Ethereum co-founder Vitalik Buterin highlights the urgent need for an enhanced wallet security solution to reduce cryptographic losses caused by inaccessible funds.
On February 28, Butarin shared his concerns about X, noting that there are many missing codes that come from the fact that the lost codes are locked out of the wallet rather than theft.
Butarin said:
“There are many people who lost a lot of cryptography to *loss* rather than theft. Software bugs, forgotten passwords, lost devices, burnt-out paper wallets on LA Fire, upgraded devices without backing up data… Many ways that it can happen.”
He also highlighted the key challenge that investors who lose access to funds often aren't accountable. He believes that many choose to remain silent from embarrassment, further complicating the matter.
Buterin's comments bring further attention to the significant risks of independence in the potential for permanent asset losses.
Independent ones protect users from replacement failures and protocol hacks, but also risk losing their holdings due to human or technical failures. Without protection, investors can lose access to their assets forever.
Recent numbers show the size of the problem. A January report from River estimates that around 1.6 million Bitcoin (over $1.5 billion at the time) has become unaccessible due to the non-controlling of independence supervision. This amount exceeds the estimated 1.2 million BTC lost in exchange-related incidents.
Social Recovery Solutions
With this in mind, Buterin has urged the crypto industry to prioritize wallet security innovations that protect users from such irreversible losses.
According to him:
“The truly robust wallet security solutions that the ecosystem needs to build also need to take into account losses. (This is a big part of why I talk so much about social recovery!)
Buterin has been promoting social recovery wallets since 2021. This method employs a multi-signature system, allowing designated parents to help users regain access to funds.
Social Recovery Wallets act like regular wallets and feature a single key signing transaction. However, if a user loses access, the guardian can request that the transaction be approved to update the signature key.
Buterin emphasized that this approach balances decentralization and enhanced security, reducing the risk of theft and permanent loss.
