By Mark Venables, CEO of The Crypto Merchant
In July 2023, the cryptocurrency sector saw a significant escalation of cyber-related incidents. The loss was initially reported at $486 million but has since been recalculated to reflect new information and placed close to $390 million. The reduction gave little comfort to those who saw losses during the month and didn’t do much to set the crypto world at ease.
Most losses were attributed to the Ethereum platform, which lost over $350 million in 36 incidents. Binance recorded notable losses totaling around $11 million from 18 incidents. Regarding the recovery efforts, their success was minor — only $7.63 million were reclaimed.
The gravity of this July’s incident report becomes even more apparent compared to July 2022, when slightly more than $80 million in cryptocurrency was lost in incidents. The fivefold increase occurred over access control exploits, rugpulls, and reentrancy attacks. It was a stark reminder that cryptocurrency holders must take security more seriously.
Cold Wallets: An Underutilized Line of Defense
Cold wallets are an effective security measure that can help safeguard cryptocurrencies against various attack vectors. They are called “cold” because they’re not connected to the internet, which means they can’t be attacked the same way a regular, “hot” wallet can. They are also called “hardware wallets” because they often come in the form resembling a USB stick — they use external hardware devices to store private crypto keys safely.
Cold wallets have additional safety features besides their offline nature. They can be dust- and waterproof for extra physical durability. Some will have automatic data elimination for breach detection. They come with PINs and seed phrases that help retrieve data if they’re lost. Cold wallets can offer different levels of tamper protection and can use biometric security features.
The biggest problem with them, however, is that their market penetration is only at ten percent — they are incredibly underused.
Cold Wallet Sales Surge in Crisis Moments
Cryptocurrency holders need an occasional nudge to remind them that there are additional things they could be doing to keep their funds safe. Sadly, it’s usually when something terrible happens that people choose to react.
When FTX collapsed in November 2022, Trezor and Ledger, among the most prominent makers of cold wallets, confirmed to Decrypt that their sales had increased. Talking to Cointelegraph, Ledger’s CEO Pascal Gauthier noted how disruptions in the market usually cause an uptick in the company’s sales. He cited Coinbase’s declaration of losses and Celsius’ fund freezing as two other events.
Chances are the most prominent players on the market will see another surge right about now. The problem remains that, despite the advantages of cold wallets, many cryptocurrency enthusiasts will remain unaware of them or hesitate to invest in one until an event or report nudges them into buying it. And hopefully, it will be a report, not a security event where their assets are compromised.
Breaking the Misconceptions
Crypto enthusiasts have been slow to adopt cold wallets for several easily identifiable reasons. One popular misconception is that the setup and maintenance of cold wallets are complex. Manufacturers have done great at streamlining the process over the years, reducing the initial learning curve. Plus, there’s a wealth of online resources for guidance.
The cost might be another obstacle. A high-quality wallet from a renowned brand with solid features comes with a price tag that might seem too much for some, especially novices. There are always cheaper options, but a costly cold wallet can still be an excellent investment. The potential costs of losses from a cyber-attack can easily justify the investment.
How to Get a Good Cold Wallet
When people decide to get their cold wallet, they first have to consider where to buy it. Cold wallets should be purchased from the manufacturer or authorized resellers. Manufacturer websites such as Ledger.com will hold a list of authorized resellers.
The next step would be determining how someone wants to use the wallet. Some users prioritize trading, while others wish for long-term storage wallets. Some cold wallets even allow crypto-loaded gift cards, a great way to pass on digital assets to others.
Wallets have many features that make them more or less complicated and secure. Some can be as simple as a thumb drive. Others will have biometric scanners. Seasoned traders will have different cold wallets for various purposes, too — there’s no need to restrict oneself to only one cold wallet.
The bottom line is that the bigger and more successful the cryptocurrency industry is, the more of a target it becomes for hackers. One of the best ways for people to safeguard their digital assets is to take an active role in self-custody. The reality is that adopting cold wallets en masse isn’t a precaution but a necessity. And no one should wait for the wake-up call of becoming a target or losing their assets.
About the Author
Mark is a multifaceted entrepreneur who has excelled in multiple industries. His diverse portfolio includes a long-standing staffing agency, a background screening business, a UK-based real estate business, and a prominent ecommerce business – The Crypto Merchant. The Crypto Merchant, his latest major acquisition in 2021, is now the largest reseller of crypto cold wallets in North America.
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