bitcoin

Air pocket? Hardware wallet? Multisig? Bitcoin Self-Storage Means Tough Choices


Bitcoin (BTC) security is hard to come by: any form of offline or “cold” storage available today has tradeoffs. Which is more secure is still a matter of debate between Bitcoin software developers and wallet makers.

Sovereign money comes with responsibilities. Experienced bitcoiners will tell you: it’s not enough to buy bitcoin; To truly begin your journey to financial independence, you must have full control of your cryptographic private keys, which means your bitcoin must remain on your own device.

However, choosing a device to store your bitcoins is a business in itself. Over the past few years, companies working in this field have come up with a variety of options, all of which have pros and cons.

The easiest thing to get started is to download a software wallet or app that generates keys for your bitcoin on your phone or laptop. But phones and computers are stolen or lost, they break, and they can be infected with malware. The fledgling hardware wallet industry offers a different solution: a small device designed to keep bitcoin keys in its memory and sign transactions, with no other features and no persistent internet connection.

However, what is the best solution for an average bitcoiner is still debatable. Some of these arguments were made during a panel at the bitcoin-only Baltic Honeybadger conference in Riga, Latvia last weekend.

Here are some highlights.

Delicate material

Pavol Rusnak, CEO of hardware wallet maker Trezor, said a product like the one made by his company is the safest way to store bitcoin because it has a “limited attack surface.”

“It’s less complex hardware, and the software isn’t as complex as Windows, macOS, or Android. And it’s offline most of the time,” Rusnak told CoinDesk, adding that “most attacks are remote attacks using malware, and that’s what the hardware wallet protects you against.”

Speaking at a panel on bitcoin security, crypto consultant Peter Todd disagreed with this approach, saying he doesn’t use hardware wallets: “I’d rather use a laptop , as it is unlikely to be specifically targeted and put [the laptop] in a safe. »

Hardware wallets, which you usually order via the Internet and receive at home, can put a target on you as a bitcoin holder. Using a laptop, people may never know, Todd explained while speaking to CoinDesk offstage.

In addition, factories making hardware wallets could become the target of a supply chain attack, he added. Someone could tamper with the devices and redesign them to steal bitcoins from users.

Therefore, “My advice to a lot of people is to buy a phone, put your hardware wallet in it, and don’t use it for anything else. Your phone is not a target. Your phone’s supply chain is not a target,” Todd said.

An ideal setup would be to use a multi-signature wallet, where you use multiple devices in your possession to sign each transaction by spending your bitcoin, Todd said. However, at the moment “the software stack for multisig technology is not very good and not easy to use”.

Ultimately, there’s no way for an ordinary person to check if the device being used is working as advertised, Todd said onstage. “Have I personally ever gone to the trouble of getting my Trezor, which I don’t use for various reasons, and doing all the work to verify that it works as it claims? No, it’s a whole lot of work, and chances are it won’t work out,” he said.

The situation gets worse, he added: if a wallet uses open source software – that is, its code is published on the Internet – you may be able to verify this code, but then there are compilers – another type of software that becomes high level. machine language code that an ordinary computer can understand – which is even harder to verify.

“These systems are so incredibly complex,” Todd said, adding that these compilers are like “gigantic factories” of code, very difficult to navigate, and not all parts of the compilers’ code are generally open source.

Left to right: Douglas Bakkum, Peter Todd, Rigel Walshe and Pavol Rusnak at the Baltic Honeybadger 2022 in Riga, Lativa (Anna Baydakova/CoinDesk)

Left to right: Douglas Bakkum, Peter Todd, Rigel Walshe and Pavol Rusnak at the Baltic Honeybadger 2022 in Riga, Lativa (Anna Baydakova/CoinDesk)

To air gap or not to air gap

Another controversial issue is how hardware wallets should communicate with other devices.

To receive information about a transaction it is about to sign, a hardware wallet must at some point be connected to an internet-connected device, laptop or mobile phone. They can connect via a wire with a USB port, a microSD memory card, or communicate via QR codes that a wallet generates for a phone camera to read.

Some hardware wallet manufacturers try to avoid a wired connection between a wallet and a computer, so they have an air gap – a security feature where a device is never connected to the internet.

