Crypto enthusiasts consider hardware wallets to be one of the best ways to protect digital assets from theft. However, such devices have disadvantages.
In a joint article with Mixer.money we will look at the security model of the most popular hardware wallets – Trezor and Ledger. We will also tell you what to do in case of a compromise or attack on the device.
Why the community thinks hardware wallets are safe
Trezor and Ledger are essentially flash drives with special software and microcontrollers for encrypting information. The mechanism of their work can be described as follows:
- The user sets a PIN.
- The device generates a seed phrase to generate private keys and encrypts them using the PIN as the decryption password.
- The wallet stores the keys in non-volatile memory.
- The software reads and decrypts the data only after entering the code.
Hardware wallets are protected from the most popular hacker attacks:
- dump – the chip does not allow copying information for decryption on a computer;
- PIN code brute force – after 3-10 unsuccessful attempts to enter the PIN code, the wallet erases all data;
- controller reflashing – the device deletes all information when trying to install custom firmware;
- side channel – The wallet software encrypts the data stream to the PC so that a hacker cannot connect to the USB cable, read the transmitted bits and extract the private key.
Despite these measures, attackers find ways to gain access to the private key.
Trezor controller vulnerabilities
Trezor wallet creator SatoshiLabs opened device source code for white hat hackers to help find wallet vulnerabilities. In 2020 Joe Grand took advantage Trezor Model One controller bug and restored access to a user who forgot their PIN. To do this, he cyclically rebooted the wallet and applied a current with a specially calculated voltage to the controller in order to deceive the security system.
In May 2023, wallet recovery company Unciphered announced that the Trezor Model T had been hacked. Its employees turned to a hardware vulnerability in the STM32 controller to copy data to a computer and extract the seed phrase.
SatoshiLabs assured that in order to exploit these vulnerabilities, a hacker needs physical access to the device, special knowledge and expensive equipment. This is partly true: it took Joe Grand three months to hack Trezor One.
Potential Vulnerability of Ledger Wallets
The Ledger manufacturer does not disclose the source code of the firmware. The wallets run on the BOLOS operating system, which does not allow you to make a memory dump even when directly connected to the chips. Since the company was founded in 2014, there has not been a single confirmed hack of Ledger wallets.
In May 2023, the company announced the Ledger Recover wallet recovery service: the user passes KYC, and the Ledger breaks the seed phrase into three encrypted fragments and sends them to trusted custodians in France, Britain and the United States. If the device is lost, the owner can verify the identity, get the fragments and restore access to the wallet.
The innovation caused discontent in the community: the possibility of creating such a function indicates that the Ledger can extract the seed phrase without the knowledge of the owner of the wallet.
Other hardware wallet vulnerabilities
In 2020, the Ledger customer database leaked to the network, and a year later, information about Trezor users appeared on sale.
intruders used names, addresses and contacts of buyers for “whale hunting” – sending personalized phishing emails on behalf of Ledger or Trezor technical support.
In both cases, the leaks were caused by third-party online stores. Buying from intermediaries carries another danger: resellers can sell flashed devices with backdoors in order to obtain private keys.
How to protect funds on a hardware wallet
Despite potential threats, hardware wallets remain one of the most secure solutions for storing cryptocurrencies.
To reduce the risk of theft and loss of access to digital assets, you need to follow several rules:
- buy wallets only from manufacturers or official representatives;
- do not use simple PIN codes like date of birth, 0000 or 1234;
- set an additional password for the seed phrase to make it more difficult to extract the key if the wallet is stolen.
If the device is lost, restore access with a seed phrase, and then send cryptocurrencies to new addresses.
When phishing, transfer assets to another wallet using bitcoin mixers like Mixer.money. So you will break the on-chain connection between the cryptocurrency and the identity of the owner of the coins.
Remember: in theory, any device can be hacked. You should not keep all the funds in one wallet, no matter how safe it may seem.
Found a mistake in the text? Select it and press CTRL+ENTER
Cryplogger Newsletters: Keep your finger on the pulse of the bitcoin industry!
