Cryptography and privacy
The undoubted advantage of cryptocurrencies is the ability for the user to maintain maximum control over assets in their hands. The owner of the crypto may not depend on third parties such as banks, states or exchanges, keeping his assets in his own wallet. In this case, the private key is protected by a seed phrase. Anyone who has it can restore access to the wallet.
On the one hand, the seed phrase, if stored securely, provides excellent security for the cryptocurrency. On the other hand, if it is lost, access to funds may be lost forever. Bitcoin does not have a hotline to call, courts, programmers, technical support – no one can help if the seed phrase is lost. To mitigate this problem without compromising security, Shamir’s secret sharing scheme (SSS for short) is used.
Adi Shamir is an Israeli cryptographer. His contribution to the study of the issue is difficult to overestimate. The public key cryptographic algorithm RSA (short for Rivest, Shamir, and Adleman) was an important milestone in the history of asymmetric encryption methods. The Fiat–Shamir protocol is widely used for zero-knowledge identification.
At the same time, Adi Shamir’s work is directly used in cryptocurrencies to a very limited extent. BTC does not use the RSA protocol, but the more convenient ECDSA protocol, which works on elliptic curves. The Fiat-Shamir protocol also had rather limited implementation. There is a scientific
studywhich recognized it as not safe enough.
Shamir’s Secret Sharing Scheme
Let’s return to SSS. The SSS algorithm works by dividing the secret into several parts, each of which is useless on its own. To recover and extract the secret, it is necessary to combine a certain number of shares, which will be sufficient. In other words, the secret is divided into n-parts, and to restore it, you need a predetermined m-quantity (it is clear that n>=m).
For example, we divided the secret into six parts and decided that four would be enough to restore it. In this case, even if two parts are lost, we will be able to restore the secret. In essence, this is very similar to a multi-signature.
When it might be useful
In the context of storing a seed phrase, SSS opens up the possibility of encrypting information and then splitting the secret into parts. This, in theory, allows you to more securely store the key to your Bitcoin wallet. Or, for example, distribute the secret among trusted persons. In this case, each individual person will not be able to independently access the funds.
A regular seed phrase may be at risk of being lost or intercepted by an attacker. Mitigating both of these risks at the same time is not possible in a seed phrase scenario: the risk of loss can be reduced by creating multiple copies, but this increases the risk of theft; The risk of theft can be reduced by having one copy, but this increases the risk of loss. Shamir’s secret sharing scheme eliminates both of these risks because there are multiple parts of the secret (reduced risk of loss) and a predetermined number of parts are required to recover the wallet (reduced risk of theft).
An interesting application of this method may be related to inheritance: parts of the secret can be
distribute among the heirs, and then only together they will be able to gain access to the wallet.
An example of the implementation of the scheme is separate hardware crypto wallets with the Shamir Backup function implemented. In particular, they are some devices from Trezor. But we note that the solution may not suit everyone.
Disadvantages of Using SSS
SSS can usually be used in conjunction with hardware wallets. In this case, there is a risk of malware and firmware that will intercept the required number of parts of the secret and seize access to the wallet. Moreover, even without attackers, there are risks associated with hardware wallets: damage or loss of the device, unsuccessful firmware.
Splitting one secret into several parts can hypothetically reduce the risk of loss (due to the fact that not all parts are needed for recovery), but this risk remains, and it is not so easy to assess how much lower it is compared to the reasonable and careful storage of a regular seed phrase .
Moreover, SSS limits “user mobility” and may be of interest to long-term investors/hodlers, but this is debatable for active users who need constant access to assets. In general, using SSS in this form may turn out to be redundant: the seed phrase that everyone is familiar with is already a completely reliable mechanism, which, by the way, can be strengthened in other ways.
Alternatives
For example, a code phrase. It would also not be a mistake to simply take reasonable security measures: write down the seed phrase and hide it in a safe place, create an encrypted medium (with all precautions, of course), buy a special capsule that does not sink in water and does not burn in fire, add extra phrases in seeds, which should be memorized first, and other methods.
Source: Bits

I am an experienced journalist, writer, and editor with a passion for finance and business news. I have been working in the journalism field for over 6 years, covering a variety of topics from finance to technology. As an author at World Stock Market, I specialize in finance business-related topics.