Only 2% Use Hardware Wallets, Despite $15 Billion Lost in Crypto

Key Takeaways

• Trezor CEO Matej Zak said hardware wallets provided the most secure storage for crypto, despite their usage by only a small number of users.
• Owning Bitcoin indirectly through ETFs or custodians incurs significant fees over time.
• Hardware wallets offer direct ownership and lower costs for long-term holders.

Physical hardware wallets are widely regarded as the optimal solution for securing digital assets and are favored by the most security-minded cryptocurrency holders.

During the BTC Prague conference, Matej Zak , the CEO of Trezor, a Bitcoin hardware wallet company, discussed the recent launch of their Trezor Safe 5 cold-storage wallet and explained why, in some cases, it’s preferable to store cryptocurrencies on hardware wallets.

Crypto Bloodbath: Hardware Wallets Key After $15 Billion Loss

The preference for hardware wallets stems from the fact that computers and smartphones are susceptible to attacks and cannot match the security of a dedicated device.

Zak, therefore, explained that many crypto enthusiasts lack trust in exchanges and seek an easy and secure method to manage their crypto assets. However, since hardware wallets are typically designed more for holding crypto rather than regular usage, he recognized an opportunity to introduce something new to the sector.

He elaborated:

“And speaking of poor life choices, I do worry about the way people own their private keys and the way they own Bitcoin.For example, have you ever wondered who owns the most Bitcoin?

So, out of all the Bitcoins that will ever exist in the network, 7% is going to be mined in the future, 9% is belongs to the miners and to the centre of chain itself, another 10% is currently held by governments, funds and all kind of businesses, and another 17% is unfortunately lost for good.”

He furthermore added that the big question is: Who owns the remaining 12 million Bitcoins?

“And it’s actually all of us. It’s you and it’s me,” he said.

Zak highlighted a significant issue in the crypto community: out of an estimated half a billion crypto users, only 2% store their private keys in hardware wallets, devices designed specifically to secure these keys. He questioned why this low adoption is problematic.

What’s the purpose of Hardware wallets? 
byu/OhMyMemories  inCryptoCurrency 

He identified a few major issues. First, he pointed out a startling statistic: in 2022 alone, more than $15 billion in Bitcoin  and other cryptocurrencies were lost due to hacks, scams, and bankruptcies, noting that the latter two are often interrelated.

He added: 

“Speaking of which, do you know why the CEO of the largest crypto exchange hasn’t come to the largest Bitcoin conference in the world? I cannot say, but let’s say he’s not on holiday.”

Hack Attacks, Hidden Fees – Why a Hardware Wallet?

Zak noted that just a few weeks ago, a major Japanese exchange was hacked , resulting in the loss of $300 million worth of Bitcoin. He emphasized that centralized institutions continue to be significant targets for hackers, a situation he believes will persist.

Zak discussed the resilience of certain companies within the Bitcoin market. He explained that these companies are impervious to hacks targeting their Bitcoin because, intriguingly, they do not possess any Bitcoin at all. This revelation led him to critique the conventional financial sector, pointing out that banks and Wall Street, often mistakenly refer to Bitcoin in overly simplistic terms.

Zak asserted that despite the reluctance of some traditional financial entities to embrace cryptocurrencies, the $1.3 trillion market capitalization  and the 500 million users of crypto are likely to change their perspectives eventually. He then introduced a third problem related to owning Bitcoin indirectly, which involves fees.

Using the example of an ETF, Zak explained that if someone invested in one Bitcoin through an ETF and held it for five years, they could end up paying thousands of dollars in fees. This cost multiplies significantly for those who plan to hold their Bitcoin long-term.

Zak summarized that the less direct ownership one has in Bitcoin, the higher the recurring fees one can expect to pay. He contrasted different levels of Bitcoin ownership, from self-custody where one holds their own keys, to using custodians, and up to investing through ETFs or funds.

He added:

“And at the end of the line, maybe you have even invested stock in a company that owns Bitcoin. So the further you go out through ownership of Bitcoin, the more you can expect to pay.”

Are Hardware Wallets Safe?

Using a hardware wallet to store cryptocurrency is a critically acclaimed method for safeguarding digital assets. These wallets, which store information offline, offer robust security against cyber threats, unlike online wallets or exchanges that are susceptible to hacks.

By keeping private keys offline, hardware wallets significantly reduce the chances of unauthorized access and security breaches. Additionally, their tamper-resistant design protects against physical attacks, enhancing security further.

By choosing hardware wallets, users reclaim control over their financial autonomy and lessen the risks associated with centralized platforms. However, it’s important to note that while hardware wallets considerably reduce risks, no method is entirely infallible.

Users must still adhere to recommended security practices, such as regular updates, strong passwords, and careful management of recovery seeds, to fully secure their cryptocurrency investments against cyber threats.

About the Author

Teuta Franjkovic

Teuta is a seasoned writer and editor with more than 15 years of experience. She has expertise in covering macroeconomics and technology as well as the cryptocurrency and blockchain industries. She has worked for several publications as a journalist and editor, including Forbes, Bloomberg, CoinTelegraph, Coin Rivet, CoinSpeaker, VRWorld and Arcane Bear. Teuta began her professional career in 2005, working as a lifestyle writer at Cosmopolitan in Croatia. From there, she branched out to several other publications, covering mainly business and the economy. She then turned her attention to the world of cryptocurrency and blockchain, believing that crypto is among the most important inventions in the history of humanity. Her involvement in fintech began in 2014 and she has since lent her expertise in writing, editing and gathering information about the world of crypto, blockchain, NFTs and Web3. An all-round news hound, mentor, editor, and writer, Teuta enjoys teamwork and good communication. She holds a WSET2 diploma and has a thing for chablis, punkrock music and shoes. She also holds a double MA in Political science and Entrepreneurship.

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