Key Points
- Vitalik Buterin suggests using “multi-sig” to address seed phrase issues in hardware wallets.
- Hardware wallet market projected to grow from $0.35 billion in 2024 to $1.56 billion by 2029.
Vitalik Buterin, the co-founder of Ethereum, has proposed a solution to the seed phrase issues that plague hardware wallets.
Self-custody wallets, particularly hardware wallets, have gained popularity as the risks associated with third parties become more evident.
The Risks of Hardware Wallets
Crypto Twitter often uses the phrase “Not your keys, not your crypto” to remind users of these risks.
However, the biggest risk to hardware wallets can often be the users themselves, who may forget their seed or even have it stolen.
To mitigate these risks, Buterin suggests using a “multi-sig” for the majority of personal funds.
“Multi-sig” as a Solution
“Multi-sig” refers to having multiple signatories on a wallet to reduce a single point of failure.
An alternative solution is Shamir backup, which divides the recovery seed phrase into multiple parts across different devices.
Buterin, however, has downplayed the effectiveness of Shamir backup, claiming it’s easier to mess up than a multi-sig.
He further supports the use of multi-sig, stating that the decision between trusting other devices or friends, and the choice between Shamir and multi-sig, are separate issues.
The hardware wallet market is expected to grow from $0.35 billion in 2024 to $1.56 billion by 2029.
This growth is likely to come with challenges, but solutions like Shamir or multi-sig could be potential remedies depending on a user’s risk profile.
