Should the recent issues with hardware wallets discourage self custody?

[Exitoral]

Let's shift away a bit and look at the big picture. Self custody is good. Yes. But you can't just do it like that. The tools you use aids that. The problem should be from the tools and not necessarily self custody. I read one comment here and he says the does it himself. Home made. That's good. Someone like that can never be a victim of all this catastrophe that has been happening since. But there is some level of risk for the person. But not as much as all this recent incidents. Let's be guided.

[Pablo-wood]

To be frank, nowhere is really safe again.

That is not completely true, remember that hackers aren't magicians, so before them go fix exploit any vulnerability, it has to first be in existence. There is no system that is 100% safe, but there are definitely safe ways you can store your bitcoins without having to lose sleep over it. Plenty open source wallets dey wey you go fit store your bitcoin, plus many of dem they very well reviewed by people with the expertise in the bitcoin community. So if to say any vulnerability exist, them for don spot am and alert the community.

A case like Coldcard wallet where wallets were accessed as a result of software bug just proved even the most structured technology can be prone to vulnerability if proper caution isn't taken. I keep wondering why the company resulted to deterministic pseudo-random generator instead of the original hardware-backed true random number generator and now a mistake from 2021 has resulted in users losing their bitcoin to hackers.

[Son Of Blockchain (SOB)]

 If not self custody what more, giving a third party access to your asset? No bro that shouldn't be encouraged at all, if there was no alternative after that hack maybe i would've said that self custody is dead cause there's no secured way of doing that and ensuring safety of the asset but there are better alternative.
 Which is using a multi sig wallets, adding extra security to the wallet with a passphrase. The recent hack should never discourage anyone to give centralized wallets a trial, it's more risky.

[Coyster]

A case like Coldcard wallet where wallets were accessed as a result of software bug just proved even the most structured technology can be prone to vulnerability if proper caution isn't taken. I keep wondering why the company resulted to deterministic pseudo-random generator instead of the original hardware-backed true random number generator and now a mistake from 2021 has resulted in users losing their bitcoin to hackers.

The Coldcard firmware bug does not represent what the bitcoin network is or the technology behind it, that is a flaw/mistake on the part of Coinkite developers and they should bury their heads in shame for such a critical mistake.

That said, it does not make the bitcoin network any less secure, neither does it make other software and hardware wallets bad. It only calls for greater responsibility from the bitcoin community, in auditing and reviewing wallet codes, to ensure there are no critical flaws lurking somewhere.

[ColdLava40]

No matter how you want to put it this person will definitely loss some confidence and trust in the self custody because he wouldn’t want to be a second victim again. I mean a lot of people haven’t even recovered from the first incident and loses.
Is this not leading to where self custody is going to be disregarded? We know the advantages but the losses are brutal and not easy to take on. What the best form of cold storage? What could be the possible solution to this?

It is really disappointing, tiring and frustrating.

Waking up one morning, having plans on spending your long term live savings on something really worth it, then see that your balance had a transaction that wasn't initiated by you and now everything is gone.

It will not be easy to move on, no one will move on from such experience quickly.

Starting again? From where exactly? This occuring incidents shows that nothing can be 100% trusted. You could still play your part right and be at the bottom of the line.

[IjawMan]

It can be deeply hurting losing money in a way that it is not your fault, no mistakes done but just that a company could not provide the security they have established about their wallet.

To your question. I will argue that it should not be a discouragement to using hardware for the storage of crypto coins. Hardware wallet still remains the safest compared to online connected wallets. There are good hardware wallets to still use.

Discouraging any one from using hardware wallet is almost similar to telling the average Joe not to use the bank again for fiat services because a bank got robbed yesterday.

[Franklyn-wood]

It's quite unfortunate that self-custody had to experience something like this. The issue with Coldcard will definitely make a lot of people distrust hardware wallets, and thopeopleons includes me. I now prefer to use the traditional storage medium, which is a cold wallet and a paper backup stored in a good location. At least with this storage medium, we haven't heard any funny story about an external entity snatching away our coins from our wallet.  Maybe all that glitters isn't truly gold.

This experience can be discouraging as losing investment can be discouraging and results to making decisions that could make of not to continue investing and quit. Using cold wallet is good and safe due to the increasing rate of coin highjacked through internet access and  sometimes as a result of low security measures put in place to safeguard investments against being hacked by internet fraudster.
Write the phrases and other security information on a piece of paper can further lead to more danger, as it may be lost and takes by another person, exposing it to greater accessible risk.

[Shadiq]

The situation is really painful for some people, but we have to accept that fact. If I were on the list of coldcard victims, I too would have lost trust in hardware wallets and or even had questions about self-custody.

But trusting centralized exchanges instead of self-custody in Bitcoin investments is much more risky. Self-custody is still important and safe in Bitcoin. However, I prefer a cold wallet over a hardware wallet. I think it is more self-custody than hardware.

Download a reliable (Electrum) wallet and collect a seed phrase and passphrase that no one else will see and no one else will carry. There is a possibility of data theft during hardware wallet deployment as we saw in the case of Coldcard. In the case of a cold wallet, definitely try to keep the device offline.

[iBaba]

Honestly I’m putting my self in the position of someone who was a victims of the coldcard hardware wallet and lost  his years of savings, after accepting the loss and deciding to move on as there is life beyond what was lost. Now imagine after the loss, he was asking for the best hardware wallet recommendation and a lot of people mentioned trezor wallet as they consider one of the best, but unfortunately just another issue of data breach came up with the recommended hardware wallet.

No matter how you want to put it this person will definitely loss some confidence and trust in the self custody because he wouldn’t want to be a second victim again. I mean a lot of people haven’t even recovered from the first incident and loses.
Is this not leading to where self custody is going to be disregarded? We know the advantages but the losses are brutal and not easy to take on. What the best form of cold storage? What could be the possible solution to this?

I can understand why someone in that situation would lose confidence, because losing years of savings once is already painful, so seeing another security incident involving a wallet you were considering would naturally make you question self custody.

Personally, I don’t think the solution is to completely abandon self custody. The important thing is understanding that a hard wallet does not make you completely resistant to every risk. The device, seed phrase, backups and even the user actions all matters. If I had large amount of bitcoin, I would probably use a reputable hardware wallet and keep the seed phrase completely offline and I will also avoid taking pictures or storing it digitally. Test the recovery process with a small amount first.

For very large holdings, I would consider a multisig setup rather than keeping everything be high one seed phrase. Self custody gives you control but that control also comes with responsibility, the goal should not be finding a wallet with zero risk because such thing does not exist, it is about reducing risk and having a recovery plan if something goes wrong