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Unlike many digital wallets, hardware ones keep a crypto user’s private keys, which are the passwords they need to access their blockchain assets, offline.

Hacks and bankruptcies continue to roil the digital-asset industry. But these setbacks have become a boon for makers of hardware wallets who have seen their sales spike as customers rush to protect their crypto assets.

French startup Ledger saw its day-over-day sales balloon 400% in the 24 hours after a $5.2 million hack involving digital wallets based on the Solana blockchain earlier this month, according to the company’s Chief Experience Officer Ian Rogers. Unlike many digital wallets, hardware ones keep a crypto user’s private keys, which are the passwords they need to access their blockchain assets, offline.

Ellipal, a Hong Kong-based company, saw wallet sales rise 30% and website traffic jump 50% in the days following the Solana wallet hack, according to a company spokesperson. Sales of KeepKey’s hardware wallet also jumped around 30% in the week following that attack, said the firm’s chief technology officer, who goes by the pseudonym “pastaghost.” The hack stemmed from a digital wallet made by Slope Finance, who revealed in a post published earlier this month that there was a security flaw in a third-party service provider it used.

“These things remind people that security and self-custody are important,” Ledger’s Rogers said in an interview.

While Ledger typically sells most of its wallets on its website, there was a big bump in in-person sales at electronics store Best Buy Co Inc., Rogers said. The device, which resembles a USB stick in size and shape, sold out at locations in multiple regions, he said. Best Buy did not respond to a request for comment.

The rush at Best Buy shows just how urgently people wanted to get their hands on a hardware wallet, according to Rogers.

“It’s the only place to get Ledger in less than an hour,” he said.

The collapse of lending platforms such as Voyager Digital Ltd. and Celsius Network Ltd., which included freezing withdrawals for customers, has spooked users, KeepKey’s pastaghost said. This has helped spur interest in hardware wallets like the company’s product, which resembles a small external hard drive, he said.

Recent market turbulence has created “elevated awareness for consumers to protect their digital assets,” Adam Lowe, chief product and innovation officer of CompoSecure Inc., said in a statement. The firm, which developed Arculus, a hardware wallet similar to a credit card in size and thickness, saw an uptick in demand between the first and second quarter despite the onset of crypto winter, he said.

Some centralized crypto exchanges, such as Coinbase Global Inc. and Binance, offer customers digital wallet options, where the keys are controlled by the companies.

“If you’re not managing the keys, you don’t own the funds,” pastaghost said.

Using a physical wallet adds another layer of defense against attacks that digital wallets may be susceptible to, said Steve Walbroehl, co-founder and chief information security officer at Halborn, a blockchain security firm.

Hackers sometimes use malicious links and fake websites that mimic those of actual crypto platforms, as was the case with a $3 million hack involving Bored Ape Yacht Club nonfungible tokens earlier this year. Users unwittingly connected their software wallets, only to have their assets wiped out.

“The hardware really keeps it protected and out of reach from all of these attacks,” Walbroehl said.

The Solana Foundation echoed this in a post from a official Twitter account after the attack, in which it encouraged users to employ a physical wallet to keep their crypto safe.

“A hardware wallet is the most secure way to store your crypto and it’s a really good idea for everyone who has serious amounts of wealth, however you define that, in crypto,” Austin Federa, head of communications for the Solana Foundation, said in an interview.

But, despite the recent uptick in sales, hardware wallets still face obstacles to garnering greater adoption, Walbroehl said.

Hardware wallets are usually more expensive than digital wallets, which may be the reason some users stick with the latter, he said. While popular digital options such as MetaMask and Phantom are free to download, the price of hardware wallets can range from less than $50 to more than $300.

“It’s the law of least resistance,” Walbroehl said. “It’s easy to just install an app you get for free.”

Hannah Miller reports for Bloomberg News.

Copyright 2022 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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