More heartbreaking than the huge loss from a sharp drop, the crypto assets are lost in vain. Can social recovery wallets come in handy?

Not long ago, a blogger said on a social platform that a friend of his died of a sudden illness and "didn't have time to give the private key to his family", and his family did not understand the concepts of private keys and wallets of cryptocurrency, so it was basically hopeless to recover the corresponding assets. This real case also exposed how important issues such as "safekeeping and emergency disposal of private keys" are.

Complete decentralization is like a double-edged sword. If the forgetting or loss of private keys due to personal reasons can be barely tolerated, then problems such as asset inheritance in emergencies like the above (which will undoubtedly become more prominent in the future) seem to be worth finding new solutions.

01 What is a social recovery wallet?

Over the years, paper wallets, brain wallets, hardware wallets and other solutions have emerged in the industry, but they are essentially traditional private key forms and cannot fundamentally solve the above problems. Against this background, the new concept of social recovery wallets seems to provide a new possibility.

In fact, Vitalik Buterin started promoting the idea of ​​social recovery mechanism as early as 2014. On January 11, 2021, he published a blog post titled "Why we need wide adoption of social recovery wallets" to elaborate on this idea.

To date, most accounts created on the Ethereum network are of the EOA type (externally owned accounts), which are protected by private keys, which are usually converted into a 12-word (or 24-word) "mnemonic" for the user.

This is one of the most significant features of cryptocurrency security, that is, "private key is asset", and everyone is responsible for their own assets. If a user loses the private key or mnemonic, it means that the assets in the account will be lost forever. This "decentralized" feature ensures absolute security, but also loses sufficient flexibility.

The social recovery wallet is not an ordinary EOA address. Its core functions are defined and implemented through smart contracts. In essence, it is to create a smart contract on Ethereum. Its working principle is mainly divided into two parts:

• There is only one signing key that can be used to approve transactions (it exists when the wallet is generated, unless the wallet is deleted or the corresponding device is lost);

• There are at least 3 (or more) guardians, a majority of whom can cooperate to change the signing key of an account.

That is to say, in social wallets, there is no concept of private keys or mnemonics, and ordinary users do not need to remember the corresponding characters and worry about loss or leakage.

Normally, users can simply use their social recovery wallet like a normal wallet, signing messages with their signing key so that every transaction signed is completed quickly with a single confirmation, just like in a "traditional" wallet such as Metamask.

How to recover in case of an accident? It's simple. If the user loses the signing key (usually by deleting the wallet or losing the device containing the wallet), the social recovery function will be activated-the user can contact the guardian directly and ask them to sign a special transaction to change the signing public key registered in the wallet contract to a new signature, thereby recovering the wallet.

Taking Loopring's smart wallet as an example, it stipulates the guardian (also known as the "guardian" concept) mechanism through smart contracts. The guardian is an individually selected Ethereum address that can provide a signature. The consensus of more than half of the guardians has greater say than the wallet owner, and can collectively decide the final ownership of the wallet, such as wallet recovery.

Theoretically speaking, as long as more than half of the guardians are trustworthy, our smart wallet is absolutely safe, because the wallet can only be restored with the approval of more than half of the guardians (if the wallet has N guardians, the transaction requires the approval of at least N/2+1 guardians).

Generally, the official provides a guardian for free, which relies on the verification code sent by the mobile phone to verify the identity. Other guardians can add other users of the social wallet or any Ethereum address (including their own EOA address).

02 What are the advantages of social recovery wallet?

EOA (externally owned accounts) type accounts achieve asset security at the expense of convenience and flexibility, but cannot cope with the needs of recovery, inheritance and other scenarios in extreme situations. Therefore, private keys and mnemonics alone are often not enough.

The social recovery mechanism above solves these problems because it is essentially "multi-sig" - each participant has some influence on the ability to accept or reject a transaction, but no one can unilaterally move funds.

