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Multisig wallets, like Gnosis Safe, are a secure way to store funds without relying on a centralized entity. They offer the benefits of self-custody, meaning that your funds are not at risk if a seemingly trustworthy entity fails. Social recovery wallets are similar, allowing funds to be recovered using keys held by others if the main key is lost. Both types of wallets rely on "guardians," which are individuals or entities holding keys that can approve transactions or recover funds.
Self-custody is important. And social recovery and multisig is a great way to do it.— vitalik.eth (@VitalikButerin) March 17, 2023
A quick reddit post on how I think about choosing guardians for social recovery and multisig wallets:https://t.co/FY1iyJ6BFC
Vitalik Buterin, the co-founder of Ethereum, recently shared his thoughts on using multisig and social recovery wallets. He personally uses a multisig wallet to store most of his funds, as does the Ethereum Foundation. He believes that social recovery wallets, once mature, will be ideal for "hot wallets," which store small portions of funds for daily use, while multisig wallets will be best for "cold wallets," which hold long-term savings.
Guardians play a crucial role in both wallet types. To ensure security, guardians should be chosen based on their ability to keep their keys safe and on their trustworthiness. Ideally, guardians should not know each other in order to minimize the risk of collusion. Also, they should be geographically dispersed and use different wallet types and operating systems to minimize common risks.
When requesting a guardian's approval for a transaction or key reset, they should ask a security question to verify your identity. This prevents hackers from posing as you to access your funds. If you require a quick responses from guardians, it is important to choose those who can act quickly and are in different time zones.
Regularly testing guardians ensures they have not lost or forgotten their accounts. Conducting two test operations per year with half of the guardians each time is recommended.