Cryptocurrency Information Bureau News: What are the dangers of self-managed key "seed phrases"? We explain the potential of new wallets! #Cryptocurrency #Security #Wallet
Video explanation
Are seed phrases, the "passwords" of digital assets, outdated? Let's think of new ways to protect them!
Hello everyone! I'm John, a blockchain navigator. Recently, we've been hearing more and more about terms like "crypto assets" (digital money that can be used on the internet) and "NFTs" (one-of-a-kind digital art or items). These are all called "digital assets," and are a new form of property.
Since these are important assets, we want to protect them well. Until now, the key phrase that has played an important role in protecting such digital assets is "Seed Phrase" However, recently I've been hearing people say, "Maybe seed phrases alone are no longer enough to feel safe?" Today, I'll be talking about seed phrases and how to protect your digital assets in a way that's easy to understand even for beginners!
First of all, what is a "seed phrase"?
First of all, what exactly is a "seed phrase" (which comes from the English word "seed phrase" and means "a phrase of words that serves as a seed")?
This is often a sequence of 12 or 24 simple English words, such as "apple," "river," "happy," "bicycle," etc. The combination and order of these words is what opens your "digital wallet" (think of it as an online wallet) that contains your digital assets.Super super important master keyIt's something like that.
If you change your smartphone or your computer breaks, as long as you remember this seed phrase, you can restore your wallet to its original state on a new device. This is a convenient mechanism.Self-management" This was a prime example of how to manage your assets yourself, without relying on a bank or someone else.
The seed phrase was revolutionary! But…
Seed phrases first appeared about 10 years ago and were a huge step forward in giving users direct control over their digital assets.
- Protect your own assetsThe idea was that even if a bank or exchange (a place where you can buy and sell cryptocurrencies) was hacked, your assets would be safe as long as you kept your seed phrase in good control.
- Accessible anywhere: With internet access and your seed phrase, you could access your wallet from anywhere in the world.
In this way, seed phrases were an amazing technology that made the dream of "having complete control over my own assets" come true.
Why are seed phrases now being called a "liability"?
However, as pointed out in a recent article, "A Seed Phrase Isn't Self Custody, It's A Liability," some people are saying that the seed phrase system is gradually becoming outdated. The word "liability" here has the nuance of something that holds you back or is a dangerous factor. What does this mean?
The main issues are:
- Only one weak point (single point of failure): A seed phrase is truly a double-edged sword. If someone were to know the sequence of these 12 or 24 words, that's right, everything in your wallet could be stolen. On the other hand, if you forget the phrase or lose the paper on which it's written, you'll never be able to access your assets again. It's your one and only key, so that's all that matters.
- Difficult to store safely :
- Write it down on paper and keep it: This is the most analog method, but there are risks that it may become unreadable due to fire or flood, that someone may see it and steal it, or that you may forget where you put it.
- Stored as digital data: If you store it on a computer, smartphone, USB memory, etc., it may become a victim of hacking (bad people breaking into a computer) or malware (bad software). As long as you are connected online, the risk is not zero.
- Remember: It would be very difficult for the average person to memorize 12 or 24 random words in perfect order.
- Human error is likely to occur: One mistake, such as copying the wrong word or putting it in the wrong order, can lead to the loss of all your assets.
- Easily targeted by fraudThere has also been a rise in phishing scams (scams to steal personal information) that try to trick people into giving up their seed phrases with fake messages like: "There has been a problem with your wallet. Please enter your seed phrase to verify."
In other words, while seed phrases are convenient and powerful, they also have a major problem in that their management is left too much to the user, and a single mistake can be fatal. "It was revolutionary 10 years ago, but it's about time for a new method," is what experts are saying now.
So what's next? Look forward to new technology!
You may be wondering, "Well, if seed phrases are dangerous, what should I do?" But don't worry! The world of technology is constantly evolving. New, safer and easier-to-use methods of asset management are currently being researched and developed.
For example, the following technologies are attracting attention:
- Multi-Sig Wallet：This means that the wallet requires multiple signatures. For example, you can set it so that in order to withdraw money, you need the approval of not only yourself, but also a trusted family member or friend. This is a mechanism that prevents assets from being moved immediately even if one person's key is stolen.
- Social Recovery：Even if you lose access, you can restore your wallet with the help of a few trusted people you have designated in advance. The key point is not to rely on the power of one person.
- Smart Contract Wallet: This is a "wallet with intelligent contracts" that allows you to set more flexible security rules. For example, you can set a "maximum amount that can be withdrawn per day" or program rules such as "a certain amount of time must be waited for certain operations."
These new technologies aim to overcome the "single weakness" of seed phrases and enable more people to hold digital assets with confidence.
John's words
Personally, I write down my seed phrase on paper and store it in a safe, but sometimes I worry, "Is this really safe?" That's why I'm really looking forward to the emergence of easier and more secure technology! The important thing is to keep up with new information like this and always think about what you can do to protect your assets. I'll continue to do my best to provide you with useful information!
This article is based on the following original articles and is summarized from the author's perspective:
A Seed Phrase Isn't Self Custody, It's A Liability.