A mnemonic is, “a device such as a pattern of letters, ideas, or associations that assists in remembering something”, and was the first proposed solution to user-friendly key management on Ethereum. Initially proposed in March of 2016, EIP-75 set out to make private key management simpler by allowing a set of seed words to regenerate a user’s private key in the case that it gets lost.
Instead of storing a 40-character private key, this approach gives users a list of 12 random words, making it much easier to store, or even memorize. Though this was a significant improvement, it doesn’t appear to be an effective enough method to store a significant amount of financial value, since it can still be easily lost or destroyed.Multi-Signature Wallets
Multi-signature, or multisig, wallets are wallets with multiple owners wherein actions can only be made if a minimum number, or threshold, of wallet owners agree. Since multisig wallets have many owners, in the case that an owner loses their private key, the other owners can still perform actions. This eliminates the single point of failure that standard wallets have.
Multisig wallets can also make use of more advanced functionality. For example, they can be configured to allow owners to agree upon adding or removing a member to the group. They can even be configured to be modified by governance models so that non-owners can vote on certain actions, such as removing an owner from the group.
As useful as multisig wallets can be, they can still have their pitfalls. It is imperative that the wallet owners are trustworthy, otherwise corrupt owners can collude to drain the funds. Although unlikely, it is also possible that enough owners lose access to their private keys, meaning that there aren’t enough members to meet the threshold to perform actions, though this can be circumvented by adding members back as soon as they lose access to their private key.Social Recovery