Crypto enthusiasts consider hardware wallets to be one of the best ways to protect digital assets from theft. However, such devices have disadvantages.
In a joint article with Mixer.money we will look at the security model of the most popular hardware wallets – Trezor and Ledger. We will also tell you what to do in case of a compromise or attack on the device.
Why the community thinks hardware wallets are safe
Trezor and Ledger are essentially flash drives with special software and microcontrollers for encrypting information. The mechanism of their work can be described as follows:
- The user sets a PIN.
- The device generates a seed phrase to generate private keys and encrypts them using the PIN as the decryption password.
- The wallet stores the keys in non-volatile memory.
- The software reads and decrypts the data only after entering the code.
Hardware wallets are protected from the most popular hacker attacks:
- dump – the chip does not allow copying information for decryption on a computer;
- PIN code brute force – after 3-10 unsuccessful attempts to enter the PIN code, the wallet erases all data;
- controller reflashing – the device deletes all information when trying to install custom firmware;
- side channel – The wallet software encrypts the data stream to the PC so that a hacker cannot connect to the USB cable, read the transmitted bits and extract the private key.
Despite these measures, attackers find ways to gain access to the private key.
Trezor controller vulnerabilities
Trezor wallet creator SatoshiLabs opened device source code for white hat hackers to help find wallet vulnerabilities. In 2020 Joe Grand took advantage Trezor Model One controller bug and restored access to a user who forgot their PIN. To do this, he cyclically rebooted the wallet and applied a current with a specially calculated voltage to the controller in order to deceive the security system.
In May 2023, wallet recovery company Unciphered announced that the Trezor Model T had been hacked. Its employees turned to a hardware vulnerability in the STM32 controller to copy data to a computer and extract the seed phrase.
SatoshiLabs assured that in order to exploit these vulnerabilities, a hacker needs physical access to the device, special knowledge and expensive equipment. This is partly true: it took Joe Grand three months to hack Trezor One.
Potential Vulnerability of Ledger Wallets
The Ledger manufacturer does not disclose the source code of the firmware. The wallets run on the BOLOS operating system, which does not allow you to make a memory dump even when directly connected to the chips. Since the company was founded in 2014, there has not been a single confirmed hack of Ledger wallets.
In May 2023, the company announced the Ledger Recover wallet recovery service: the user passes KYC, and the Ledger breaks the seed phrase into three encrypted fragments and sends them to trusted custodians in France, Britain and the United States. If the device is lost, the owner can verify the identity, get the fragments and restore access to the wallet.
The innovation caused discontent in the community: the possibility of creating such a function indicates that the Ledger can extract the seed phrase without the knowledge of the owner of the wallet.
Other hardware wallet vulnerabilities
In 2020, the Ledger customer database leaked to the network, and a year later, information about Trezor users appeared on sale.
intruders used names, addresses and contacts of buyers for “whale hunting” – sending personalized phishing emails on behalf of Ledger or Trezor technical support.
In both cases, the leaks were caused by third-party online stores. Buying from intermediaries carries another danger: resellers can sell flashed devices with backdoors in order to obtain private keys.
How to protect funds on a hardware wallet
Despite potential threats, hardware wallets remain one of the most secure solutions for storing cryptocurrencies.
To reduce the risk of theft and loss of access to digital assets, you need to follow several rules:
- buy wallets only from manufacturers or official representatives;
- do not use simple PIN codes like date of birth, 0000 or 1234;
- set an additional password for the seed phrase to make it more difficult to extract the key if the wallet is stolen.
If the device is lost, restore access with a seed phrase, and then send cryptocurrencies to new addresses.
When phishing, transfer assets to another wallet using bitcoin mixers like Mixer.money. So you will break the on-chain connection between the cryptocurrency and the identity of the owner of the coins.
Remember: in theory, any device can be hacked. You should not keep all the funds in one wallet, no matter how safe it may seem.
Found a mistake in the text? Select it and press CTRL+ENTER
Cryplogger Newsletters: Keep your finger on the pulse of the bitcoin industry!
