How You Should Not Lose Your Money In 2020: Alternative Recovery Methods

How You Should Not Lose Your Money In 2020: Alternative Recovery Methods

Many people in the crypto community became skeptical when Peter Schiff claimed that his wallet had lost Bitcoin (BTC). Others, like Ethereum co-founder Vitalik Buterin, stressed that losing private keys remains an important issue for cryptocurrency users, while some believe Schiff has lost his password. 

It's hard to be your own bank

Maintaining custody of your own cryptocurrency is particularly complicated for non-tech-savvy users. Most wallets require the user to type in the private key before accessing the wallet. The storage of the key can be done by writing on a paper, which is a method that tends to malfunction due to the loss, theft or corruption of the paper.

Maintaining custody of your own cryptocurrency is particularly complicated for non-tech-savvy users. Most wallets require the user to type in the private key before accessing the wallet. The storage of the key can be done by writing on a paper, which is a method that tends to malfunction due to the loss, theft or corruption of the paper.

Using hardware wallets or encrypted digital backups is an alternative, but it requires some degree of preparation and technical knowledge that many ordinary users can find too much to grasp.

In response to the loss of Peter Schiff, Binance CEO Changpeng Zhao argued that storing money in central detentions is safer for most users.

However, this naturally goes against the principles of decentralization in the crypto community. Some members drew attention as a potential solution to alternative methods developed on Ethereum.

Social rescue

As an alternative to complex storage solutions, the concept behind social recovery is to give friends, family and even companies the right to regain access to a particular account.

A person who has lost access to his wallet can search for pre-selected assets that are entitled to reassign control of a particular account as "guardians."

The Argent wallet is currently a live implementation of this idea. A user can set other Argent users and even other wallets they own as a protector. However, by default, the guardian is Argent himself, who uses the person's email and phone as an identity guarantee. This recovery method cannot be removed without other parents.

A slightly different method is offered by Ethereum Improvement Proposal (EIP) 2429 developed by Ricardo Guilherme Schmidt et al. 

Taking the concept of social recovery, it introduces “user secrets” - personal data from fingerprint scanners such as biometrics, a password or personal information provided in a survey.

This information should then be provided during the recovery process; in this way, guards cannot be hidden to steal the user's wallet. In addition, the list of protectors is never disclosed until the actual recovery procedure is activated.

However, this is a development proposal that is still subject to change.

Social healing criticism

A common disadvantage of social recovery is the reappearance of trust - this time in friends rather than central beings.

Cointelegraph approached Schmidt for explanations about EIP. While admitting that the system is not perfect, he suggested that the proposed system is much more unsafe than simpler applications:



Other solutions

Since the first days of Bitcoin, Keybase has offered a private key generation service based on the user's password and email.

Torus allows users to create Ethereum wallets by logging in with their Google or Facebook accounts. The private key is uniquely associated with this account through some rather complex assignment mechanisms.

However, as Schmidt explains, providing solutions based entirely on personal secrets is extremely difficult:

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