Sales of hardware crypto wallets are increasing as centralized exchanges fail

The blockchain analysis company Glassnode recently characterized the bear market in 2022 as the worst that has been registered. This seems to be the case due to events such as the war in Ukraine and rising inflation, combined with serious problems among centralized crypto exchanges.

Nevertheless, the bear market has not negatively affected all players in the crypto ecosystem. Hardware wallet vendors seem to be taking advantage of the huge amount of cryptocurrencies from centralized exchanges.

Pascal Gauthier, CEO of the crypto company Ledger for hardware wallet, told Cointelegraph that the company’s revenue fell by around 90% during the 2018 crypto winter, but this has not been the case this year. He said:

“Every quarter we earn as much as the whole of 2020, which was a very good year for Ledger. Right now year after year we are still up, which tells us that this bear market is different. It is not a real bear market, but rather, a bear market for centralized value propositions. “

To put this in perspective, Gauthier shared that the company sent most units of Ledger hardware wallets to date after Coinbase’s loss declaration, which further indicated that users are not protected in the event of bankruptcy. “We had $ 2 million a day in revenue after the release of this report, but it was just a peak because nothing bad actually happened with Coinbase. People just realized that their crypto was not secure,” he said.

Gauthier elaborated that when Celsius froze users’ funds and rumors began to circulate that BlockFi could do the same, Ledger once again saw a big boost in the business. “People rushed to our products to move money to a safe place. We have now seen about six times an increase in revenue week by week, Gauthier said. Ariel Wengroff, head of global communications and marketing at Ledger, told Cointelegraph that the company has recently formed a partnership with Best Buy so that consumers can buy Ledger products directly in the store, which has also increased sales. “We are launching in 256 more stores this July,” she said.

Ledger is not the only hardware wallet provider that is witnessing revenue gains in this bear market. Josef Tětek, Bitcoin (BTC) analyst at Trezor, told Cointelegraph that the company has also seen a significant increase in interest in Trezor devices. “People find that it can be very risky to keep their coins on exchanges and with depositors, so they naturally look for alternatives to self-deposit,” he said.

Tětek added that Trezor believes that the liquidation cascade that centralized lenders and stock exchanges are undergoing has not yet been fully implemented. For his part, he noted that Trezor encourages stock exchange customers and managers to consider withdrawing their coins into their own wallets, at least for the time being. He added:

“As Warren Buffett famously said, we do not know who swims naked until the tide goes out – and the outflow has only just begun.”

Hardware wallet provider GridPlus has also seen an increase in sales, which are mainly generated by the NFT (nonfungible token) community. Justin Leroux, CEO of hardware wallet GridPlus, told Cointelegraph that the company has struggled to meet consumer demand recently, noting that they are increasing production. He explained:

“The NFT community has been the biggest sustained source of growth for us: New users attracted to crypto’s application teams must immediately jump into self-defense to participate in NFT markets since centralized alternatives are not readily available.”

Risks to consider

According to findings from research firm Mordor Intelligence, the global market for hardware wallets was valued at $ 202.40 million by 2020. This market is expected to be valued at $ 877.69 million by 2026, but today’s growing demand for hardware wallets may affect this amount to corresponds to more. While it is remarkable to see the hardware wallet market thrive during a bear cycle, it is also important to mention that these products are not foolproof.

Alejandro Munoz-McDonald, a smart contract engineer at Immunefi – a bug bounty platform for Web3 products – told Cointelegraph that keeping funds in a hardware wallet does not mean they are 100% safe. He said:

“A user can still fall victim to a phishing attack. They sign a transaction and think it will do something else, and then they get NFT or tokens stolen. Another attack vector can be through an infinite approval a user has made to a contract that turns out to have a critical vulnerability. If a compromised contract has permission to transfer your money, they are virtually gone. ”

Munoz-McDonald pointed out that Ledger and Trezor do a relatively good job of preventing attacks on a user’s private key. However, he noted that hardware wallets are still vulnerable to physical attacks. “If an attacker gains physical access to your hardware wallet, the game is over,” he said.

In addition, hardware wallets are also vulnerable to data breaches, allowing attackers to access user information. Ledger witnessed a data breach on June 17, 2020, which prompted the competing popular hardware wallet provider Trezor to issue the coupon code to consumers wishing to transfer funds from Ledger to Trezor.

