Notifications after using wallet recovery phrase.
The biggest thing that concerns me about crypto is how fragile seed phrase security can be, in the context of compromised seed phrases. It seems there are people who fall for phishing scams, wherein they enter in their seed phrases and someone else gets ahold of them. Also, there is a possibility that a device is compromised already, and the seed phrase is stolen as soon as the wallet is created. Obviously a hardware wallet mitigates this, but this post is for people who don't have one.
So, what about implementing a (opt-in system) lock to a wallet after a recovery phrase has been entered. Furthermore, one could implement in the same system a notification suite, which sends notifications on whatever medium desired to the original wallet owner to alert them to move their funds or create a new wallet. The temporary lock would only affect the non-original wallets, giving the real owner time to create a new wallet, or send to a more secure place. Is this a possibility? What are the downsides of this idea?
I think the idea of someone getting your seed phrase, and potentially your life savings disappearing is too big a risk for some people, and is a big disadvantage for people who prefer the insurance of a centralized bank.
Posted Jun 25, 2021, 3:33 PM UTC
Sadly it's not that easy to improve security without a hardware wallet. Otherwise it would have been done already. With your seed phrase your security is in your own hands and you can't finger point if something goes wrong. I'm no epxert but I feel your solution would need that your seed phrase is stored somewhere together with your credentials to check if the seed phrase someone entered matches with one on the list (or yours). So if someone enters your seedphrase the system will recognize that someone entered it and notify you via the credentials you entered. That doesn't sound really secure to me as your seed phrase shouldn't be stored anywhere but on paper. Your seed phrase is safed on your computer with a hot wallet but at least it's encrypted. When it's stored somewhere else it most likely would be encrypted, too but I think you'll still have to trust someone. I don't know how you'll solve this decentralized. Blocking transactions on a newly entered seed phrase wouldn't help neither because without the checking and your credentials you can't get notified. Your funds will still disappear but a bit later. You see it's not that easy but I hope the geniuses at IOHK come up with an idea for this in the future. Until then I can strongly recommend to buy a hardware wallet.
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