- Hardware wallets are the safest option for securing digital assets, but issues remain
- Security in key storage remains a significant hurdle for adoption
A medium report published this week has pinpointed the several shortcomings of Hardware Security Modules (HSM) the crypto community sees as the best fit for securing digital assets.
When cryptocurrency companies consider issues of security, they tend to look towards hardware; mostly cold wallets and Hardware Security Modules (HSM) – it is currently considered the safest option to financial or financial technology companies for the management of cryptocurrency keys.
Points of Failure
Hardware Security Modules are built purposely to keep keys confidential and can be used both online and offline, often referred to as cold storage – disconnected from the internet. These modules, however, have a few shortcomings when it comes to blockchain key management.
Blockchain and cryptocurrency technologies are revolutionary, and mainly involve transactions; in place of passwords and actual keys to access assets, the key is the asset for these technologies. Cryptocurrency is a digital form of money and has changed the very nature of fiat currency, and a wrong transaction cannot get a do-over, and misuse can cause you to lose everything. This is why protecting the keys is crucial, and also the reason why HSMs are limited in their ability to provide such security, especially when they operate both online and offline.
Comprehensive protection for your asset key would be ideal, but HSM may not be the best solution for that. They do keep keys confidential, but have limited controls for malicious key usage; they lack measures to detect any misuse and no quorum when it comes to authorization of key usage. This makes it possible for an attacker to compromise an account with access to use keys in HSM and make fraudulent transactions. Thus, these modules are still vulnerable to attacks and loss of customer’s assets.
Upgrading an HSM is a bit challenging since the security is intertwined with the hardware which does not give much room for upgrading. Improving these systems is costly and time-consuming, especially in cases where an upgrade may involve more than updating the firmware. For production systems especially, upgrades can take months or even years since it may need the actual appliance to be replaced and updated to deal with emerging security threats.
When used as cold storage (offline), they require manual input and physical access, which makes them difficult to automate and limited capabilities in a fast-paced digital world.
The best we have
Hardware wallets are becoming a common trend in the crypto space with the Ledger Nano X wallet and the Bamboo Hardware Wallet being the most recent to be launched. Despite the shortfalls mentioned above, HSM still offers useful features in the crypto space, and the core developers keep improving the tech in place.