I've seen some requests to add YubiKeys as 2FA alongside passwords to encrypt the Sparrow wallet file. However, I believe this adds unnecessary complexity. Instead of using a YubiKey or another external key, why not leverage the hardware wallet itself to access the watch-only wallet file? Password encryption would remain available but this feature could be a plan B.
Most users already store their 12/24-word mnemonic plus their passphrase, adding redundancy to prevent loss of funds. Adding passwords to the Sparrow file is yet another element to manage and back up. What if we could avoid relying exclusively on this password and have the option to decrypt the file directly with the descriptor when connecting our hardware wallet?
This solution would allow storing wallet files more securely in the cloud and other locations without the risk of them being decrypted with weak passwords. Additionally, it would be an effective way to protect transaction labels and metadata against accidental loss, since you could maintain multiple encrypted copies without compromising privacy.
This approach is already implemented in Liana through a specific BIP they developed to make it possible:
https://github.com/pythcoiner/bips/blob/encrypted_descriptor/bip-encrypted-backup.md
I've seen some requests to add YubiKeys as 2FA alongside passwords to encrypt the Sparrow wallet file. However, I believe this adds unnecessary complexity. Instead of using a YubiKey or another external key, why not leverage the hardware wallet itself to access the watch-only wallet file? Password encryption would remain available but this feature could be a plan B.
Most users already store their 12/24-word mnemonic plus their passphrase, adding redundancy to prevent loss of funds. Adding passwords to the Sparrow file is yet another element to manage and back up. What if we could avoid relying exclusively on this password and have the option to decrypt the file directly with the descriptor when connecting our hardware wallet?
This solution would allow storing wallet files more securely in the cloud and other locations without the risk of them being decrypted with weak passwords. Additionally, it would be an effective way to protect transaction labels and metadata against accidental loss, since you could maintain multiple encrypted copies without compromising privacy.
This approach is already implemented in Liana through a specific BIP they developed to make it possible:
https://github.com/pythcoiner/bips/blob/encrypted_descriptor/bip-encrypted-backup.md