There are around 5 billion crypto users all over the world. The most generous estimate is that only 2.5% use hardware wallets. It’s a small number, but I was relieved that it wasn’t expensive.
why? I want people to be loaded with 1 billion Bitcoin on board, so I want to see everyone safe and independent. The consumer hardware wallet industry is one of the biggest obstacles to achieving this goal. And not only adopting Bitcoin: the entire decentralized revolution is at risk if we don’t deal with the fatal flaws at the heart of the world’s most popular wallets.
My wallet is stepping on water
Last year, on these pages, Lucien Bourdon celebrated the “10 Years of Wallet Revolution.” There are many things I agree with, but one obvious omission. With few exceptions, “major” consumer hardware wallets in today’s market are barely innovated in a decade. And, as all security experts know, if you’re not constantly moving forward, you’re moving backwards.
The problem is that new threats are constantly emerging, as well as the rapid evolution of Bitcoin use cases. Bitcoin and other cryptocurrencies are no longer “just” stores of value. Nowadays, these are the media of increasingly complex transactions. However, the underlying technology of hardware wallets has not changed inherently since the days when the major utilities were secure offline keysafes. The same goes for UX. Users are expected to write down the word for seed and then squint at the small screen every time they approve a transaction.
This is not just a bitcoin issue. With the future of security, everyone uses encryption keys to protect their most valuable digital assets and sensitive data. In fact, the entire decentralized economy relies on what is in these wallets. So let’s take a look.
Trust me and don’t check.
Lucian was the right thing to emphasize that Bitcoin’s strength comes from its commitment to open source principles. What I have a deep opposition to him is that open source is adopted by “most wallet industries.”
In fact, major hardware wallets continue to be built on their own closed source systems that cannot be fully inspected by users. If the test cannot be performed, it cannot be performed. If you can’t confirm, why do users trust the manufacturer’s trust?
The reason so many hardware wallets have “black boxes” remains because they have something to hide, like the decades-old smart card technology used by many wallets that Bitcoiner entrusts keys to. This technology is not suitable for today’s crypto use cases and certainly not for the future of distributed security. You need the key to access your credentials to protect everything from your digital identity.
Barriers to innovation…and adoption
The ongoing reliance on hardware wallets on their own closed systems is not just a security nightmare. It’s also terrible for Bitcoin innovation and adoption.
Wallets today are effectively walled gardens, and developers need to follow restrictive rules and cannot provide users with some degree of customization. This doesn’t just control freaks for themselves. Often, it is a function of the underlying technology. Devices like Ledger should have access to the Master Seed for all apps. Obviously, that means they need to be painstakingly reviewed before they are approved (if they are).
If that were how the app store works, we still had a 3310S round in our pocket. Instead, we got an open ecosystem, a thriving developer community, competition and a galaxy of great apps.
That’s what I want for a wallet. If developers can get permission, they play a key role in the evolution of wallets, not only to enhance new features and user experiences, but also to support (and ensure) the ever-growing complexity of Bitcoin applications.
Wallets must be a hub of innovation. This is where developers build killer apps that force developers to adopt Bitcoin and blockchain-based services. In reality, ecosystems like Ledger are “App Stores,” and rather than pushing it forward, they limit decentralized innovation.
Open your wallet
The solution is both simple and essential. It’s transparency. Just as strong encryption relies on publicly available open source algorithms, devices that store encryption keys must follow the same philosophy to ensure security. Open source hardware and software allows security researchers, developers, and even individual users to audit and verify security measures, reduce reliance on manufacturer claims, and increase overall reliability.
Newer, safer alternatives already exist. Hardware wallets based on open source microkernel architectures provide a more robust security foundation and enable independent verification of safety. These systems ensure that a single company does not control the security of users’ encryption keys, reduce the risk of hidden vulnerabilities and drive innovation.
The good news is that only one in 40 people currently own a hardware wallet. Provide the other 39 with a truly safe way to make your customers independent of the digital future and support innovations that attract billions more to adopt.
This is a guest post by Zach Herbert. The opinions expressed are entirely unique and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
This post-hardware wallet: Bitcoin’s biggest adoption barrier was first featured in Bitcoin magazine and written by Zack Herbert.
