In a statement on X that counters the prevailing wisdom among crypto enthusiasts, Ethereum founder Vitalik Buterin has recently expressed reservations about the reliance on hardware wallets for securing digital assets.
Buterin’s commentary emerged during a broader conversation on crypto security, which featured insights from several leading figures from the Ethereum ecosystem.
Why The Ethereum Founder Doesn’t Use Hardware Wallets
The debate illuminated the complexities of digital asset security and showcased a range of opinions on how best to protect these assets. Peter Watts, founder of Reservoir, pointed out the inherent risks associated with hardware wallets. He emphasized the potential personal errors that can undermine the security of such devices.
“Counterpoint: when using a hardware wallet, the biggest risk becomes yourself. Beware of the footguns: Someone finds your stashed seed, You hide the seed so well you forget, You put the seed in a bank safety deposit then hastily move overseas due to covid,” Watts commented, reflecting a critical vulnerability — human error, which can lead to significant security breaches even with robust technological safeguards.
Responding to these concerns, Buterin elaborated on his personal approach to crypto security. He stated, “The above is why I use a multisig (@safe) for >90% of my personal funds. M-of-N, some keys held by you (but not enough to block recovery), the rest held by other people you trust. Don’t reveal who those other people are, even to each other. Decentralize your own security.”
Buterin’s approach involves a multisig configuration, which requires multiple keys to authorize transactions, thereby dispersing the risk and reducing the chances of theft or loss due to a single point of failure.
During the discussion, tobbykitty.eth proposed an alternative method known as Shamir’s Secret Sharing, a cryptographic scheme that divides a secret into multiple parts. He argued for its benefits in eliminating the need to trust others during the recovery phase, asserting that this method allows full control over the cryptographic keys without involving others.
However, Buterin countered this suggestion, pointing out the practical difficulties associated with implementing Shamir’s Secret Sharing correctly, noting, “It’s way easier to screw up than a multisig.” He also cautioned about the practical use of Shamir’s method.
“It depends who’s storing the shamir shares! I think the questions (i) ‘trust your other devices’ vs ‘trust your friends’ (ii) shamir vs multisig are orthogonal,” Buterin concluded. Thus, he underscored the complexity and potential for user error inherent in implementing Shamir’s method effectively.
The starting point of the debate was a post by Kofi, associated with gasfees.io. He provided a real-world perspective on the importance of using hardware wallets despite their potential drawbacks. He vividly described the emotional and financial impact of losing significant crypto holdings and advocated for the use of hardware wallets as a fundamental component of a comprehensive security strategy.
He said, “Buy a hardware wallet today and start using it ASAP. Send a little ETH to your hardware wallet from your hot wallet (Metamask, Phantom, Rainbow .etc). Then move the majority of your funds to your hardware wallet, everything you won’t critically need for the next few days. Store the wallet somewhere safe.”
Kofi’s advice reflects a pragmatic approach to crypto security, emphasizing the importance of protecting against online threats. However, he later also acknowledged in response to the Ethereum founder that investors with a large portion of their net worth in cryptocurrencies should consider using a multisig wallet. “With a multisig, multiple keys (can be a combination of hardware and hot wallets) are needed to sign any transaction,” he added.
At press time, the Ethereum price was at $2,916.
Featured image from NZZ, chart from TradingView.com
