Cryptoverse: Hack jitters push bitcoin investors back to the future
11/10/2022 06:10
(Our weekly analysis of the wild world of cryptocurrencies)
By Hannah Lang
Oct 11 (Reuters) - It's not easy being a crypto
investor.
They've seen the value of their holdings drop like a brick
this year, and now many are stewing over the safety of their
crypto cash after a series of heists that's seen around $2
billion spirited away by hackers.
Enter the ghost of technology's past.
Hardware wallets - old-school physical devices similar to
USB drives that stash crypto holdings offline - might seem a
throwback to a more innocent digital age, but they're proving to
be a popular response 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, has seen thieves
steal $1.9 billion in crypto in the first seven months of the
year, an increase of 60% from a year earlier. Much of this was
stolen directly from blockchains or "hot" online wallets.
It's not only hacks making investors edgy. Others lost
access to their crypto when major lenders such as Celsius
Network and Voyager Digital collapsed in July.
"We have definitely seen increased interest in hardware
wallets, and in general self-custody, post-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 capitalize on a rush for safety.
"The day of or day after those events, we would see very
significant (sales) lifts."
There's no such thing as a free crypto lunch, though: While
hot wallets are convenient and allow for quick trading, hardware
wallets typically don't appeal to first-time investors, who
often buy cryptocurrencies on big exchanges and might choose to
keep their assets on those platforms, where they can simply log
in with a username and password.
BLOWING HOT AND COLD
Although hot wallets are usually free and offer 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 hardware wallet maker, said it saw
a spike in sales after the Solana wallets heist.
"We do see significant uptick in user-based interest in some
of these situations of stress in the markets," aid 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.
Yet companies in this ballooning market might be advised to
make hay while the sun shines.
One long-term question is whether phone makers will want to
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.
"One question, I think, for the industry and where it's
going and in part what will drive consumer adoption, is what if
every iPhone has a built-in Secure Enclave hardware wallet?"
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Crypto hacks fall https://tmsnrt.rs/3TbRJbm
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(Reporting by Hannah Lang in Washington; Editing by Tom Wilson
and Pravin Char)
((Hannah.Lang@thomsonreuters.com;))