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Data of the day: Can Cold Wallets be Hacked?

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There are many within the crypto community that believe that cold wallets cannot be hacked. The latest study by wallet maker Ledger has thrown some interesting insights into this notion.

Today, we analyse whether it is possible to hack cold wallets by taking a critical understanding of blockchain technology.  

Why are Cold Wallets Preffered by Crypto enthusiasts

One of the critical elements of blockchain technology is that it is immutable. This means that blockchains are effectively impossible to manipulate.

Since the existence of blockchains effectively guarantees the records of cryptocurrencies, currencies such as Bitcoin and Ethereum cannot be modified by third party agents.

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However, this does not mean that cybercriminals cannot break your wallet security and steal your cryptocurrencies. Especially when you have porous security features on your wallets to prevent cyber attacks.

As we all know once a third party is able to decipher your wallet passwords and access your portfolio and sends your crypto assets to another wallet there is no way to reverse such transactions.

This is why many turn to different wallets that provide different security features and cold wallets are largely considered the safest. Cold wallets are devices that are not connected to the internet and could include materials like a USB stick or a simple QR code printed on a paper.

Since these materials are not connected to the internet, it is safe from the prying eyes of hackers and cybercriminals. Cold wallets have begun to attain popularity with companies like Ledger and Shapeshift major producers of excellent storage devices.

This leads us to the major question: Is it Possible to hack a cold wallet

Recently studies carried out by Legder showed that a cold wallet can be hacked if the right tools are used to exploit certain vulnerabilities. The studies focused on Coinkite  Coldcard MK2 and Shapeshift KeepKey

In the case of KeepKey, Ledger researchers used the variations of voltages consumed by the memory chip of the cold wallet. This was then related with a data that was inputed into the password of the wallet. With time and continual trial they were able to unlock the security of the wallet.

The KeepKey cold wallet was hacked by Ledger’s team.

While for MK2 it was a little bit more complicated as the Leger team was able to breach the protection of the wallet that limits the number of password attempts. This was performed by using a flaw injection attack to deactivate the password attempts protection system.  After achieving this, the researchers used a password generating software to unlock the cold wallet.

Although it is a good that cold wallet companies are working together to resolve flaws within their security. It also serves as a reminder to the crypto community to always protect their assets security irrespective of if it stored in a cold wallet.

This would prevent the scenario of hardware wallets falling into the wrong hands that can access the wallets with enough time and resources.

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