It is not easy being a crypto investor this year. They have seen the value of their investments drop like stones and now most are stewing over the safety of their crypto funds after a series of hacks and heists that have seen nearly $2 billion stolen by the criminals.
Enter the ghost of the technology’s past.
Hardware wallets – old-school physical devices similar to USB drives that store crypto holdings offline – may seem a throwback to a more innocent digital age. However, they are now proving to be a popular response to a cutting-edge challenge.
The global hardware wallet market, valued at $245 million in 2021, is now expected to grow to more than $1.7 billion by 2030, based on market research company Straits Research.
It is being underpinned by a constant stream of cyber robberies and heists that, based on researcher Chainalysis, has seen the criminals steal at least $1.9 billion in crypto in the first seven months of this year, an increase of 60% compared with 2021. Most of this was stolen directly from blockchains or “hot” online wallets.
It is not only hacks making investors nervous. Others have already lost access to their crypto when major lenders like Voyager Digital and Celsius Network collapsed in July. Adam Lowe, chief product and innovation officer at U.S.-based CompoSecure (CMPO.O), stated:
“We have definitely seen increased interest in hardware wallets, and in general self-custody, post-several issues.”
CompoSecure is one of the many hardware wallet makers seeking to capitalize on a rush for safety.
Lowe added:
“The day of or day after those events, we would see very significant (sales) lifts.”
There is no such a thing as a free cryptocurrency lunch, though: while the hot wallets are convenient and support quick trading, hardware wallets normally do not appeal to first-time investors, who mostly purchase cryptos on large exchanges and may decide to keep their assets on these platforms, where they can just log in with a password and username.
Blowing Hot And Cold
Although the hot wallets are normally free and offer quick access to cryptocurrency, they can be vulnerable to hacks. In August, around 8,000 crypto wallets on the Solana blockchain were hit by hackers who stole over $5 million in crypto.
Engineers from multiple ecosystems, with the help of several security firms, are investigating drained wallets on Solana. There is no evidence hardware wallets are impacted.
This thread will be updated as new information becomes available.
— Solana Status (@SolanaStatus) August 3, 2022
Solana said at that time:
“Users are strongly encouraged to use hardware wallets.”
Another hardware wallet maker, France’s Ledger, said that it saw a surge in sales after the Solana wallets heist. Alex Zinder, global head of Ledger Enterprise, commented:
“We do see a significant uptick in user-based interest in some of these situations of stress in the markets.”
A majority of the hardware wallets connect to a mobile app, where the users of the digital keys needed to access their crypto keys can control their funds. Some of them use “Secure Enclave” technology, a security component that is used to store sensitive data.
One Bitcoin analyst at Czech-based hardware wallet firm Trezor, Josef Tětek, said that he expects better phone interaction with cold storage wallets in the future, to serve investors in places like Africa and South America, where it is highly common for users to have mobile phones than the personal computers.
Yet, firms in this expanding market may be advised to make hay while the sun shines. One long-term question is whether the phone makers will want to get in on the action, according to co-founder and partner at 10T Holdings, Stan Miroshnik. 10T Holdings led Ledger’s $380 million Series C funding round in 2021.
“One question, I think, for the industry and where it’s going and in part what will drive consumer adoption, is what if every iPhone has a built-in Secure Enclave hardware wallet?”
