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Bitcoin investors return to the future despite hack concerns

Being a crypto investor is challenging.

They have witnessed the value of their investments plummet this year, and many are now worried about the security of their cryptocurrency funds following a string of heists in which almost $2 billion was stolen by hackers.

Hardware wallets, which are retro physical storage devices like USB sticks that store cryptocurrency holdings offline, may seem like a holdover from a simpler digital era, but they are proving to be a popular solution to a modern dilemma.

According to market research company Straits Research, the worldwide hardware wallet industry, which was estimated to be worth $245 million in 2021, would increase to more than $1.7 billion by 2030.

It is being driven by a constant stream of cyber thefts, which have seen crooks take $1.9 billion in cryptocurrency in the first seven months of the year, a rise of 60% from a year earlier, according to researcher Chainalysis. A large portion of this was taken illegally from "hot" internet wallets or blockchains.

Investors are uneasy about more than just cyberattacks. Others were unable to access their cryptocurrency when significant lenders like Celsius Network and Voyager Digital failed in July.

Following several issues, there has been a noticeable increase in interest in hardware wallets and self-custody in general, according to Adam Lowe, chief product and innovation officer at US-based CompoSecure (CMPO.O), one of many hardware wallet manufacturers looking to cash in on a rush for security.

"The day of or day after those events, we would see very significant (sales) lifts."

However, there is no such thing as a free crypto lunch. Hardware wallets typically do not appeal to first-time investors, who frequently purchase cryptocurrencies on major exchanges and may choose to keep their assets on those platforms, where they can easily log in with a username and password, despite the fact that hot wallets are convenient and allow for quick trading.

Hot wallets can be hacked even though they often give instant access to cryptocurrency and are free. On the Solana blockchain, almost 8,000 cryptocurrency wallets were attacked by hackers in August, who stole more than $5 million in cryptocurrency.

At the time, Solana stated, "Users are strongly encouraged to use hardware wallets."

Another manufacturer of hardware wallets, France's Ledger, said that following the Solana wallets heist, sales increased.

According to Alex Zinder, worldwide head of Ledger Enterprise, "We do see a significant uptick in user-based interest in some of these situations of stress in the markets."

The majority of hardware wallets connect to a smartphone app, where users may manage their money if they have the digital keys required to access their crypto keys. A security feature called "Secure Enclave" is often used to store sensitive data.

To better serve investors in regions like South America and Africa, where smartphones are more prevalent than personal computers, Josef Ttek, a bitcoin analyst at the Czech hardware wallet manufacturer Trezor, predicts improved phone interaction with cold storage wallets in the future.

However, businesses in this expanding sector should be recommended to seize the opportunity while it lasts.

According to Stan Miroshnik, co-founder and partner at 10T Holdings, which led Ledger's $380 million Series C investment round last year, one long-term concern is whether phone manufacturers will want to join in on the action.

"One question, I think, for the industry and where it’s going and in part what will drive consumer adoption, is what if every iPhone has a built-in Secure Enclave hardware wallet?"



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