This is far safer than having funds unilaterally controlled by one person or key, and it also has obvious advantages for the popularization and development of the current crypto world. Vitalik Buterin mentioned the need for the birth of a social recovery mechanism in his corresponding blog post:

• There is no single point of failure. This prevents attackers from accessing funds through a single point of attack, while providing enough reaction time to freeze the funds;

• Low brainpower consumption. Users are not required to learn new unfamiliar habits or spend brainpower to remember certain behavior patterns.

• Maximizes transaction simplicity. Most normal activities should require no more effort than using a normal wallet (e.g. Metamask);

In short, it is not only secure enough and able to cope with the needs of wallet recovery, asset inheritance, etc., but more importantly, it is user-friendly and simple enough to be easily understood and used by the huge number of incremental users outside the crypto world.

After all, private keys and mnemonics are difficult to achieve mainstream popularity, while social recovery methods have long been adopted by WeChat and other platforms, and there is no difficulty in accepting and understanding them - if you lose your WeChat password, you can just select a few friends in your address book to verify your identity.

Taking the Loopring smart wallet mentioned above as an example, if I set up three "guardians", then if the wallet containing the "signature key" is accidentally deleted by me or the corresponding device is lost, or even if I suddenly pass away under unexpected circumstances, my family wants to restore my wallet, it can be done through the guardian.

For example, in addition to the "Loopring Official Guardian" in my wallet, I have also set up a close relative and a friend, which means that only the approval of two of the guardians is required to restore the wallet.

If my mobile phone number can still be used and the "Loopring Official Guardian" can approve it, I only need to find any one of the remaining two relatives and friends and ask him to approve and verify the transaction with his own wallet to restore my wallet.

During this process, my relatives and friends do not need to be involved in the concept of private keys and mnemonics, and can achieve recovery only by relying on social mechanisms. In other words, they only need to report to their relatives and friends who they need to contact in case of an accident, but the security is no less than that of private keys and mnemonics.

After all, at least three guardians need to be set up. The more guardians there are, the stronger the ability to resist single-point risks. At the same time, the guardians set can include their own EOA addresses (or even more than one) to achieve the security effect of multi-signature. At the same time, other guardians can be set without knowing each other.

In fact, this “trust-minimized multi-signature effect” is far more secure than having one person protect the wallet with a private key.

03 Social recovery wallets are on the rise

Currently, wallets that have implemented social recovery functions include Argent Wallet (MYKEY), Loopring Smart Wallet (Guardian), MYKEY (Emergency Contact), etc.

When registering for the Argent wallet, you need to provide a mobile phone number and email address to verify your identity. At the account management level, users cannot export private keys. Private keys are strictly bound to the device and can be migrated to a new device.

At the same time, Argent users set relatives, friends, hardware wallets or Argent Guard as "guardians" to achieve account recovery - more than half of the guardians can assist users in locking, unlocking and recovering their wallets.

MYKEY allows users to export management private keys (recovery codes) based on the KEY ID protocol. Operational private keys are not allowed to be exported, but can be synchronized to new devices. In addition, MYKEY Lab becomes the emergency contact of real-name users by default, and can assist users in operations such as account recovery.

However, these wallets all have two major problems: reliance on repeaters to resolve transactions and high transaction fees. The most direct problem is that since they are all smart contract wallets, they need to call relatively complex contracts during the creation and use process, so the gas fee is often higher than that of ordinary wallets.

For example, when Ethereum gas fees were high in the past few months, creating a new wallet using Loopring Smart Wallet would cost tens or even hundreds of dollars.

For this reason, smart wallets like Loopring are committed to migrating and developing based on layer 2 (such as ZK-Rollup) to achieve ultra-low transaction fees and scalable Ethereum.

In 2021, with the development of the incremental crypto market, especially the accelerated maturity of Layer 2 applications, it remains to be seen whether the social recovery wallet can gradually take root and gain further market recognition.