In theory.

> If you accidentally plug in the USB drive into some untrusted box, you could potentially have everything stolen.

This is like saying that no one should own a gun because you might point it straight at your own head and pull the trigger.

> You still have this option with a hardware wallet. eg:

Yes, that is true, but a hardware wallet is an extra piece of hardware that needs to be actively used to provide HD wallet keys for transactions. If all a person wants to do is store BTC for the very long term, then this approach is more complicated and hazardous than storing a non-HD wallet key pair on some physical medium; this is because a hardware wallet failure can result in loss of the ability to sign transactions, and chances are you're storing the seed phrase separately. Again, just for long term storage, there's next to no advantage between storing a seed phrase for an HD wallet and storing private and public keys. Depending on what a person intends to do with their money, a hardware wallet may provide zero value over the least complicated approach. Unless someone is paranoid over other people or the government knowing their balance, a single public address is more straight forward than managing an HD wallet.

The hardware wallet itself has a screen, and requires you to confirm your transactions, so generally not true

The only hardware wallet compromises I've heard of still required someone to have physical access to the device. If you can keep the device in your possession, it's still much safer than any of the alternatives.

The original point was

> They do not realize that with that wallet if the wallet is gone so is the money. Wheras if the phone is gone, nothing happens to their money.

Which is just false as a seed phrase is all that's needed if the hardware wallet is lost.

>If you only have bitcoin on a single hardware wallet, then if that hardware wallet fails to work one day, then you're boned.

By "only have bitcoin on a single hardware wallet", I meant the case that the user did not back up their seed phrase (such as to a piece of paper). I was trying to hint that the best setup would be multiple paper wallet backups (or the seed phrase written onto multiple papers; I'm not sure it's useful to call that something other than a paper wallet) combined with a hardware wallet for actually making transactions.

Their absolutely is. A hardware wallet can take unsigned transactions and sign them internally, and output a signed transaction. Your private key never leaves the hardware wallet.

Compare this to signing a transaction with a private key on a computer. Your computer can have spyware that can snoop on the key and steal your coins.

The hardware wallet has a burned ROM with a firmware that is signed and verified every time you use it.

Someone else using your recovery phrase to steal your private keys wouldn’t actually brick your hardware wallet. It would still work but obviously since the thing that it was there to secure (your keys) had been stolen that would be moot.

The subtext is that keeping all this stuff secure is hard and depending on your threat model may not be worthwhile. This is similar to the way in which for most people it makes sense to have a bank look after their funds. In the world of crypto though we’ve seen obvious examples of these centralised custodians being untrustworthy and since they are not regulated or FDIC insured or anything of that kind it’s much more risky.

[1] If you want the ability to recover your funds if the hardware device becomes inoperable, lost, stolen etc. If not you could just burn the recovery phrase so you don’t need to secure it.

You can do exactly the same with paper wallets, for what it's worth. Think of the paper wallet as you hardware wallet's backup. Store it securely in 2 places and you're ok.

So if someone doesn’t have my wallet but has my recovery phrase they can regenerate my keys and brick my hardware wallet as it sits in my home safe??

Admittedly, hardware wallets do a good job of keeping your private keys secure, allowing you to safely transact even on a malware infested PC.

You're overstating the problem. Companies like Ledger make "hardware" wallets as you're describing and they're not complicated to use. If you're using crypto in small amounts and not as long-term storage, I think a phone wallet or desktop wallet is fine.

I can use my recovery seed phrase after, but as far as I’m concerned that’s an “oh crap” backup. For all I know I could have screwed up writing it down. Unlikely, but possible. Apparently it’s also possible to other software wallets to get the crypto off of there.

Frankly, if there aren’t ways for the average non-tech person to safely and reliably hold crypto there’s no point. Most of my stuff is on Coinbase and I’ve always figured that if that ship goes down the whole thing will come crashing down anyhow.

That seems like a usability nightmare. Are there plans to improve this? Hardware wallets for cryptocurrencies seem to have it solved. You can keep multiple copies of the keys around (ie. multisig wallets) for maximum security, or you can write down the private key of the device you have and store it somewhere safe. In either case you can retain the public keys so you don't need access to the device if you want to send funds to them (or in the case of authentication tokens, enroll them).

Split and distribute geographically, if it's worth the effort.

These steps have nothing to do with BitCoin though.

>a properly secured wallet is impossible to steal

Define "properly secured wallet"? And whose responsible for securing wallets? "The consumer is responsible" is not the right answer.

I had to Google that and they do indeed exist. It seems they use QR codes to send and receive data. It's probably a step up from USB since you can visually inspect how much data is transferred. But then again, the device could theoretically transmit your seed to your computer camera and you might not even notice[0]. Probably a step up from USB in terms of security but at the cost of some convenience.

> Without a keyboard, how do you enter your seed phrase?

They have a very rudimentary virtual keyboard which takes forever to type.

[0] As part of the QR code itself, as a separate QR code that flashes too quickly to be noticed to the naked eye, encoded as slight pixel brightness variations within the QR code itself, etc. It could even exfiltrate the seed one bit at a time which would make it pretty much impossible to detect (but would take ~256 transactions to complete).

It seems to me that bitcoin wallets are a relatively new and not well enough understood risk. There are very few other "files" like them, in that an attacker copying them can deprive you of their value in a way that you cant protect with backups. I feel a big part of current "internet security best practices" are about minimising the risk of getting exploited - but with a pragmatic limit to how much effort you invest mediated by the excuse of "if we _do_ get rooted, we can always reinstall and recover from backups". It'll only cost you time, and perhaps some reputation, and may put assumed-private-to-you information in someone else's hands, but it hasn't deprived you of access to any of your data. That doesn't apply to bitcoin wallets, and example like this are pointing out flaws in assumptions people are making about appropriate ways to manage them.

It'd suck to be "that guy" who provides the object lesson in why we need to think differently about bitcoin wallets to just about any other file type we might put on an internet accessible machine, but we _do_, and I don't know whether we have an answer to the question "Is there a way to secure a bitcoin wallet on a machine someone else has root access to (either your datacenter's staff with physical access, or the people with hypervisor access to the hardware your vm is running on)?"

I _think_ the answer is "if you can't trust those people, you can't risk storing your bitcoins there". There's a reason people keep their money in banks, and not in train station luggage lockers. I'm guessing inexpensive commodity VPS's should be considered closer to storage lockers than bank vaults. I suspect the finance sector and/or fortune500 companies have hosting arrangements with companies offering bank-vault grade protection and reserve bank style insurance - but sure as hell not at $24.95/month.

People store them in safety deposit boxes or do a variety of security rituals to keep them safe. It's not as difficult as you make it out to be.