In the world of cryptocurrency wallets, there are two ways transactions can be confirmed: blind signing and clear signing. These methods are commonly found in decentralized wallets, whether they are cold wallets or hot wallets.
What is Blind Signing?
Blind signing is a way to confirm a transaction without knowing the details of the smart contract used for that transaction. It is often used in hot wallets associated with crypto applications targeted at novice investors. This method simplifies confirmation by presenting a button without revealing the smart contract details. Users only need to press the confirmation button in their connected wallet.
Blind signing can also be used by cold wallet owners who want quick confirmations without diving into extensive details on the wallet device. Despite its convenience and fast confirmations, blind signing has significant dangers. It fails to provide essential information to the wallet owner, such as the smart contract address, destination wallet, transaction fees, and confirmation time on the blockchain.
Some applications using blind signing provide only two pieces of information: the transaction amount and the user’s wallet address. The danger lies in the potential theft of funds if the connected application is compromised by hackers.
For example, a security breach occurred with applications linked to Ledger and WalletConnect, leading to numerous Ledger wallet owners losing funds due to blind signing mechanisms enabling access without awareness of the compromised application. Since then, Ledger and several other cold wallet providers strongly discourage the use of blind signing, with some even discontinuing the feature.
Despite the time saved in reviewing transactions, users using blind signing remain inadequately informed about the transaction details.
Avoiding Blind Signing Risks
For those still inclined to use blind signing, several precautions can be taken to secure wallets.
- Users must ensure trust and familiarity with the application before connecting their wallet, verifying a history of reliable usage without disruptions or fund losses.
- When accessing known application sites, users should confirm that the site links remain unchanged and match their usual patterns, as links could potentially redirect to malicious sites.
- Users should stay vigilant for any news regarding hacks or rumors of breaches related to the intended application. It is advisable to wait until all security concerns are resolved.
- Any transactions with unfamiliar individuals from social media, especially those providing links, should be avoided due to the prevalent risk of phishing through malicious links.
- For enhanced security, users may consider using hardware or cold wallets, making transactions more secure and less susceptible to hacking.
- Sharing the wallet’s seed phrase should be restricted to trusted individuals only, ensuring overall security.
- Implementing a warm wallet mechanism, where users maintain two wallets, one for holding substantial funds and the other for transactions with less secure applications or sites, can mitigate potential losses in the event of a breach, providing additional security for long-term funds.
While following these precautions can minimize the risk of fund loss, it is crucial for users to prioritize comprehensive security. Opting for clear signing mechanisms over blind signing ensures users have complete visibility into all transaction details before execution.