A detailed explainer of multisig wallets and whats happening at Gnosis
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We are using a multisig for defi slate wallet. Every major decentralized protocol uses one for governance.
Multisigs combine decentralization with security for max use case.
And, currently none better in the biz than Gnosis.
We sat down with Lukas to go over some key aspects of the Gnosis safe and whats on the agenda for a massive 2021.
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Tap In Tuesday: Best Multisig in DeFi, Gnosis Safe AMA
What are the benefits of smart-contract accounts?
Most DeFi users on Ethereum today are used to a single private key wallet, often referred to as an externally owned account (EOA). These accounts are secured with a private key, often accessed via a 12- or 24-word seed phrase, and have a very simple access-control logic. Whoever holds the private key, has full control over all assets associated with this account. This also means that if the private key is compromised or lost, this account’s assets cannot be recovered.
Smart-contract accounts such as Gnosis Safe solve this problem through logic definition at the smart contract instead of protocol level, giving users more power and flexibility to implement access-control schemes such as multi-signature thresholds.
This popular feature of our Gnosis Safe Multisig solution enables users to define multiple signer keys for a given Gnosis Safe account, as well as a threshold of signatures required to execute any transaction on this account. This is especially useful for collective asset management by companies and organizations like DAOs, as well as individuals who need to customize the security level of their account.
What would be examples of custom access-control schemes?
One example that illustrates the benefit of custom-access control for private key management is a scenario in which a single user could have their account controlled by 3 signer keys with a threshold of 2. Whereas one key is a hot-wallet that can be easily accessed, another one a more secure hardware device, and finally a third backup key stored in a secure location. So the user can easily prepare a new transaction or DeFi interaction with their hot-wallet and then use their hardware device as a two-factor authentication. If any of those two is compromised or lost, the funds can still be recovered using the third backup key.
The power of smart-contract accounts does not stop there, as further modules can be enabled such as the Gnosis Safe Spending Limits module that allows defining allowance thresholds where only 1 of the signer keys is required to trigger a transaction. So in a company setting a Gnosis Safe could be used with 3 out of 5 people required to sign a transaction but special allowances can be defined where smaller transactions can be conducted by an individual member.
Finally, there is also a huge potential for recovery mechanisms that can be implemented this way, ranging from social recovery schemes to recovery via a trusted custodian.
What are other benefits of using Gnosis Safe?
The general benefits of Gnosis Safe as a new account standard go beyond customized access-control schemes, as Gnosis Safe also provides significant UX improvements over regular EOA accounts. For example, DeFi users often need to provide multiple confirmations with their regular wallet to make a trade or provide liquidity to a protocol. Gnosis Safe eases this friction point by bundling these interactions into a single batched transaction.
Gnosis Safe also alleviates friction caused by transaction fees, as a transaction relayer could be used to make sure the gas price is automatically increased if the transaction is not executed after a given time. It can even be set to pay transaction fees in ERC-20 tokens or have the Dapp pay for the user’s fees. (Disclaimer: Transaction relaying is not yet fully supported in our own solution).
Besides the contract-level benefits, we also have some additional unique features in our solution. Last year, we launched “Safe Apps,” Dapps specifically developed for users to perform (DeFi) operations right from their Gnosis Safe interface. We currently feature about 20 Safe Apps and have big plans for 2021!
Finally, we also recently launched native mobile applications that allow Gnosis Safe users to track and interact with assets on-the-go.
What is the likelihood of a hack or private key loss where I lose access to funds?
While DeFi empowers users and allows for a new innovative financial system to emerge, the lack of intermediaries brings also significant risks. As actions are usually irreversible, DeFi interactions are prone to human error and also become a prime target for hacks or phishing attacks, which even very experienced users aren’t fully protected by.
Many of these risks associated with DeFi aren’t necessarily inherent, but rather go back to the limits of single-failure-point EOA accounts described above, and the challenges of validating authenticity in DeFi transactions and Dapp interactions.
Recent reports suggest that more than $7.6B in crypto assets has been stolen since 2011 and roughly 20 percent of all BTC lost because the user no longer has access to their private key. Even major exchanges suffer from these issues, with reports of high-profile exchange hacks unfortunately not being that uncommon. This is also why one of the biggest exchanges has recently adopted the Gnosis Safe solution to securely store their ~$10B in user funds with an added layer of security.
What does the future hold for Gnosis Safe?
A big focus over the upcoming months is stabilizing the product, further improving the UX and optimizing the onboarding experience. We will also be providing a lot more contextual information to users so it’s easier to get information about their asset holdings and the exact outcome of any transaction they conduct.
DeFi is often accompanied by a lot of uncertainty and anxiety on the side of the user, and we want to build an asset management solution that creates trust and educates users. All of this means that we will be able to address less technical users who may lack prior experience with self-custody solutions.
We also look forward to making it even easier to develop and list Safe Apps so we can onboard even more projects and provide a single interface for all DeFi interactions, as well as continuing to build out the feature set of the Safe mobile apps to make them the most secure and convenient way to sign transactions.
Besides our own solutions, we are also happy seeing an increasing amount of third-party solutions being built using the Gnosis Safe account standard and developer tooling. We want Gnosis Safe to be a portable account that can be used through many different interfaces without having users locked-into a single platform. Just recently, we have seen Tongue Wallet, Parcel SmartDeFi, and Staker building Gnosis Safe solutions. There are a bunch more in the pipeline, each having its own unique feature set!
What else is the Gnosis team working on besides Gnosis Safe?
We recently launched the GnosisDAO, a prediction market-driven collective stewarding our ecosystem and guiding decision-making via proposals like whether to establish a governance token for Gnosis Safe.
It has been exciting utilizing our Conditional Tokens Framework, a protocol for event-based assets with if-then logic, in this applied setting for exploring governance based on futarchy and as a testing ground for forecasting tool Gnosis Impact.
We also look forward to Omen, the decentralized prediction market platform powered by our Conditional Tokens Framework, joining Gnosis Safe and DEX Gnosis Protocol in deployment on the xDai Ethereum sidechain. There are also additional big moves coming up for Gnosis Protocol, as we aim to release GP v2 in the coming months.
How can I get in touch / learn more?
The best place to get started learning more about Gnosis Safe would be our landing page, where you can create your own Gnosis Safe.
Developers interested in building on top of our open-source stack can check out the Developer Portal, and get started building Safe Apps.
Also, I recommend following us on Twitter to keep up with upcoming announcements about Gnosis Safe and to be part of the community by joining our Discord Chatand participating in the Gnosis Forum.
You know what they say…not your keys, not your coins 😉
⚠️ DISCLAIMER: Investing into cryptocurrency and DeFi platforms comes with inherent risk including technical risk, human error, platform failure and more. At certain points throughout this post, we might get commission for promoting certain projects, if this is the case we will always make sure it is clear. We are strictly an educational content platform, nothing we offer is financial advice. We are not professionals or licensed advisors.
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