Vitalik Buterin recently shared some insightful tips on securing cryptocurrency holdings, highlighting unconventional but highly effective methods. While hardware wallets are widely recommended for their robust security, Buterin points out the risks they carry, notably due to human error. Common pitfalls include misplacing the recovery seed, hiding it so well that it is eventually forgotten, or unforeseen situations like needing to move, leaving the seed in a bank safety deposit box.
To counteract these risks, Buterin adopts a sophisticated approach known as multisignature for over 90% of his personal funds. This method is not just about diversifying security measures — it is about decentralizing them. In a multisig setup, a transaction requires the approval of multiple, separately held keys to proceed, which significantly mitigates the risk of loss or theft.
Buterin recommends an M-of-N scheme, where “M” represents the minimum number of approvals needed from a total of “N” possible keys. Importantly, not all keys are held by one person, and the identity of the holders is kept confidential, even from each other.
This technique enhances security by not relying on a single point of failure. If one key is compromised, the funds remain secure as long as the other required keys are safe. However, it does depend on the trustworthiness and reliability of those who hold the other keys.
Buterin also critiqued the Shamir Backup, another method that splits a seed into multiple parts. While it sounds secure, Buterin argues that it is easier to mishandle compared to a multisig setup. The complexity and risk of error in reassembling the seed parts can outweigh its security benefits.
One way or another, if you are willing to feel safe when using digital assets, avoid some red flags like storing large amounts of cryptocurrency on exchanges, in decentralized applications or a custodial crypto storing service.
