Can hardware wallets be hacked? ⋆ ZyCrypto
Management of cryptocurrency assets can be done in a custodial or non-custodial manner. Those who choose the latter often use a hardware wallet, which offers many advantages, but also has a steep learning curve. Even then, the question remains: are these devices 100% secure?
Hardware wallets are powerful
There are many good reasons why so many crypto users rely on hardware wallets to protect their assets. Unlike a software wallet, the hardware device does not connect directly to the internet. Instead, it often requires a computer or mobile device connection, introducing an additional layer of security. Also, the private keys and seed phrases are only stored locally. That means no one can access them without physical access to the device and the necessary credentials to use funds.
Although hardware wallets may seem a bit cumbersome at first, they also provide peace of mind. Users don’t have to worry about hackers infiltrating their computer or mobile device and stealing crypto assets in a software wallet. Instead, wallet apps can communicate with the hardware device but not directly access funds. Spending requires hardware wallet verification and may require additional two-factor authentication.
There is a small upfront cost when purchasing a hardware wallet. Many manufacturers sell these products at reasonable prices. A Ledger device can be purchased from 78 euros, while the Satochip costs 25 euros. There are also devices from Trezor (starting at 69 euros) and SafePal, which have never been hacked or involved in any hack-related claims, priced at $50.
There’s something for everyone in the hardware wallet. However, users must always prepare themselves for the responsibility when using these devices. That includes properly backing up your private keys or seed phrase and ensuring that no one has access to that data. However, embarking on a journey of self-storage is not without risk.
Physical hacks are somewhat possible
Crypto hardware wallet hacking differs from going after software wallet users. Since these hardware devices have no internet connection, a hacker cannot install malware directly. Instead, they often require physical device access. That should be hard to achieve, assuming device owners don’t leave their wallets open. Even then, one would need access to the PIN or security keys to use the device.
However, there has recently been talk of a vulnerable Trezor wallet. Two hackers recovered a lost PIN code on the device through some tinkering. While that would be cause for concern, Trezor quickly explained that the bug dates back to 2017 and was corrected shortly after its discovery. As such, devices from 2018 and later are safe. However, the vulnerability existed earlier and it would have been possible to retrieve a forgotten PIN through that method.
As such, the “hack” is somewhat valid, if outdated. Users who have an older Trezor model – or a model from Ledger, SafePal or other manufacturers – may want to make sure they upgrade their devices regularly. Like a computer or TV, hardware wallets come in many iterations. It’s never a bad idea to go for a newer model after a few years to avoid vulnerabilities in older generations.
Self-storage may not be for you
Over the years, people have dived headfirst into cryptocurrency without the necessary knowledge to make educated decisions. The same applies to hardware wallets. It is the best option to store cryptocurrency for the long term, but it may not be for everyone. Binance CEO Changpeng Zhao recently discussed how most users are likely to lose [some of] their funds when they choose self-storage. It is a bigger task than simply sending funds to a new address.
Although a solid concept, self-storage isn’t always practical. Losing your hardware wallet is not the biggest problem, although it is a likely scenario for many. Assuming they’ve properly backed up their security keys, they can recover their wallet quickly through a new device. Unfortunately, many will struggle to back up this information. Writing it on a piece of paper is out of the question. Using encryption is the best option, even if it negates the convenience.
Another key concept to consider is the idea of ”kin”. If the owner of a hardware wallet passes away, the funds are not automatically transferred to next of kin. Centralized exchanges like Binance have built-in procedures to deal with such unfortunate developments, making them favorable for crypto storage. Still, if one is tech-savvy, self-storage is the most viable option.
There are many factors to consider when choosing hardware wallets to store cryptocurrencies. However, they are excellent for those willing to take the necessary steps to keep their funds safe. That doesn’t mean they can’t be hacked, but it’s a pretty unlikely scenario.
Disclaimer: The ‘Crypto Cable’ section contains insights from crypto industry players and is not part of ZyCrypto’s editorial content. ZyCrypto does not endorse any company or project on this site. Readers should conduct their own independent research before taking any action related to the company, product or project mentioned in this piece.