Open source: Buzzword or real security for crypto wallets?

Open source crypto wallet designs offer some advantages, but there are also tradeoffs.

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Last month, hardware crypto wallet maker Ledger announced its "Ledger Recover" program designed to allow customers to back up their seed phrases to the cloud and link them to their real identity.

The announcement was strongly pushed back by the crypto community, as many saw it as an opposition to the ideals of blockchain security and the decade-old mantra of keeping custody of your own keys.

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Ledger responded quickly, assuring clients that their seed phrases were safe and that the Ledger Recover program was activated. But the whole saga has led to a growing demand for open-source hardware wallets, which could allow the community to rule out any hardware or software backdoors.

A week later, Ledger announced that it was accelerating its open source roadmap. But what does an open source hardware wallet mean? What are the benefits? And most importantly, are they actually more secure than their closed-source counterparts?

What your hardware wallet is not

First of all, this will help dispel some misconceptions about hardware wallets.

Your wallet does not store crypto.

Many people think that hardware wallets are used to store cryptocurrencies, but in reality, they are used to store your private keys. All cryptocurrencies exist on the blockchain and your private keys prove that you own your tokens. That's why it's important to keep your private key, well, private.

Your spare phone is not a hardware wallet.

Making hardware wallets is complicated, and for good reason. People use these devices to secure millions of dollars in digital assets, and ensuring the safety of customer funds is essential to building and maintaining a successful hardware wallet brand.

For this reason, various hardware wallet components are typically proprietary, meaning they cannot be purchased or inspected outside of purchasing a device and tearing it down. Some wallets even have built-in tamper protection to prevent this. Phones use much more accessible parts, maki...