In the history of Bitcoin, there have been cases of wallets with unrecoverable private keys, a problem that could have its cure thanks to the latest Trezor update. This week, the SatoshiLabs team launched a security standard that mitigates the risks of losing access to a wallet without custody.
The new security option is enabled for all Trezor Model T purses, says the SatoshiLabs team in a press release. The mechanism is called Shamir Backup or SLIP-0039 and aims to offer a safer way to self-guard private keys.
The standard is based on an algorithm by Adi Shamir, an Israeli cryptographer who published his “secret sharing system” in 1979. Shamir’s theory points out that a secret can be shared securely if the information is divided into several parts. In this way, the group of people who own these fragments can reconstruct the secret without leaking information.
Bitcoin, as well as other cryptocurrencies, has the peculiarity of being self-custodial money. To make a transfer on this network, you don’t need the help of a third party or a bank. In this way, the user has full power over their money, avoiding censorship and increasing their privacy.
However, great benefits bring great responsibilities. By eliminating third parties, the user has to store and protect their private keys at their own risk, since they are direct access to their crypto assets. Loss of recovery seed is one of the most common risks in the ecosystem. Two years ago a man lost about $30,000 in bitcoins, after forgetting the private key of his wallet.
How does this update work?
Because private keys are a secret, the standard works under the same Adi Shamir algorithm maximum. The mechanism allows you to divide the private key of a cryptocurrency address into several files.
Thus, when creating a wallet, in Model T hardware, users will not have a single recovery seed but a group of shared files. The resources each have a sequence of more than 20 words. The customer can set the number of shared files that are needed to recover the wallet.
The developers point out that up to 16 compatible files can be generated, although it recommends setting a threshold of 2-3 or 3-5 files to recover the portfolio. Users can share fragmented information with family or trusted people. Also, the keys can be stored in computers, safes or home hiding places.
The Shamir Backup standard is open source, according to the SatoshiLabs team. In this way, ecosystem developers can review it and other companies adopt it for their wallets.