Page 168 - Cyber Defense eMagazine September 2023

Cold Wallets: An Underutilized Line of Defense

Cold wallets are an effective security measure that can help safeguard cryptocurrencies against various
attack vectors. They are called “cold” because they’re not connected to the internet, which means they
can’t be attacked the same way a regular, “hot” wallet can. They are also called “hardware wallets”
because they often come in the form resembling a USB stick — they use external hardware devices to
store private crypto keys safely.

Cold wallets have additional safety features besides their offline nature. They can be dust- and waterproof
for extra physical durability. Some will have automatic data elimination for breach detection. They come
with PINs and seed phrases that help retrieve data if they’re lost. Cold wallets can offer different levels
of tamper protection and can use biometric security features.

The biggest problem with them, however, is that their market penetration is only at ten percent — they
are incredibly underused.

Cold Wallet Sales Surge in Crisis Moments

Cryptocurrency holders need an occasional nudge to remind them that there are additional things they
could be doing to keep their funds safe. Sadly, it’s usually when something terrible happens that people
choose to react.

When FTX collapsed in November 2022, Trezor and Ledger, among the most prominent makers of cold
wallets, confirmed to Decrypt that their sales had increased. Talking to Cointelegraph, Ledger’s CEO
Pascal Gauthier noted how disruptions in the market usually cause an uptick in the company’s sales. He
cited Coinbase’s declaration of losses and Celsius’ fund freezing as two other events.

Chances are the most prominent players on the market will see another surge right about now. The
problem remains that, despite the advantages of cold wallets, many cryptocurrency enthusiasts will
remain unaware of them or hesitate to invest in one until an event or report nudges them into buying it.
And hopefully, it will be a report, not a security event where their assets are compromised.

Breaking the Misconceptions

Crypto enthusiasts have been slow to adopt cold wallets for several easily identifiable reasons. One
popular misconception is that the setup and maintenance of cold wallets are complex. Manufacturers
have done great at streamlining the process over the years, reducing the initial learning curve. Plus,
there’s a wealth of online resources for guidance.

The cost might be another obstacle. A high-quality wallet from a renowned brand with solid features
comes with a price tag that might seem too much for some, especially novices. There are always cheaper
options, but a costly cold wallet can still be an excellent investment. The potential costs of losses from a
cyber-attack can easily justify the investment.

Cyber Defense eMagazine – September 2023 Edition 168
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