“The physical transfer of electronic information, for example via a MicroSD card, rather than via a computer network, will significantly reduce the possibility of synchronous attacks,” said Rodolfo Novak, co-founder and CEO of Coinkite, maker of the hardware wallet. Coldcard, in an email to CoinDesk. (Coinkite did not present at the Riga conference.).

“With USB, attackers have direct access to the hardware, which makes remote attacks easier. The fact that the computer’s operating system must choose the correct driver for USB devices based on their serial numbers creates an anonymity problem for devices like Trezor whose data clearly includes a serial number on startup. Novak explained, adding that “Any malicious actor who may have penetrated your computer’s internet connection may have access to your keys if you are connected via USB.

By exposing the existence of the wallet and its unique serial number to the internet, a USB connection makes it vulnerable, Novak said. With a micro-SD card, on the contrary, no crucial information is compromised when a live internet connection is involved, he added.

However, Baltic Honeybadger panel participants disagreed that an SD card is safer than a USB cable.

“The wire between your wallet and your computer isn’t necessarily a bad thing,” Todd said on stage. “The question is how do you design this wire, how much current, how many electrons, literally, per second, flow through this wire, and how quickly can that number change.”

He added that modern SD cards used for isolated versions of wallets are not as simple devices as they seem: an SD card is “a full 32-bit microprocessor”.

Rusnak, from Trezor, echoed the idea. “Nowadays SD cards use more computing power than my first computer,” he said. “I’m more afraid that this SD card may exfiltrate some data from my computer.”

Novak disagrees. “A MicroSD attack is more difficult to perform compared to a USB attack by a factor of several orders of magnitude,” he told CoinDesk, adding that the microSD cards Coldcard provides with its wallets use “an amount much smaller code”, compared to USB, “which makes it easier to audit exploitable bugs”.

Ultimately, anything can be hacked.

“A hardware wallet maker’s job is to make it not worth the attacker’s time, too costly in time or money,” said Douglas Bakkum, the founder of a hardware wallet company. BitBox.

There are several levels at which hardware wallets can be attacked, Bakkum explained in his presentation, which repeated points raised in an October company blog post: Attacks on the communication layer (i.e. i.e. the protocol connecting a wallet to a laptop, be it USB port, QR code or SD card, is compromised), the logical layer (malware is injected) and the physical layer (the attacker breaks the device , attaches probes to it and tampers with it).

A supply chain attack threat can affect both USB-connected devices and SD cards, Rusnak said.

“If there is an attacker who wants to attack you via USB, he might as well give you an SD card which is somehow malicious. If your attacker is a regular thief, that’s not a problem, and if the attacker is the FBI or some other federal agency, even an SD card won’t help you,” he told CoinDesk.

“You have to draw a line in the sand somewhere when you go down the rabbit hole where you can’t trust anything,” Rusnak said.

A bigger picture

When securing your bitcoin, it’s important not to make things too complex for yourself, Rusnak said. People who choose to design a complex security setup for their bitcoin storage, for example, by writing their seed phrase (a key to recover a lost wallet) in the wrong order, could “shoot themselves in the foot.” if they forget the correct order or their heirs are unable to restore it.

“Your setup should be usable even 10 years from now, 15 years from now,” Rusnak said onstage, recommending users always document their security hardening processes for the future.

“Don’t trust your brain,” Bakkum repeated.

Rigel Walshe, a former police officer in New Zealand and now a developer at Swan Bitcoin, a California-based company that helps customers save with bitcoin, reminded the audience that regardless of the technical solution used, it is important to take take care of your physical security – meaning, don’t let anyone know where you (and your bitcoins) are.

For example, you can use a PO Box or even an LLC for a mailing address to protect your actual location; even your utility bills may be sent to an address other than where you actually are, Walshe said. In this case, even if people find your personal information on the Internet, they still won’t be able to get you (and your bitcoin).

“Assume your information will be doxxed and released,” Walshe said.

Speaking to CoinDesk, Todd mentioned another possible security factor, pulling the Ethereum blockchain, which hardcore bitcoiners consider a worse technology.

“Because there are ecosystems like Ethereum, where the security is terrible, bitcoiners aren’t as much at risk as they could be,” Todd said. “If you’re a bad guy and you know how to crack stuff, what would you focus on? You will focus on stealing [decentralized finance], which is easier than stealing bitcoins. It keeps hackers away from us.

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