Comment by ArtTimeInvestor
18 days ago
Hardware wallets are not a solution to self-custody.
If one would make a list of things that can go wrong, starting from the supply chain that delivers parts to the manufacturer, malicious employees at the manufacturer, mistakes the manufacturer can make, attacks on the delivery chain from the manufacturer to the user, to mistakes the user can make creating, using and storing their keys - the list would contain hundreds of points.
> Hardware wallets are not a solution to self-custody.
Nothing in this world tends to be "the solution", everything has tradeoffs.
Say you want to do self-custody, what is then the best option? "Don't do self-custody" obviously isn't the solution, as the core use case here is self-custody, so what in your opinion is a better way, than hardware wallets?
If there is nothing better today than hardware wallets, then for now, they are "one of the better solutions" for how to do self-custody, even with the current tradeoffs. But again, I'm eager to hear what the alternatives are.
There is no solution yet.
From a bird's-eye perspective, 3 things are needed: Create a key, derive an address from the key, store the key.
Creating a key safely is possible with dice. You would probably create a seed phrase instead of a key directly, but for this discussion it is the same.
Deriving an address from the key is hard and I have not yet seen a good protocol on how to do it. I have read through a bunch of descriptions of how people do it and they are all weak and brittle. The most popular seems to be "I order a hardware wallet and follow the instructions that come with it". But even people who put a lot of thought into it come up with weak and brittle approaches. I would think there is a way to do it safely. But I have never seen a description of one yet. It might involve multiple computers, multiple software implementations and a hell of a lot of work to create a multisig that is not prone to a single attack vector.
Storing the key is probably the hardest. The most popular way seems to be to store it in a drawer or a safe. So now those coins are just as safe as a piece of gold would be. Or they use a multisig and store the keys in multiple locations. Quite painful. As you have the ongoing problem of keeping those locations accessible and safe at the same time.
> There is no solution yet.
Again, "best solution we have available" for self-custody is hardware wallets, so we're back to square one.
Imagine if I tried to discuss and argue about things like this on a TypeScript submission? "No, this won't actually solve the problems of TS" I say, "What is the solution then?" someone asks me and I reply "There is no real solutions to those problems, just use Clojure, problems avoided!", completely missing the point.
How is multisig "quite painful" in your opinion?
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> Say you want to do self-custody, what is then the best option?
A $5 USB stick with Tails on it. You can make as many clones as you want, so no need for a recovery phrase. It's not specialized hardware, so there's no incentive for anyone to look for money on it (plus it's encrypted). If you want to be extra tinfoil hat, make sure you only plug it into an air-gapped machine and copy any output (address, transaction hex etc.) onto another USB.
thats what I did. But that simply is just too complicated for the average consumer.
The reality is that normal people need to have a simpler solution they can trust. For nerds like us booting up tails and creating cold storage paper wallets is fine but definitely a solution for the general public
> Hardware wallets are not a solution to self-custody.
Look back as recently as last year and hardware wallets were held up as the recommended way to do self-custody all over.
Whenever I brought up the issue of losing coins due to hacks or bugs, I was told that hardware wallets had solved this problem.
There have been more hacks, bugs, and coins lost from software or custodial wallets than ever have and likely ever will be lost from hardware wallets.
People selling hardware wallets might pay good money to convince you of that. People not selling hardware wallets probably won’t pay for the reverse.
Do passkeys next.
Passkeys don’t gate immutable financial transactions. (Pretty much everything you do in a bank’s website is reversible during the day to a few days out.)
Apparently in human societies "trust" is a feature and not a bug to be removed. Who knew, right? :)
Then can you give an example of what you would consider a solution, whether hypothetical or real?
Banks and payment providers (Visa Mastercard AMX) provide services beyond simply a store of wealth and a mechanism to transfer it.
Actually 2FA, hardware biometrics, behaviour based fraud prevention and personal confirmation of suspicious transactions. If you’re using credit they can refund fraudulent transactions, and there is the chargeback mechanism. This is probably banking system dependent, but in AUS there is a refund mechanism for mistaken/fraudulent traditional bank transactions.
BTC has effectively none of the safety net, and humans are fallible. We need the safety net. It’s the hugest barrier to adoption. Exchanges do a far better job of managing the risks than trusting your wealth to a hardware wallet.
In financial systems with a basis in law, no transaction is ever final. It doesn't matter what the protocol says or what the technology is capable of, if the judge says that the transaction must be reversed, you get it reversed, even if that means delivering cash in briefcases or something like that.
