A Practical Recovery Mechanism for Blockchain Hardware Wallets

Blockchain hardware wallets, through their security-by-design architecture, offer higher security assurances. They fundamentally differ from software wallets due to an important security property called Unicity. Unicity ensures that ownership is tied to a unique hardware entity, both physically and logically. This property is highly desirable if cryptocurrency assets under ownership are high in value. However, when such a hardware wallet is backed up, this unicity property is lost as the root seed or private key is cloned. The resulting security ramifications are numerous, ultimately leading to theft of funds in many cases. In this work, we introduce a practical recovery mechanism for hardware wallets that does not involve extraction or cloning of the private key or root seed for backup, thus preserving this unicity property. The proposed recovery mechanism ensures that the owner can access their cryptocurrency funds in case of malfunction/theft of the hardware wallet, even when it is not backed up. The novel mechanism is based on Symmetric Secret Sharing, a Key Revocation Certificate, a Smart Contract-based Registry, and Smart Accounts and can be practically implemented. We compare our mechanism with other solutions and show how it performs better on all security parameters. The paper solves the important problem of secure backup of hardware wallets without compromising the design paradigms associated with it.