Single point of failure
Any one thing whose loss or theft is enough, on its own, to lose your money.
The term comes from engineering: a part that, if it fails, takes the whole system down with it. With bitcoin and digital dollars, the part is usually a secret, a device, a person or a company.
Common ones:
- A seed phrase written in one place, or kept as a photo on a phone.
- A single device with the only copy of a key.
- An exchange that holds everything for you.
- One person who is the only one who knows how to reach the money.
- An email account or a phone number that can reset access to everything else.
Removing one usually adds something else to look after. A second copy of a seed phrase protects against losing the first, and doubles the places it can be stolen from. That’s the trade-off behind every setup: copies protect against loss and expose you to theft.
Multisig wallets are built to escape it: with several keys and a rule that needs more than one, no single key can lose or steal the money.
A useful test is to go through what you have, one item at a time. If this were lost tomorrow, could you still get in? If it were stolen, could the thief get out?