Crypto wallets are open or closed source, and this may have an effect on their security. Let’s talk a little about wallet security.
Performing audits and reviews using open-source software is a useful tool for users and experts alike. This does not ensure safer solutions automatically.
Hackers can sometimes exploit open-source software easily due to the abundance of resources, codes, and utilities.
The purpose of this article is to discuss how to evaluate the security of a hardware wallet and why open-source might not be necessarily related to security.
We can see four layers of security issues that are fundamental to whether you will lose your crypto assets when considering the security of a cryptocurrency wallet:
- Key/seed generation must be random and safe.
- Secure and protect private keys/seeds.
- Avoid compromising the private key during the spending or signing process.
- The protection against social engineering. It should contain powerful methods to prevent the PIN from being exposed.
Let us see these in detail below
1. Key/seed generation must be random and safe
Is there such a thing as a key, or more precisely, a private key? In general, the private key consists of 256 bits. The person who created a backdoor or bug in the Key generation can easily steal your crypto by exploiting it.
Open-source Bitcoin wallet can be explicitly checked to see if it generates trustworthy keys by checking the open-source code.
New users should also know: in a full-fledged crypto wallet, there will be many child private keys calculated from a seed for various coins.
2) Secure and protect private keys/seeds
Isolation and formatted access are the two pillars of private key protection. For engineers who wish to protect private keys inside a hardware wallet, SE (Secure Element) chips are a popular choice.
As well as using software to protect the private keys against tampering and attacks, engineers can use upgraded hardware to provide even more security.
3) Avoid compromising the private key during the spending or signing process.
When talking about private keys protection, users often forget the crypto spending process (transaction). A major attack point during spending is the online part, which is the APP. Hackers are easily able to attack the APP because of its online nature. Your coins could be sent to a hacker’s address instead of your own by a fake transaction.
An easy way to protect the user is to decode the full transaction data to show the receiver’s address. Irrespective of whether your wallet is closed or open source, if it cannot clearly show you every aspect of your transactions, it is not secure.
4) The protection against social engineering.
The fact remains that despite how technically secure a wallet may be, many people are victims of social engineering attacks. Social engineering attacks, like peeping PIN codes or imposing customer support, are the main reasons people lose their coins.
A well-designed security product should help users to avoid these kinds of problems. These aren’t caused by an open or closed source wallet. You cannot use open-source if you use an easy PIN and make yourself vulnerable to peeping.
Open-source also provides an opportunity for the whole community to improve the software features and security of a product. However, this only applies to software. It is still impossible to control how hardware and applications are built. To use hardware wallets at their highest level of security, it is crucial for users to understand security and cryptocurrency.