In systems with a basis in technology, final means final. If the North Koreans take your money, your money is taken.
This piece from Patrick mcKenzie explains this well https://www.complexsystemspodcast.com/episodes/the-900m-wire...
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I have worked for and/or audited the majority of exchanges, that mostly white-label a much smaller number of players.
I have yet to see a single one, not one, that had a system of custody that did not allow any one of hundreds of people, most not even employees, to walk away with all of the funds.
There are no standards for security that apply to crypto custodians and the mostly fail to do the bare minimums.
If you use even a top ten custodian, operate under the assumption that the funds are in multi billion dollar plaintext wallets sitting on AWS servers the whole team has ssh access to from the same laptops they "npm install" random shit to all day.
Honestly if you do not feel confident custodying crypto yourself, you should probably not own any.
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The safety net makes you less secure against the U.S. government, but more secure against everyone else. That's the right choice for almost all users, but I still think it's at least kind of good that people have a choice.
You sure about that last sentence?
https://de.fi/rekt-database
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Reason why I consider BTC to not have sense, it makes sense only compared to cash, and when you want cash? Illegal activity or tax evasion.
A person that doesn't have anything to hide is happy to leave it's money in a bank where, under EU legislation, it's guaranteed up to 100k euros per account (so you can have multiple accounts in multiple banks so you are safe), that is no matter if the bank goes bankrupt, the money is stolen, or whatever else you will have your money back.
Use a device that’s mass produced enough it can’t be targeted e.g a MacBook, then keep it airgapped and don’t do normal computing on it.
Hardware wallets are air-gapped. The issue here was a distributor got acquired and then snuck a chip in that could read the spi link between the microcontroller and the screen. The chip had its own cellular modem and could send the passphrase that was shown on the screen to the attackers.
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airgapped pre crypto devices are extra safe: break out the ti82! don’t buy a ti82 for this purpose, it has to be one you had in your closet. If a blog post describes how to code it in TiBasic then affiliate links a calculator in ebay, well…
As dense as MacBooks are, it is nearly trivial to fit a spying device inside them, especially compared to small hardware wallets like Ledger Nanos. As secure as macOS is, once a device is inside the chassis, there are numerous ways to read data. USB serial is easily decodable, as are the many SPI, I2C, and other buses inside the machine.
Keyboard traffic is plain. Bluetooth access depends on where you are positioned. DVI is not hard to decode for capturing the entire screen. KVMs are so small now that one could easily be snuck in. Even though the motherboard is very compact, there is space above it and near the batteries.
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Qubes OS can be more secure than airgapping in some cases: https://doc.qubes-os.org/en/latest/introduction/faq.html#how...
There is none yet.
If there was one, someone would write down the steps necessary and put them on the internet. But I have never seen a sound description of how to self-custody Bitcoin in a safe way.
The hardest part seems to not even be the one that currently creates all those problems - the hardware and software used. The hardest part is storing the key (for example a seed phrase). If anyone says they know a way to safely store Bitcoin, my first question is: How do you store the key?
Where do you store your bank password? Couldn't the same be used for a seed phrase?
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remember it? Write it down somewhere hidden if you have to.
There are a few out there, but this is probably the best: https://github.com/bowlarbear/yeti-2.0
Using the banking system instead of crypto.
get a brand new, cheap laptop or machine (even a raspberry pi works) that you randomly pickup at the store (no delivery order). Install debian 13, install electrum, airgap the device, reboot and generate 1-of-2 your wallet keys.
The wipe the device, use any non-debian other linux (or BSD) to generated the 2-of-2 wallet key.
Why would you ever connect it to the internet? Air gap forever. Physically rip out the radio, only load software by CD (ideally not through a USB interface).
The existing financial system which provides protection to consumers. Crypto doesn’t solve the problem the general public assumes it does and hype has inflated its value dramatically.
MPC or multi-sig is a pretty good solution, you can require a 2/3 sign off from different custody solutions (ie. a hardware, desktop, and mobile wallet)
Yes, but this threat analysis also holds for laptops and phones.
What do you use to access your bank account online? I use my laptop, or my phone.
If your money is stolen from a bank account via fraud you have recourse to get it back, and it’s pretty straightforward to do in most cases.
Very often this is not the case. Debit / credit cards payments are quite reversible, but once a person send $100,000 or even $10,000 to a scammer it can be quite hard to recover.
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But freedom.
Seriously, that's why we have banks, still.
Good luck trying send money abroad or dealing with a sudden unexplained account shutdown.
I have had no problem sending or receiving money abroad, thank you.
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