Social recovery is a stepping stone, not a silver bullet to the digital ownership dilemma

Given that Web3 is built on the core tenet of decentralization and the removal of third-party intermediaries, why is it that most crypto users today are wed to centralized exchanges? Unfortunately, taking full ownership of your digital assets is still too difficult.

Social recovery tackles this problem by offering self-custody with a little help from your friends; users designate “guardians” who can help regain access to an account in the case of a lost key. With the need to manage complex seed phrases and private keys one of the biggest barriers to self-custody adoption, the concept of social recovery is appealing indeed.

The launch of Ethereum standard ERC-4337, which, among many features, enables social recovery, raised awareness of this system and saw many frame it as a silver bullet to the most pressing user experience issues associated with self-custody.

While social recovery has been a revolutionary development for decentralized autonomous organizations (DAOs) and other organizations, it does not completely resolve the issue of key recovery without creating other problems around trust and centralization. Rather, social recovery is a stepping stone to achieving greater user security in the field of smart contracts, and alternative methods will be needed in order to meet the needs of users.

Against the backdrop of the revelations over customers’ funds security stemming from the ongoing FTX trial, it is time for the industry to take stock, consider the risks of centralization, and establish a plan to provide true digital ownership for users.

The History of Social Recovery

For the record, social recovery is not new; it’s been in practice for years. ERC-4337 is just one potential mechanism that can be used to facilitate this feature. Moreover, social recovery is one of the many benefits of multi-signature wallets (multisigs), built with smart contract accounts through account abstraction.

Why are multisigs such a big deal? Previously, self-custody accounts…