Shamir's Secret Sharing vs Multi-Sig for Key Recovery

Operational Simplicity: A single transaction signature is required for recovery, avoiding complex multi-party coordination. This matters for inheritance planning or individual user wallets where speed and simplicity are critical.

Flexible Thresholds: Allows for M-of-N configurations (e.g., 3-of-5) where any subset of shares can reconstruct the key. This is ideal for distributing trust among geographically dispersed team members without requiring all to be online.

Single Point of Reconstruction: The secret is reassembled in one location, creating a temporary vulnerability window. This matters for high-value institutional assets where the reassembly process itself is a risk.

Relies on Share Security: The entire system's security depends on the secure generation, distribution, and storage of individual shares. A compromise of the share storage method (e.g., paper, encrypted files) can defeat the scheme.

On-Chain Transparency & Auditability: Approval logic and signer addresses are immutably recorded on the blockchain. This matters for DAO treasuries (e.g., Uniswap, Compound) and corporate wallets requiring verifiable, non-repudiable governance.

Active Security During Execution: Requires multiple independent approvals for every transaction, providing continuous protection. This is critical for hot wallets managing daily operations, as it mitigates single-point compromise risks.

Higher Gas Costs & Complexity: Every transaction requires multiple signatures, leading to higher Ethereum gas fees and more complex smart contract interactions. This matters for high-frequency trading operations or protocols on high-fee chains.

Coordination Overhead: Requires multiple key holders to be available and in agreement for routine actions. This can create operational latency, which is problematic for time-sensitive DeFi actions like liquidations or rapid treasury moves.

Off-Chain Simplicity & Portability: The secret key is split into shares using pure cryptography (e.g., using libraries like tss-lib). No smart contract or blockchain required for setup, making it chain-agnostic and portable across wallets like Ledger and Trezor.

Single Transaction Execution: Reconstituting the key from a threshold of shares (e.g., 3-of-5) results in a single, standard private key. This enables gas-efficient signing and avoids multi-signature contract gas fees for every action.

Single Point of Failure Post-Recovery: Once the shares are combined, you have a single private key. If compromised during reconstruction or stored improperly, all assets are at risk. This lacks the persistent security of multi-signature setups.

Relies on Shareholder Security: The security model depends entirely on the physical/digital security of the share holders (e.g., paper backups, USB drives). There is no on-chain audit trail or ability to change participants without generating new shares and a new wallet address.

On-Chain Policy Enforcement: Rules (e.g., 2-of-3 signers) are codified in a smart contract (e.g., Safe{Wallet}, Gnosis Safe). Transactions require explicit, verifiable approvals, creating a transparent audit trail on-chain. Signers can be changed without changing the wallet address.

Resilient Against Single Points of Failure: A compromised signer key does not compromise the vault. The attack must meet the threshold (e.g., steal 2 of 3 keys). This model is standard for DAO treasuries and institutional custody.

Chain-Specific & Complex: Deployment is tied to a specific blockchain (Ethereum, Polygon, etc.) and its smart contract ecosystem. Migration between chains is a complex process. Interacting with the contract incurs higher gas fees for setup and every transaction.

Recovery Dependent on Live Signers: If signers lose keys or become unavailable, a social recovery or pre-set guardian process (like in Safe) is required, which can be slow and may involve trusted third parties. It's not a simple cryptographic recovery.