Peter Watts, the founder of NFT marketplace Reservoir, recently spoke out about the risks associated with using hardware wallets. He specifically mentioned the danger of losing seed phrases or hastily moving assets stored in a bank’s safety deposit box, especially during unexpected events such as the COVID-19 pandemic.
While Vitalik Buterin didn’t dismiss the idea of cold wallets, he stressed the importance of decentralizing security. He expressed a preference for multisig setups, where multiple keys are required for transactions.
Buterin emphasized the significance of security in the cryptocurrency space and suggested a “M-of-N” configuration, in which some keys are held by the user and others by trusted individuals, without disclosing their identities to each other. In response to Buterin’s suggestions, Ethereum investor Tobby Kitty proposed Shamir, a backup method for splitting cryptographic keys or passwords into multiple parts called “shares.” Buterin, however, cautioned that Shamir is more prone to mishandling compared to multisig, as it relies on careful handling and storage of many parts of the secret.
He highlighted the risk that if any of these parts are lost or handled incorrectly, it could become impossible to reconstruct the original secret.