Hardware wallets are small devices (a Ledger, a Trezor & their cousins) that hold your cryptocurrency’s private keys in an internal chip; this chip will never let your private keys leave. Here’s how that process works, what the seed phrase really means, and what occurs if the device breaks down, gets wet, lost etc.
Your cryptocurrencies live on the blockchain. The device houses the keys that verify ownership of these cryptocurrencies, and the seed phrase is simply a piece of paper with the keys written on it. Once you understand this concept, every possible loss scenario should become very predictable.
While the cleverness doesn’t reside in how well the device stores your secrets, it resides in how no secret ever exits.
When you first install a hardware wallet, it creates your private keys within a secure element: a microchip engineered to allow your keys to be utilised while they cannot be read. In other words, when you send some cryptocurrency through your device, the transaction remains unsigned until it goes into the device, at which point it is signed inside the device. Only the harmless signature created during this signing process returns. If malware were present on your computer it could monitor all transactions throughout the day and still never view your keys as the keys would have never crossed the wire. This describes the entire security architecture and it’s quite effective.
At the same time as establishing the hardware wallet, the device displays a recovery seed, typically comprised of 12 or 24 words. These words represent more than just passwords. These words are your keys themselves, in code for humans. Anybody who has possession of this seed can create a new version of your wallet on any device that is compatible. This strip of paper represents both your insurance policy and greatest risk factor.
Work through each potential situation based on the one-liner above and the solutions will emerge.
Device dead, seed safe: nothing to worry about. Place the seed on a different device, all will be as it were; money didn’t move. Device stolen, seed safe: thief faces PIN entry and there are only a handful of attempts that the thief can make before the device wipes itself; just place seed back in a wallet and send money to some new wallets for your peace of mind. Seed destroyed, device alive: act immediately, as the device is still signing transactions; move all funds to a wallet whose seed you hold (and therefore control) since you are one failure away from being in the last situation. Both gone: the honest one. The secure element was designed with anti-extraction techniques and the blockchain does not offer customer support; this is what each other protection exists to protect against.
Far less compared to what the scammers say they can do, but also much more than most people realise.
Be very cautious about people who say they can “hack” into a hardware wallet or get money back once you have sent it to a thief; the former is exactly why the chip was designed with this protection in place (to make an attack by someone trying to access your funds impossible) and the latter will be the next scam after this one. The actual work surrounding the device includes recovering your seed phrase off a dead phone; wallet files off a failed laptop disk; corrupted USB backup; or your old software wallet that won’t boot. Our cryptocurrency wallet recovery services recover keys & backups from your own broken devices; we do not quote unless we believe recovery of your data is possible; and we charge a fee for the work on the project, not as a percentage of the amount in the wallet.
They protect against different things. Hardware wallets remove the risk of the exchange being hacked, frozen or collapsing (exchange risks). With a hardware wallet you have full control over the private keys, which means that only you hold the keys. This is the trade off for removing the exchange from the equation. If you lose both the hardware and the seed phrase associated with it then there is no way that anyone will be able to recover your account. While this may be safer for those who are very cautious with their digital information, it is much more unforgiving for people who aren’t.
Typically no, but most people would be shocked by that. The digital currency lives on the blockchain. The hardware wallet merely stores the private key(s). Simply purchase another wallet and input your seed recovery phrase. Your original wallet will restore itself in its previous state. The worst-case scenario is having both the hardware wallet fail AND losing your seed phrase.
This is precisely what the security chip(s) inside the hardware wallets are designed to defend against. And we will say honestly: routinely, no. However, the lab environment can genuinely help with all surrounding issues related to the hardware wallet. Recovery of lost seed backup and/or lost wallet file data from a failed hard drive, failed phone SD card, failed USB stick, or failed computer (in addition to recovering access to software wallets where the storage for those wallets have failed).
If your keys or backups are trapped on a dead drive, phone card or stick, all of these represent areas in which we can assist you. First a free, confidential consultation regarding a potential problem; then we provide a detailed written quote before doing anything.