Cryptoverse: Hack jitters push bitcoin investors back to the future

Oct 11 (Reuters) – Being a crypto investor is not easy.

They have seen the value of their holdings drop like a brick this year, and now many are monitoring the safety of their cryptocurrencies after a series of heists that have seen around $2 billion driven away by hackers.

Enter the ghost of technology’s past.

Hardware wallets—old-fashioned physical devices similar to USB drives that store crypto holdings offline—may seem like a throwback to a more innocent digital age, but they’re proving to be a popular answer to a cutting-edge conundrum.

The global hardware wallet market, valued at $245 million in 2021, is expected to swell to over $1.7 billion by 2030, according to market research firm Straits Research.

It’s being fueled by a steady stream of cyber robberies that, according to researcher Chainalysis, have seen thieves steal $1.9 billion in crypto in the first seven months of the year, a 60% increase from the previous year. Much of this was stolen directly from blockchains or “hot” online wallets.

It’s not just hacks that make investors nervous. Others lost access to their crypto when major lenders such as Celsius Network and Voyager Digital collapsed in July.

“We’ve definitely seen increased interest in hardware wallets, and self-storage in general, after several issues,” said Adam Lowe, chief product and innovation officer at U.S.-based CompoSecure ( CMPO.O ), one of several hardware wallet makers. seeking to exploit a rush for safety.

“The day or day after these events, we will see very significant (sales) boosts.”

There’s no such thing as a free crypto lunch: While hot wallets are convenient and allow for fast trading, hardware wallets typically don’t appeal to first-time investors, who often buy cryptocurrencies on major exchanges and may choose to hold onto their holdings. on these platforms, where they can simply log in with a username and password.

BLOWS HOT AND COLD

Although hot wallets are usually free and provide quick access to crypto, they can be vulnerable to hacks. In August, nearly 8,000 crypto wallets on the Solana blockchain were hit by hackers who made off with more than $5 million in crypto.

“Users are strongly encouraged to use hardware wallets,” Solana said at the time.

France’s Ledger, another wallet maker, said it saw an increase in sales after the Solana wallets.

“We’re seeing a significant increase in user-based interest in some of these stressed markets,” said Alex Zinder, global head of Ledger Enterprise.

Most hardware wallets connect to a mobile app, where the owners of the digital keys needed to access their crypto-keys can control their funds. Some use “Secure Enclave” technology, a security feature used to store sensitive data.

Josef Tětek, bitcoin analyst at Czech-based hardware wallet company Trezor, says he expects better phone interaction with cold storage wallets in the future, to serve investors in places like South America and Africa, where it’s more common for users to have mobile phones than personal computers .

Nevertheless, companies in this ballooning market can be advised to make hay while the sun shines.

A long-term question is whether phone makers will get in on the action, said Stan Miroshnik, co-founder and partner at 10T Holdings, which led Ledger’s $380 million Series C funding round last year.

“A question, I think, for the industry and where it’s going, and partly what will drive consumer adoption, is what if every iPhone has a built-in Secure Enclave hardware wallet?”

Reporting by Hannah Lang in Washington; Editing by Tom Wilson and Pravin Char

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