The end of the year is the most important time to address the basics of protecting Bitcoin, with so many newcomers being gifted a hardware wallet for Christmas and pushed over the edge into the deep-end. If you’ll be gifting someone a Trezor this year, point them to this blog so they can get started on the right track.
Bitcoin has already been written about extensively over the last decade, covering every inner-working of the technology in detail. Instead of repeating all that’s been said before, this piece will just sum up the fundamentals and make the case for why everyone should Trezor their Bitcoin.
Cash has long been the favorite way to receive payment, even in the face of more efficient digital banking systems. Cash was king because it could be used anonymously, could be stored in one’s own custody, and it could be used to avoid government oversight. But cash is not fit for a digital world. Cross-border payments with cash are unfeasible, and the fact that it is government-issued means the government can dilute the supply by printing more bills, crippling their buying power.
Bitcoin is just data on a network; each coin or fraction of a coin is a structured piece of code that can be assigned an owner by transferring it to a particular address that someone has the private key to. If you are the only one with keys to an address, you own whatever Bitcoin exists there. If you want to pay someone, use your private key to unlock the Bitcoin and send them to whomever you wish.
Really, it’s a similar process to using online banking but with one key difference — there’s no-one else involved, just you and your coins. Banking involves a lot of trust and communication between institutions, with middle-men known as clearing houses ensuring that bank A has the funds to pay to bank B and fulfills their obligation.
Using a trustless system like Bitcoin, one erases all of the inefficiencies built around trust. Instead, a network of computers known as nodes independently verifies transactions, so no-one can spend more than they actually own. This is the critical problem that Bitcoin managed to solve where other attempts at native digital currencies failed.
So, why should you use Bitcoin if you don’t care how efficient your bank is? Well, the present opportunity is that bitcoins are still being created, a process which will stop when they hit the limit of 21 million. This scarcity has driven the price up due to speculation that the 21 million coins could be a substitute for the current fiat system (euros, dollars, yen, etc.) and therefore even a fraction of a coin would be worth many times what it is worth now. By the year 2025, 95% of all bitcoins will already exist.
Using Bitcoin does make it easier and cheaper to move money across borders. It also stops anyone from freezing or seizing your money, is not subject to inflation, and transactions can not be reversed, preventing some forms of fraud. Like cash, it can also be used anonymously, and no-one can prevent you from holding custody of it.
These are all great things but do they really make you want to use Bitcoin? Most people today are buying Bitcoin simply as a speculative investment, expecting higher returns than savings accounts or stocks. For the time being, speculation is still the main reason people invest, but those fundamental advantages Bitcoin has over fiat is what is convincing long-term investors to hold on.
While the keys that unlock your bitcoins are practically impossible to crack using current technology, there are ways to steal them. In recent years, phishing and fraud has become a huge problem, catalyzed by the rising bitcoin prices. Rather than attempting to brute-force a key, a procedure that could take thousands of years even using all the computers in the world, it’s much easier to target the owners — humans prone to making mistakes.
By creating fake websites, phishing attacks trick their victims into providing the recovery seed that generates their Bitcoin keys. Other attacks use keyloggers to read any data entered via the keyboard, thereby also obtaining the private key and access to funds, while substitution attacks simply replace the intended address with an attacker’s, redirecting your payment elsewhere.
Trezor was designed to mitigate any such attacks, by keeping the private key completely isolated and only accessible in specific, legitimate situations, such as when signing a transaction. By using a separate, protected device to hold your keys, any attempt to substitute an intended recipient’s address for an attacker’s will be evident because the Trezor will only show the actual address funds are being sent to. When the user checks the address they are sending to, they will see that it is not the intended recipient and cancel the transaction.
Having a hardware wallet makes it much easier and safer to use Bitcoin. Nowadays, there are thousands of kinds of malicious software built specifically to target cryptocurrency holders. Using a hardware wallet mitigates most known attacks, both online and physical. If you are considering a long-term investment in Bitcoin, a hardware wallet gives you a much higher chance of resisting the many attacks on your holdings which may come over the years.
The Trezor Model One was the first hardware wallet to ever be made. It was a product designed by Bitcoin enthusiasts for personal use and use by friends and family, but demand for a better way to protect bitcoin holdings made it an overnight sensation. For any user with a significant investment, a Trezor hardware wallet was the one thing that could offer peace of mind.
Like Bitcoin, Trezor is and has always been open source, meaning everything from hardware to software is available to audit. Trezor is constantly reviewed by security researchers, who time after time confirm its high levels of security. The security benefits of an open-source approach are enormous; a closed approach hides behind one-size-fits-all certifications and obscures hardware flaws using non-disclosure agreements which prevent the flaw from being reported or fixed.
A drawback of making everything open source has been an influx of competitors who use Trezor’s schematics to clone, repackage and rebrand our hardware wallets. Thanks to our transparency, however, Trezor remains hugely popular as a trusted, honest company that is helping to make Bitcoin better for everyone. To that end, SatoshiLabs has collaborated on five Bitcoin Improvement Proposals (BIPs), including BIP-39, which set the recovery seed standard.
With excellent customer service and constant improvements to its devices, SatoshiLabs’ leadership has made it clear they are dedicated to making cryptocurrency easier to use and more resilient. We understand our obligation to proactively protect our users data so all our data is scrubbed after 90 days so our customers can not be identified. The consequences of not doing so is evidenced by the recent, massive data leak at a competitor, which has even led scammers to try and target Trezor users with the information they stole.
When shopping for a hardware wallet, there are many things to consider: how long you will be holding your coins; how much you have to depend on the manufacturer; how easy it is to use; how secure it is. On all counts, Trezor will come out ahead, in some cases simply by virtue of being open source. If SatoshiLabs were to go out of business, all code and hardware that makes up a Trezor, even Trezor Suite, can be maintained by anyone with a technical background. Even without IT expertise, anyone can always recover their coins using any app that supports the BIP39 standard. Thanks to transparency, Trezor is maintainable and auditable indefinitely and independently. As long as Bitcoin exists, Trezor will be there to protect it.