your crypto assets may be worth a considerable amount of money and you need to take extra precautions to protect your crypto assets. Take responsibility and explore all avenues for securing them.