A social recovery wallet, also known as a social key recovery wallet, is a type of crypto wallet that includes a mechanism for recovering access to the wallet through a social network of trusted individuals. Self custody crypto wallets using this approach can provide an additional layer of security and convenience for wallet owners.
With a traditional wallet, if users lose their private key or forget their password, they may permanently lose access to their funds. With a social recovery wallet, however, the user creates a network of trusted contacts who can collectively help restore access to the wallet in the event of a lost key or forgotten password.
Social recovery wallets work by each trusted contact having a piece of the recovery key or a unique piece of information needed to regain access to the wallet. When needed, the user can initiate the recovery process and the trusted contacts work together to reconstruct the necessary credentials, allowing the user to regain control of their wallet and funds.
Let's say Alice has a social recovery wallet for her cryptocurrency holdings. She sets up the wallet with three trusted contacts: Bob, Carol, and Dave. Each contact is given a unique piece of information that, when combined, can help recover access to Alice's wallet.
One day, Alice accidentally loses her private key and cannot access her wallet. She contacts her trusted contacts and initiates the recovery process. Bob, Carol, and Dave each provide their respective pieces of information to get her private key back. Once all three pieces are collected, Alice can use them to regain access to her wallet and retrieve her funds.
In this example, the social recovery wallet ensures that Alice doesn't permanently lose access to her funds due to a lost private key. She can recover her wallet and continue managing her cryptocurrency holdings by relying on the collective knowledge of trusted contacts.