Crypto Traders Flock to Hardware Wallets as Hacks Roil Industry
Unlike many digital wallets, hardware ones keep a crypto user's private keys, which are the passwords they need to access their blockchain assets, offline.
August 23, 2022 at 12:43 PM
4 minute read
Hacks and bankruptcies continue to roil the digital-asset industry. But these setbacks have become a boon for makers of hardware wallets who have seen their sales spike as customers rush to protect their crypto assets.
French startup Ledger saw its day-over-day sales balloon 400% in the 24 hours after a $5.2 million hack involving digital wallets based on the Solana blockchain earlier this month, according to the company's Chief Experience Officer Ian Rogers. Unlike many digital wallets, hardware ones keep a crypto user's private keys, which are the passwords they need to access their blockchain assets, offline.
Ellipal, a Hong Kong-based company, saw wallet sales rise 30% and website traffic jump 50% in the days following the Solana wallet hack, according to a company spokesperson. Sales of KeepKey's hardware wallet also jumped around 30% in the week following that attack, said the firm's chief technology officer, who goes by the pseudonym "pastaghost." The hack stemmed from a digital wallet made by Slope Finance, who revealed in a post published earlier this month that there was a security flaw in a third-party service provider it used.
"These things remind people that security and self-custody are important," Ledger's Rogers said in an interview.
While Ledger typically sells most of its wallets on its website, there was a big bump in in-person sales at electronics store Best Buy Co Inc., Rogers said. The device, which resembles a USB stick in size and shape, sold out at locations in multiple regions, he said. Best Buy did not respond to a request for comment.
The rush at Best Buy shows just how urgently people wanted to get their hands on a hardware wallet, according to Rogers.
"It's the only place to get Ledger in less than an hour," he said.
The collapse of lending platforms such as Voyager Digital Ltd. and Celsius Network Ltd., which included freezing withdrawals for customers, has spooked users, KeepKey's pastaghost said. This has helped spur interest in hardware wallets like the company's product, which resembles a small external hard drive, he said.
Recent market turbulence has created "elevated awareness for consumers to protect their digital assets," Adam Lowe, chief product and innovation officer of CompoSecure Inc., said in a statement. The firm, which developed Arculus, a hardware wallet similar to a credit card in size and thickness, saw an uptick in demand between the first and second quarter despite the onset of crypto winter, he said.
Some centralized crypto exchanges, such as Coinbase Global Inc. and Binance, offer customers digital wallet options, where the keys are controlled by the companies.
"If you're not managing the keys, you don't own the funds," pastaghost said.
Using a physical wallet adds another layer of defense against attacks that digital wallets may be susceptible to, said Steve Walbroehl, co-founder and chief information security officer at Halborn, a blockchain security firm.
Hackers sometimes use malicious links and fake websites that mimic those of actual crypto platforms, as was the case with a $3 million hack involving Bored Ape Yacht Club nonfungible tokens earlier this year. Users unwittingly connected their software wallets, only to have their assets wiped out.
"The hardware really keeps it protected and out of reach from all of these attacks," Walbroehl said.
The Solana Foundation echoed this in a post from a official Twitter account after the attack, in which it encouraged users to employ a physical wallet to keep their crypto safe.
"A hardware wallet is the most secure way to store your crypto and it's a really good idea for everyone who has serious amounts of wealth, however you define that, in crypto," Austin Federa, head of communications for the Solana Foundation, said in an interview.
But, despite the recent uptick in sales, hardware wallets still face obstacles to garnering greater adoption, Walbroehl said.
Hardware wallets are usually more expensive than digital wallets, which may be the reason some users stick with the latter, he said. While popular digital options such as MetaMask and Phantom are free to download, the price of hardware wallets can range from less than $50 to more than $300.
"It's the law of least resistance," Walbroehl said. "It's easy to just install an app you get for free."
Hannah Miller reports for Bloomberg News.
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllDelray Beach Financial Adviser Indicted in Alleged Illegal Tax Shelter Scheme
McGlinchey Opens Third Florida Office in Tampa, Hopes to Tap Region's Talent
2 minute readBuy-Now-Pay-Later Company Affirm Hit With Data Breach Class Action After Cyberattack on Banking Partner
Law Firms Mentioned
Trending Stories
Who Got The Work
Dechert partners Andrew J. Levander, Angela M. Liu and Neil A. Steiner have stepped in to defend Arbor Realty Trust and certain executives in a pending securities class action. The complaint, filed July 31 in New York Eastern District Court by Levi & Korsinsky, contends that the defendants concealed a 'toxic' mobile home portfolio, vastly overstated collateral in regards to the company's loans and failed to disclose an investigation of the company by the FBI. The case, assigned to U.S. District Judge Pamela K. Chen, is 1:24-cv-05347, Martin v. Arbor Realty Trust, Inc. et al.
Who Got The Work
Arthur G. Jakoby, Ryan Feeney and Maxim M.L. Nowak from Herrick Feinstein have stepped in to defend Charles Dilluvio and Seacor Capital in a pending securities lawsuit. The complaint, filed Sept. 30 in New York Southern District Court by the Securities and Exchange Commission, accuses the defendants of using consulting agreements, attorney opinion letters and other mechanisms to skirt regulations limiting stock sales by affiliate companies and allowing the defendants to unlawfully profit from sales of Enzolytics stock. The case, assigned to U.S. District Judge Andrew L. Carter Jr., is 1:24-cv-07362, Securities and Exchange Commission v. Zhabilov et al.
Who Got The Work
Clark Hill members Vincent Roskovensky and Kevin B. Watson have entered appearances for Architectural Steel and Associated Products in a pending environmental lawsuit. The complaint, filed Aug. 27 in Pennsylvania Eastern District Court by Brodsky & Smith on behalf of Hung Trinh, accuses the defendant of discharging polluted stormwater from its steel facility without a permit in violation of the Clean Water Act. The case, assigned to U.S. District Judge Gerald J. Pappert, is 2:24-cv-04490, Trinh v. Architectural Steel And Associated Products, Inc.
Who Got The Work
Michael R. Yellin of Cole Schotz has entered an appearance for S2 d/b/a the Shoe Surgeon, Dominic Chambrone a/k/a Dominic Ciambrone and other defendants in a pending trademark infringement lawsuit. The case, filed July 15 in New York Southern District Court by DLA Piper on behalf of Nike, seeks to enjoin Ciambrone and the other defendants in their attempts to build an 'entire multifaceted' retail empire through their unauthorized use of Nike’s trademark rights. The case, assigned to U.S. District Judge Naomi Reice Buchwald, is 1:24-cv-05307, Nike Inc. v. S2, Inc. et al.
Who Got The Work
Sullivan & Cromwell partner Adam S. Paris has entered an appearance for Orthofix Medical in a pending securities class action arising from a proposed acquisition of SeaSpine by Orthofix. The suit, filed Sept. 6 in California Southern District Court, by Girard Sharp and the Hall Firm, contends that the offering materials and related oral communications contained untrue statements of material fact. According to the complaint, the defendants made a series of misrepresentations about Orthofix’s disclosure controls and internal controls over financial reporting and ethical compliance. The case, assigned to U.S. District Judge Linda Lopez, is 3:24-cv-01593, O'Hara v. Orthofix Medical Inc. et al.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250