Hardware Wallets and Asset Security

2026-01-25

For managing crypto assets, the ranking from most secure to least secure is:

  1. Family trust
  2. Hardware wallet
  3. MPC wallet
  4. Exchange custody
  5. Hot wallet

If you are not on the billionaire rankings, family trusts have nothing to do with you. For individuals, hardware wallets are currently the safest option.

I did not mention multisig wallets or mnemonic-plus-passphrase schemes here, because those approaches are technically complex enough that most people cannot use them correctly. A solution that is too complex cannot be preserved reliably over the long term. Instead, it increases the risk of forgetting something and becomes less reliable.

So there are a few misconceptions about hardware wallets that need to be corrected:

  1. A hardware wallet is a key, not a safe.
  2. Your funds are stored in the mnemonic phrase, not in the hardware wallet.
  3. If you enter the wrong password on a hardware wallet too many times, the device will wipe itself.
  4. A mnemonic phrase is not a spare key to open the safe. The mnemonic phrase is the safe itself.

There are also a few interesting edge cases around mnemonic security:

  1. You cannot verify whether your mnemonic phrase has already leaked.
  2. If you never take out the mnemonic phrase, you cannot verify that it is correct.
  3. The act of taking out the mnemonic phrase itself increases the risk of exposing it.

So while decentralized assets give you control, they also require you to bear the risk of securing those assets yourself.