Hardware Wallet Supply Chains Face Trust Crisis Among Crypto Users
Recent discoveries of implants in Ledger hardware wallets have intensified concerns about distribution networks and intermediaries who handle these devices before customers receive them, including through officially authorized resellers.
Average cryptocurrency holders cannot reasonably be expected to identify advanced tampering attempts on hardware wallets, according to security researcher Joe Grand, who spoke with Cointelegraph on Tuesday.
Grand's expertise lies in hardware security, and he has previously assisted in recovering digital assets from inaccessible wallets. His professional experience encompasses creating methods to circumvent security measures and retrieve information from memory chips found in wallets manufactured by Trezor and KeepKey.
It's really hard to explain to people how they're supposed to look at their devices, because even technical people like me are not looking at every single device to see if it's been tampered with.
Joe Grand, Security Researcher
These concerns emerged on Friday following reports of cryptocurrency losses connected to Ledger devices purchased through CryptoBilis, a reseller with authorized status in Indonesia, Malaysia and the Philippines. On Saturday, Ledger verified that one compromised device included an unauthorized implant.
The malicious implants discovered in Ledger wallets distributed by CryptoBilis were designed to intercept users' recovery phrases and send them via cellular networks, according to statements from the French hardware wallet manufacturer.
More control doesn't mean less trust
The purpose of hardware wallets is to maintain private keys in an offline environment, minimizing vulnerability to internet-based attacks that commonly target software wallets. Certain hardware wallets have gained worldwide adoption, and their distribution systems have generated vulnerabilities for supply-chain interference.
Crypto analyst Mati Greenspan shared with Cointelegraph that despite his participation in the industry dating back to 2013, he has never utilized a hardware wallet, perceiving minimal benefit in establishing another trust relationship.
When you buy a hardware wallet, you're introducing a whole new chain of trust, from the manufacturer to the supplier to whoever handled the device before it reached you.
Mati Greenspan, Crypto Analyst
Nick Neuman, CEO of Bitcoin security company Casa, explained that completely eliminating third-party trust is not feasible. "There is always an intermediary you will need to trust," he said, adding that users should spread their risk across multiple providers rather than rely on just one.
Security checks cannot catch everything
Trezor, one of Ledger's primary competitors, indicated that its devices are subjected to authenticity verification and only accept signed firmware, though the company recognized that these safeguards cannot completely prevent physical tampering.
You can also check that the packaging and holographic seal are intact and look for unusual marks on the device, but these checks alone cannot guarantee that it has not been modified.
Trezor Spokesperson
The company explained that the implants discovered in Ledger devices represent a distinct challenge since they extract information directly from the screen without altering the firmware. Trezor stated that it has not detected this particular type of attack targeting its own devices.
On Tuesday, Trezor made an announcement that it would decrease the number of resellers as a "preventive" step.
Hardware wallet designs can reduce tampering risks
Grand proposed multiple physical design modifications, ranging from transparent casings that reveal internal components to tamper-resistant enclosures that would require attackers to replicate the housing in order to hide modifications.
It's going to be a lot harder for an adversary to inject additional hardware into the device, because they would have to recreate the entire housing.
Joe Grand
The security researcher also referenced anti-tamper design recommendations from electronics engineer Dave Jones, though he warned that such measures should not be treated as standalone solutions. They could increase the difficulty of supply-chain attacks, but would not completely eliminate the risk.