7

Let's say I invest in a physical Bitcoin wallet. They aren't exactly free, so it's going to cost me money, effort, time and energy (to set it up and put coins on it).

Then what?

It's not like I can actually use it in physical stores. And if I'm supposed to use it as a secure storage device for all my coins, doesn't it just scream "STEAL/SEIZE ME!" to burglars and the cops? And if I keep it hidden in my fireproof safe, why buy such a hardware wallet instead of just an encrypted USB stick with a wallet.dat on it? Much cheaper and the convenience of a hardware wallet is gone if it's physically tucked away in my safe anyway.

Basically every way I look at it, it seems like a bad idea.

The only situation I can think of where it would be good is if I were to meet up with a person physically to buy something from them with Bitcoin. I wouldn't want to take a computer with me, even a laptop, so then that hardware wallet would come in handy, if I "load it up" from my Bitcoin Core before leaving my home.

But that's a pretty specific and rare (to me) scenario. It's never happened, in fact.

As nice as it first sounds to have a dedicated hardware device which in theory allows me to easily pay people Bitcoin "on the go", I don't see the actual use of this in this world as it is now. Is this only useful in some theoretical future when Bitcoin has taken over? If so, is it really a good idea to buy a hardware wallet today and risk it becoming obsolete by the time Bitcoin ever takes off?

Is there something I'm missing?

  • 1
    I see them as a glorified piece of paper with a pin in front – Thomas Oct 27 at 0:05
  • @Thomas the privkey(s) backed up on that piece of paper would need to be generated somewhere though, and a hardware wallet is a rather user-friendly way of securely generating said keys in an offline environment. For many people, they represent the cheapest/easiest option for a device which has a stronger guarantee to not be infected with malware, compared to the other devices they already own. – chytrik Oct 27 at 20:29
  • @chytrik, when I see my friends struggling to find where they saved files they made 2 hours ago, I can definitely understand that :D – Thomas Oct 27 at 21:20
9

Hardware wallets are generally designed to securely store your private keys in an always-offline environment ("cold storage"). This allows the user to have confidence that their coins will not be stolen by malware/hacking/etc, since any attacker would need to have physical access to the device itself.

If nothing else, this is the main advantage of a hardware wallet: the user can securely store their funds, without needing too much technical knowledge or skill.

It's not like I can actually use it in physical stores.

Well, if the store accepts BTC payments then you could, but I agree this is a perhaps less important/rare use case at the moment.

And if I'm supposed to use it as a secure storage device for all my coins, doesn't it just scream "STEAL/SEIZE ME!" to burglars and the cops?

Yes, any educated thief/cop/etc may view a hardware wallet as a target for theft. Most hardware wallets have security against this though, such as a PIN to unlock the device (usually with the threat of wiping the device after some number of failed attempts). Each device will have different features in this way, so as a user you'd have to decide what fits your needs best.

Keep in mind that you can also just use the device to generate a wallet in an offline/secure environment, then create and test backups of that wallet, and finally destroy the hardware wallet device itself. In this way, you could create a cold storage setup, without the added risk of having a device which is obviously a bitcoin hardware wallet in your possession (of course you'll need to keep the backup, but the idea is that the backup may be easier to hide- for example using steganographic techniques).

why buy such a hardware wallet instead of just an encrypted USB stick with a wallet.dat on it?

If the wallet.dat file was generated on a computer which connects to the internet at any point in time (past/present/future), then you will not have the strongest of guarantees that it is not infected with malware. The same goes for the USB stick.

A hardware wallet, on the other hand, should be designed to have extremely restricted communication channels with the outside world, such that the user can have a higher assurance that their privkeys have not been leaked. In many cases, I've seen hardware wallets include a physical confirmation that the firmware running on the device is genuine.

Worth mentioning as well: no electronic device should be used as the only form of long-term storage for a user's funds. Bit-rot and general electronic failure are guarantees, given a long enough timeline. It is very important to have a physical backup of the privkeys as well (think: written on paper, stamped into metal, etc. This backup usually comes in the form of a mnemonic seed phrase these days).


Of course, if you're a technically savvy, then you may prefer to create your own cold storage device, perhaps something as simple as a raspberry pi running Tails as the operating system. But for many users, a hardware wallet offers a great mix of security and convenience, for a reasonable price.

The extremely adversarially-minded user may also feel alarmed at the prospect of a supply-chain attack against a hardware wallet manufacturer. They would be great targets after all! To combat this, the user may choose to use a multi-sig setup, with signing keys generated on multiple devices from different manufacturers, and perhaps even keys from bitcoin-core, etc, as well.


Ultimately, there is no 'perfect solution' for security of your funds, each user will have to make a choice based on their needs, preferences, and comfort level.

| improve this answer | |
  • 1
    Note that having a PIN lock on that hardware wallet may prevent the thief from gaining access to the money it represents, but unlike with a PIN locked bank card that is not the same as you not losing the money. – Shadur Oct 26 at 13:42
  • 1
    @Shadur yes, and for that reason you should also keep a physical backup of the funds. It is a bad idea for several reasons to just rely on the hardware wallet device as a single point of failure. If someone steals it and you have a backup, then you can just restore from the backup without issue, no money lost. – chytrik Oct 26 at 21:51
2
  1. If you use hardware wallet in a computer that has some malware, it won't affect your transactions. So it is creating an isolation for you that can also be achieved with virtual machines or Qubes OS.

  2. Humans feel safer using an external USB like stick with firmware instead of using software on their system/device.

  3. Easier to use lot of things with hardware wallet integration in website or app or a browser add-on

  4. Not everyone is as good as some of the devs involved in bitcoin development. So hardware wallets work better for less technical users.

Also I love such projects even though I am not good when it comes to experimenting with hardware:

https://github.com/cryptoadvance/specter-diy

You can also make a modular phone with open source parts to use as hardware wallet and phone:

https://www.pine64.org/pinephone/ is one open source phone that I find interesting

| improve this answer | |
-1

I would recommend to use warp wallet with a passphrase and an email. If you want to transfer the bitcoin, just install blockchain mobile app then scan the private key and you can send to funds.

It is so secure that there are warp wallet challenges with 20 bitcoins put in bitcoin address with only passphrase just 8 characters long.

here is a challenges:

https://blockchain.info/address/1AdU3EcimMFN7JLJtceSyrmFYE3gF5ZnGj

passphase: PuACRv0R

| improve this answer | |
  • 3
    This is terrible advice - brain wallets and similar systems have been proven insecure many, many times - theoretically, hashing random data works fine. Realistically, humans are terrible at coming up with random data. – Raghav Sood Oct 27 at 3:26
  • this is a secure brain wallet. i myself put bitcoins in this wallet for a simple passphase, yet no one stoled it. take a look at the challenge for 20bitcoins with 8character passphase. it seems easy to brute force but nobody cracked it. – suhailvs Oct 27 at 22:22

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.