Earlier this year, the Web3 Foundation (W3F) commissioned Trail of Bits for a security review and assessment of the risks in storing cryptocurrency. In response to the concerns shared by the cryptocurrency community, Trail of Bits has published their recommendations for the secure use of hardware wallets. Whether you hold a few Satoshis or a significant amount of cryptocurrency, this post will provide valuable insights on how to protect your digital assets.
The Rise of Hardware Wallets
In the early days of cryptocurrency, users would generate their payment addresses on a standard PC using client software. However, as cryptocurrencies gained popularity and became targets for theft, it became clear that storing private keys on a general-purpose computer was a security liability. This realization led to the emergence of custodial storage services provided by cryptocurrency exchanges.
However, repeated thefts from these services drove many users to seek alternative ways to protect their cryptocurrency holdings. Hardware wallets, which are tamper-resistant peripherals, gained popularity as a secure solution that allows users to create and protect cryptocurrency accounts without relying on a third party.
The Reality of Hardware Wallets
Hardware wallets are consumer-grade Hardware Security Modules (HSMs) that provide a tamper-resistant vault for users to create and use their cryptocurrency accounts without exposing their private keys. While hardware wallets offer significant improvements in security, they are not foolproof.
Users must properly initialize their wallets, update firmware, and protect recovery codes. As security expert Bruce Schneier famously said, “Security is a process, not a product.” Therefore, users must take necessary precautions to enhance their hardware wallet security.
10 Rules for Secure Hardware Wallet Use
- Purchase from Trusted Sources: Buy hardware wallets directly from the manufacturer to minimize the risk of acquiring counterfeit or tampered devices.
- Initialize Your Own Wallet: Avoid pre-initialized hardware wallets to eliminate the risk of using a wallet controlled by an attacker.
- Generate Recovery Words On-Device: Only use recovery words generated on the hardware wallet itself. Pre-selected recovery words can compromise the security of your wallet.
- Verify Device Integrity: Confirm that the device can provide an attestation of its integrity before purchasing it.
- Test Recovery Words: Verify that your recorded recovery words can successfully recover your wallet by testing them on a spare hardware wallet device.
- Securely Store Recovery Words: Write down your recovery words by hand and store them separately from your hardware wallet, ensuring they are not photographed or typed into a computer.
- Verify Desktop Software: Use code-signed executables and demand reproducible builds to prevent tampering with the software used to communicate with the hardware wallet.
- Consider a Dedicated Workstation: Use a separate workstation solely for operating your hardware wallet to minimize exposure to potential compromises on your everyday computer.
- Multi-Signature Wallets: Consider creating a multi-signature wallet with keys stored in physically separate locations to protect against single points of failure.
- Manually Verify Address Generation: Be cautious of compromised workstations during the creation of multi-signature addresses.
The Need for Safer and More Usable Solutions
While hardware wallets provide an essential layer of security, there is still room for improvement. The challenges faced in designing fixed-function devices for private key protection highlight the need for safer and more user-friendly solutions. Usable security plays a crucial role in ensuring that secure computing is accessible to all users.
As the cryptocurrency industry continues to evolve, it is crucial to demand better-designed hardware wallets that are resistant to traps and mistakes. The goal is to create devices that are secure, reliable, and easy to use for both technologists and regular users alike.
Trail of Bits remains committed to building security awareness and collaborating with organizations like the W3F to promote secure practices. If you are a hardware wallet manufacturer, Trail of Bits welcomes you to reach out for assistance in protecting your users.
FAQs
Q: Are hardware wallets completely secure?
A: While hardware wallets offer enhanced security compared to software wallets, they are not entirely foolproof. Users must follow best practices and take necessary precautions to ensure the safety of their cryptocurrency holdings.
Q: How can I verify the integrity of a hardware wallet?
A: It is essential to purchase hardware wallets directly from trusted sources and verify the device’s integrity using software provided by the manufacturer. Follow the vendor’s instructions to perform necessary checks.
Q: Should I use a multi-signature wallet?
A: Multi-signature wallets provide an additional layer of protection by requiring multiple keys to authorize transactions. Consider using multi-signature wallets with keys stored in physically separate locations for added security.
Conclusion
Protecting your cryptocurrency holdings is of utmost importance. By following the recommended security practices for hardware wallets outlined by Trail of Bits, you can significantly reduce the risks associated with storing and using cryptocurrencies. Stay informed, remain vigilant, and demand safer and more usable hardware wallet solutions for a secure digital future.