Bitcoin BIP138 Proposal Aims to Recover Lost Multisig Wallets

The Bitcoin Improvement Proposals repository merged BIP138 on September 21, a draft proposal designed to help users recover complex multisig wallets when seed phrases alone are insufficient. The proposal suggests storing descriptors and wallet policies in an encrypted file to reconstruct accounts. However, it introduces a potential privacy risk: a third party possessing an eligible extended public key (xpub) could potentially decrypt the backup file, though they would still lack the private keys necessary to sign transactions. The draft includes safeguards to prevent on-chain public keys from serving as decryption keys for off-chain backups.