Source: Bitkey (Block). Distilled and processed for Signal; not original content.
TL;DR
Bitkey argues that “keys” and “seed phrases” got conflated, and that the seed phrase is the weak part: a single secret that is equally useful to you and to whoever steals it. Its answer is a 2-of-3 multisig with one key on the phone, one in the hardware, and one on Bitkey’s server, so the user holds two of three and the company can never move funds alone. Every feature that usually needs a seed phrase, including recovery, escape from the vendor, and passing funds on at death, is rebuilt as a quorum problem instead.
Actionable items
- Separate the two ideas before designing recovery: private keys are what custody means, a seed phrase is only one recovery mechanism. Treating them as the same thing forces a single point of failure into the design.
- Distribute keys so the provider is never sufficient and never necessary: user holds two of three, provider holds one. The user can always move funds without the provider, the provider can never move funds without the user.
- Give each loss scenario its own path rather than one universal backup. Lost phone uses hardware plus server. Lost hardware uses app key plus server. Lost both falls back to a social step.
- Use a time delay as the security control for any recovery that reduces the number of factors: Bitkey enforces 7 days on hardware or phone recovery, with notifications on every channel during the wait so a real owner can cancel a hostile attempt.
- Make cloud backup safe by making it useless alone: store the app key encrypted in iCloud or Google Drive, decryptable only by tapping the physical device over NFC.
- Design the social recovery role to verify identity, not to hold value. Recovery Contacts hold an encryption secret and confirm the person is who they claim to be. They never see the key, the balance, or the transactions.
- Ship a vendor-independent escape hatch and prove it: the Emergency Exit Kit is a PDF holding the encrypted app key, plus open-source tooling, so funds move with the hardware key alone if the company disappears. Two of the three keys must be reachable with no vendor involvement for self custody to be real.
- Model transfer at death as a claim with a veto window instead of handing over secrets in advance. The beneficiary starts a claim, a 6 month period runs, the owner is notified and can cancel, and only then does an encrypted key the vendor cannot read pass to the beneficiary.
- Keep the beneficiary blind until the claim completes. Sharing a seed phrase in advance leaks the balance and grants access early, which is the failure mode this design exists to avoid.
Key quotes
A seed phrase is just one way of thinking about recovery, one that we think introduces more problems than it solves.
You can always move your money without Bitkey, but Bitkey can’t move your money without you.
At no point does Bitkey ever have control of the funds. Its role is limited to securely passing along information it cannot decrypt and co-signing only when appropriate.
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