There has been no shortage of crypto casualties this summer.
On August 8, Singapore’s Hodlnaut joined fellow lenders Vauld and Celsius and Singaporean exchange Zipmex in suspending user crypto withdrawals because of “recent market conditions.”
The measure was ostensibly taken to “stabilize liquidity,” a phrase also used in Celsius’ withdrawal freeze announcement.
With little warning, investors were hit with the news that the bulk of their digital wealth had been effectively seized while firms hashed out a recovery plan. Many have been affected in varying degrees of severity and the human cost is often harrowing to read.
Left high and dry, the recent liquidity crisis has reminded many of the industry’s sage words: Not your keys, not your coins. And new evidence now shows that many are taking these words to heart this time around.
While crypto companies are filing for bankruptcy or receiving bailouts; while Coinbase, Gemini, and blockchain.com have all announced mass layoffs; while Solana and Nomad are left reeling after another multimillion-dollar attack, one subsector is flourishing: hardware wallets.
Crypto security takes center stage
Hardware wallets are often touted as the ideal option for storing crypto long-term.
They keep users’ private keys stored securely offline. Unlike software wallets, they're mostly immune to online attacks, though they have been targeted by phishing attacks, the most recent of which happened this year when a Mailchimp newsletter database containing the emails of Trezor users was compromised.
So, they’re not invulnerable, but if you’re careful and hawk-eyed, hardware wallets can be a much better alternative than their software counterparts.
The top models from Ledger or Trezor are also resistant to physical tampering, making them a safe bet for anyone looking for long-term digital asset storage.
An exploit in Slope mobile wallet applications, for example, led to Solana users’ private keys being “inadvertently transmitted” to a “third party,” according to Solana’s developers. The attacker made off with $4.5 million in SOL and USDC.
Binance CEO Changpeng Zhao later tweeted that those who were concerned could send their funds to a hardware wallet.
There is an active security incident on Solana. Many (7000+ and counting) wallets are drained of SOL & USDC. Don't know root cause yet. Maybe permissions granted to apps. For remediation, send the funds to a cold wallet or CEX like @Binance. https://t.co/nQrBXAgCbf
— CZ 🔶 Binance (@cz_binance) August 3, 2022
Amid the wave of insolvencies, freezes, and hacks, hardware wallet sales have spiked.
A Ledger representative tells Decrypt people were always eventually going to think about security. At the Ledger Op3n conference in June, the company announced it had sold over 5 million units. "Recent issues with lenders, bridge hacks, the Solana wallet exploits, etc. have only increased demand and sales.”
He told Decrypt that Ledger sales jumped “4.5x” after Celsius’s bankruptcy.
Ledger isn’t alone, either. Trezor and SafePal have also posted a hefty rise in sales of late.
Users are ‘waking up’
Decrypt emailed representatives from Ledger, Trezor, and Singapore-based hardware wallet manufacturer SafePal to ask if they’ve seen an increase in sales during the latest crypto winter, and all three unanimously affirmed it.
SafePal replied that it had seen “substantial growth” in both product and asset management scales, attributing it “to the collapse of centralized financial institutions and the liquidity crises affecting the crypto industry.”
SafePal didn’t offer specific sales information, but CEO Veronica Wong said that her firm believes “the growth will continue” as crypto continues to gain traction among newcomers.
A representative from Trezor also confirmed it has seen “increased interest in self-custody solutions over the past few months, although the effects of the ongoing bear market are also being felt.”
The company said that crypto users are “waking up to the fact that they could lose access to their assets at any time,” adding, “We believe this is a good development that should ensure that user losses are not as widespread and large as they were in the recent cascade of bankruptcies.”
The Ledger representative iterated this sentiment, telling Decrypt that “this almost had to happen for people to realize how important security is for storing people’s assets.”
On the day of the Solana wallet exploits, sales of Ledger hardware wallets had “more than tripled” before Ledger announced the“MOVESOL2LEDGER” discount code, which ran till August 7, offering new buyers 10% off the Nano X and the Nano S Plus models.
Ledger reported “a bigger increase” after the announcement and said both models “are seeing a similar interest.”
“While it’s really disappointing and sad for a lot of people that they lost out, something like this was going to happen. I think people are now realizing why they need to have more of a focus on security, and I think we’ve seen that reflected in the sales,” the Ledger representative.
Unfortunate and inevitable sacrifices have been made, say experts, but clearly, the spotlight is turning from yield farming and meme coins. Now, crypto security is taking center stage.
Editor's note: This article has been updated to correct the attribution of a source.