Diversified set of guardians required for safe self-storage: Vitalik Buterin

Ethereum co-founder Vitalik Buterin has emphasized the importance of having a diverse set of “guardians” to maximize the security of self-custodianship of crypto-assets via multisig and social recovery wallets.

Given the ever-increasing rate of crypto fraud and hacking in recent years, and several major crypto firms going bankrupt in 2022, the importance of self-storage and maintaining adequate wallet security procedures has never been more important.

In a March 16 Reddit post on the r/ethereum community titled “How I think about selecting guardians for multsig and social recovery wallets,” Buterin provided a detailed overview of how he approaches wallet security.

While their structures differ, both Multisig wallets and social recovery wallets rely on guardians, who essentially act as external sources to recover funds or approve transactions. Typically, Guardians can be sets of remote wallets belonging to the same person, or addresses controlled by other people/entities.

According to Buterin, it’s important to decentralize wallet guardians, since owning more than one of your guardians creates a “difficult trade-off: you can rely less on other people, but you also concentrate more power into yourself, which can create a risk if you are hacked, forced or disabled or die.”

“My rule of thumb is that enough guardians should be controlled by other people that if you disappear there are enough other guardians left to get your money back.”

Buterin went on to say that someone’s set of guardians should not know each other, as this “significantly reduces the risk of them working together” to attack their wallets and assets, but they should still be able to find each other in case something happens to the wallet owner .

“If something happens to you, they will still be able to find each other, because there are obvious standard protocols that naturally come to people’s minds in such a situation (e.g. contact your family),” he wrote.

In addition, the Ethereum co-founder suggested that people should “instruct their guardians to ask a security question” that only they and their guardians will know when confirming an operation, and only confirm when the correct answer is given.

Related: DeFi sees its biggest hack in 2023 as Euler loses $197M: Finance Redefined

For degen traders, or those who do not play long-term HODL games, the Ethereum co-founder also emphasized that they should use guardians who can react quickly to suit their quick needs.

“If you’re doing the degen stuff with on-chain contracts, you might need to act fast: withdraw money if a contract gets a vulnerability, move money around if you’re close to liquidation, etc. If your needs include this, then you will find guardians who can act quickly at short notice.”

Finally, Buterin recommended testing each guardian at least once a year, as this will verify that they “have not forgotten or lost their accounts.”

Given the ever-increasing frequency of crypto scammers and hacks in recent years, and several crypto firms going bankrupt last year, the importance of maintaining adequate wallet security procedures has never been more important.