It’s estimated that there are about half a billion cryptocurrency users worldwide, yet only a minuscule 2.5% use hardware wallets. While that might seem concerningly low, I’m somewhat relieved it isn’t higher.
Here’s my thinking: I envision billions of people embracing Bitcoin, managing their assets securely on their own, but the consumer hardware wallet industry is a significant roadblock to this vision. It’s not just Bitcoin adoption at stake—the entire decentralization movement is jeopardized if we don’t address a fundamental flaw in the world’s most popular wallets.
### Stagnant Innovation in Wallets
A year ago, Lucien Bourdon highlighted a decade of wallet innovation in these pages. While I agree with much of his point, he missed a critical aspect: the leading consumer hardware wallets have seen almost no significant innovation in the past ten years. As every security expert knows, if you’re not progressing, you’re falling behind.
It’s not just the constant emergence of new threats; Bitcoin applications are evolving at a breakneck pace. Cryptocurrencies have transcended their role as mere stores of value and have become means for increasingly sophisticated transactions. Yet, the technology powering hardware wallets remains stagnant, much like when their sole purpose was keeping keys safe offline. The user experience is similarly archaic, requiring users to jot down seed words and strain their eyes on tiny screens for transaction approvals.
This is not just an issue for Bitcoin. As we move toward a future where security involves safeguarding valuable digital assets and sensitive data through cryptographic keys, the decentralized economy hangs in the balance. Let’s delve into what’s inside these wallets.
### Trust Without Verification
Lucien rightly pointed out that Bitcoin derives its power from open-source principles. However, I strongly disagree when he mentions that most wallet makers embrace this philosophy.
The reality is that the leading hardware wallets are still constructed on closed, proprietary systems, leaving users unable to inspect or verify their claims. Without the ability to verify, why should users accept manufacturers’ assurances?
I suspect many hardware wallets remain “black boxes” because there’s something to conceal—like the outdated smart card technology many wallets rely on. This aging tech is unsuitable for today’s crypto scenarios and certainly not for a future where decentralized security will require safeguarding everything from digital identities to access credentials.
### Hindering Innovation and Adoption
Reliance on closed, proprietary systems by hardware wallets is not just a security concern; it’s a hindrance to Bitcoin’s innovation and wider adoption.
These wallets function as closed ecosystems where developers must adhere to restrictive rules without offering customizable options for users. This is often dictated by the underlying technology, as in the case of Ledger: every app requires access to the master seed, necessitating a meticulous review process before approval—if they’re approved at all.
Imagine if this model governed the App Store; we’d still be using antiquated devices rather than enjoying the variety of apps available today through open ecosystems that promote competition and innovation.
That’s the vision I have for wallets. When developers are freed from restrictions, they can deliver groundbreaking features and improve user experiences, playing a crucial role in evolving wallets to support and secure the increasingly complex nature of Bitcoin applications.
Wallets should serve as innovation hubs, enabling developers to create compelling applications that drive Bitcoin and blockchain services adoption. Unfortunately, ecosystems like Ledger act more like “anti-App Stores,” suffocating rather than propelling decentralized innovation forward.
### Embracing Transparency
The answer is clear and vital: embrace transparency. Just as robust encryption relies on publicly assessed, open-source algorithms, devices storing cryptographic keys must adhere to the same ethos. Open-source hardware and software empower security researchers, developers, and individual users to audit and verify security measures, diminishing reliance on manufacturers’ promises and enhancing overall trustworthiness.
Fortunately, there are newer, more secure alternatives available. Hardware wallets built on open-source microkernel architectures offer a robust security foundation, allowing independent verification of their safety. These systems prevent single-company control over users’ cryptographic keys’ security, reducing the possibility of concealed vulnerabilities and encouraging innovation.
The silver lining is that just one out of every 40 crypto users currently owns a hardware wallet. Let’s provide the remaining 39 with a truly secure path to managing their digital futures and support the innovations that will draw billions more to the fold.
This is a guest article by Zach Herbert. The views expressed are solely those of the author and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