Munoz-McDonald continues to encourage users to take care of their money, noting that a hardware wallet is the best way to do it. “But they also need to be educated about phishing schemes and have a general online awareness,” he said.

Gauthier added that users need to understand how Web3 works to ensure the self-storage of cryptocurrencies. «Web3 gives ownership to users, while Web2 does not. Decentralization may seem more difficult, but it is a price to pay for self-sovereignty, he said.

Gauthier, who shed light on this, explained that while some crypto-investors may find it easier to buy and hold cryptocurrencies through centralized exchanges, there may be false underlying sentiments that are difficult to capture in the first place. “No one reads the fine print associated with these exchanges, so no one understood the Celsius business model to begin with. Scams are generally easy to use, so users need to do more due diligence, “he said.

Fortunately, as more crypto investors migrate to hardware wallets, a number of vendors have begun to place great emphasis on user education. Adam Lowe, the creator of Arculus – a wallet solution for cold storage – told Cointelegraph that it has become clear that there is a strong tailwind that drives the need for hardware wallets.

Given this, he believes that first-time crypto users should evaluate hardware wallets based on best-in-class security features and ease of use. “If it looks too complicated to use, you will either stop using it or worse, lose access to your crypto,” he said. To help users navigate this, Lowe mentioned that Arculus has a comprehensive FAQ page, along with videos to help users get started.

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Leroux also stated that the most important security tool is education. According to Leroux, common attack vectors for hardware wallet users are social engineering and phishing attempts rather than sophisticated technical approaches. “Although we’ve seen scripts for browser extensions that hijack user wallets, it’s far more common to see users lose money due to basic mistakes like incorrect storage of the seed phrase or being tricked into sharing it,” he said.

While much of this may sound daunting, it is important to point out that many providers offer 24/7 support centers in addition to educational content. It is also noteworthy that both Ledger and Trezor wallets allow users to restore access to the wallet through a seed phrase using a different hardware wallet. This feature can be very useful if a user loses or has their wallet stolen. Should this happen, a user can recover their money on another Ledger, Trezor or SafePal hardware wallet.

Veronica Wong, CEO of SafePal, told Cointelegraph that the company emphasizes the importance of keeping private keys safe and has seen an obvious growth curve over the last 30 days due to the problems at the centralized crypto company. She added:

“As crypto-penetration and user base continue to grow, decentralized wallets will become the most important blockchain entry for new users. In the long run, wallets can even become a chain identity administrator, protecting all your chain data and authorizations.”

Meet new growth

Aside from risk, the phrase “Not your keys, not your coins” has become clearer to the crypto community than ever before. “The current challenges of accessing crypto on exchanges highlight the need for secure ownership of your private keys,” Lowe stressed.

As a result, hardware wallet vendors are preparing to accommodate a sudden increase in users. To do this, many develop new products while ensuring that existing features meet market requirements. For example, Lowe shared that Arculus recently announced NFT support and WalletConnect integration, giving consumers the ability to browse NFTs and DApps within the Arculus ecosystem.

Gauthier also explained that Ledger has been focused on developing its products for Web3, noting that the company has just announced “clear signing” technology for NFTs. While the Ledger Nano S Plus was designed with NFT collectors in mind, Gauthier explained that the clear signing feature was officially implemented during “Ledger Op3n”, an event that took place on June 22 this year in New York.

“No one makes clear signings for NFTs – everyone just sends NFTs blindly left and right, which is a terrible thing to do,” he commented. Clear signing aims to provide all the details of a transaction. Gauthier, for his part, added that hardware wallet vendors need to focus on certain features going forward, such as larger screens, more memory and extra connectivity.

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While it is crucial to meet NFT growth, Tětek mentioned that Trezor is exploring options to implement Lighting Network features for its users, which will help make Bitcoin transactions faster and cheaper. According to a Trezor blog post, this will ultimately make Bitcoin more convenient to use as a means of payment.

All of this boils down to the urgency for crypto-investors to take personal security more seriously. «Self-care is a basic requirement for both financial self-overview and the use of unauthorized decentralized systems. “If you only use centralized exchanges, you do not use crypto, you can only trade IOUs in a company’s database,” said Leroux.