Can Hardware Wallets Be Hacked?
After a 15-year old British teenager hacked the FBI back in 2016, it’s easy to understand why many people are skeptical when it comes to buying cryptocurrencies and storing them in hardware wallets.
After all, if the most top-secret information in the US isn’t even hacker-proof—what is?
This is a question that many prospective crypto owners are faced with before purchasing cryptocurrencies.
In this article, we will explore the question of digital security and explain exactly why if used correctly and purchased from an authorized source, hardware wallets cannot be hacked and are the safest place to store your cryptoassets.
First Hacking Incident
In March of this year, Saleem Rashid, another teenage hacker, figured out two possible attacks on cryptocurrency wallets. One was a supply chain attack in which the hacker would modify the device before it shipped to the customer, and the other was a post-purchase hack, where the hacker gets hold of your device and tampers with it through a third-party application in order to obtain your private keys.
For the supply chain attack to work, the hacker would have to get his hands on the device before it was shipped to the customer.
Crypto investors can completely prevent this risk by purchasing their Ledger device from an authorized retailer with an expertise in crypto.
In order for the post-purchase attack to work, the hacker would need to obtain your physical device, acquire your PIN code, and install a rogue unsigned application on your device. You can prevent this attack if you move your assets to a different private key upon losing your device.
Hardware wallet manufacturer Ledger acknowledged Rashid's attacks, and they promised the crypto community that they had resolved the vulnerabilities in their firmware update.
To date, there have been no known instances of a user getting their Ledger or Trezor hardware wallet hacked and losing their assets.
As long as you keep your PIN code, physical device, and private key secure and do the firmware updates, then your assets stored in a hardware wallet cannot be stolen or hacked.
Apart from the unique incident of Rashid’s hack, there have not been any other confirmed instances where a hardware wallet was successfully hacked.
Do you know how hardware wallets protect your digital assets from attackers? Let’s find out.
Isolation of Private Keys
Hardware wallets use both private and public keys to manage crypto assets. After a purchase transaction, crypto assets are deposited to a public address, where the owner can spend them with their unique private key.
Hardware wallets are designed to make it possible to access the private keys they protect because they never leave the device. This is called the principle of isolation, also known as cold storage. The private keys are never online, thus they can never be exposed to the internet nor to the computer to which it’s connected.
2FA (Two Factor Authentication) PIN
Hardware wallets are encrypted with a PIN, which also acts like a 2FA. This adds an extra layer of security to your hardware wallet as well as the crypto assets stored in it.
In the case of an attacker gaining physical access to your hardware wallet and attempting to steal your private keys or crypto assets, they would be unable to steal your assets unless they know your PIN.
If you forget your PIN or enter the wrong one more than three times, your entire hardware wallet will reset, adding another level of security to your device.
To avoid this scenario, you should remember your correct PIN and/or backup your wallet using a recovery phrase, so that if your wallet gets lost or reset, you can still access your crypto assets and private key.
Hardware Required to Confirm Transactions
Although crypto wallets like Ledger, Trezor, and KeepKey include online apps developed for their interfaces that make it easy for owners to conduct transactions on the blockchain, you physically need the hardware wallet in hand to complete a transaction.
Whenever you are conducting a transaction, you’ll have to confirm the send or receive address on the physical Ledger or Trezor, or KeepKey screen. This protects you from malware attacks that change the destination address.
You now have a better understanding of why hardware wallets are the best way to keep your crypto assets safe.
For more on where to find hardware wallets that are guaranteed secure and authentic, visit our hardware wallets page here.