Speaker 1: This is Bloomberg Crypto and Daily Bloomberg. I heard podcast
Speaker 1: and I'm Stacy Marie Ishmael, Managing editor of Crypto for
Speaker 1: Bloomberg News. It's Tuesday, September six. Sometimes it feels like
Speaker 1: everywhere you look there's somehow yet another crypto hack happening.
Speaker 1: By some estimates, major crypto hacks two have cost the
Speaker 1: industry nearly two billion dollars this year alone, and those
Speaker 1: headline numbers don't even typically take account of the smaller
Speaker 1: exploits the target individual consumer accounts, so the real number
Speaker 1: is probably way bigger. In light of all this digital theft,
Speaker 1: crypto holders, the venture capitalists who invest in crypto companies,
Speaker 1: and the leaders of those organizations seem to only be
Speaker 1: focusing on security. So how should people who hold crypto
Speaker 1: protect their assets and what kinds of security measures are
Speaker 1: currently in focus in the industry. Joining me now is
Speaker 1: Bloomberg Reports to Hannah Miller. We've really seen a lot
Speaker 1: of people in the industry come together to encourage safer,
Speaker 1: more secure usage of crypto. Hannah, always a pleasure to
Speaker 1: have you on the show. Thank you for having me.
Speaker 1: We're going to talk about security again. I feel like
Speaker 1: we talked about security a lot, but I think it's
Speaker 1: because crypto seems to be bad at it. So, you know,
Speaker 1: in the time since we last talked about security, there
Speaker 1: have been several more hacks worth several hundred million dollars,
Speaker 1: so it feels like a relevant thing for us to
Speaker 1: be discussing. One of the stories that you wrote recently
Speaker 1: on this topic was about people turning to what are
Speaker 1: known as hardware wallets in response to this steady stream
Speaker 1: of hacks and scams. What exactly is a hardware wallet?
Speaker 1: How do the work? Yeah, so think of something like
Speaker 1: a USB stick or you know, some of them even
Speaker 1: look like a credit card. These are physical devices that
Speaker 1: protect the private keys, which are essentially the passwords that
Speaker 1: you would need to access your crypto holdings. And they
Speaker 1: keep these passwords offline. So that's why they're called cold
Speaker 1: wallets or hardware wallets. These are physical devices that keep
Speaker 1: your private keys offline. And what's the advantage of having
Speaker 1: your private keys offline? So like, if I, let's say
Speaker 1: I have my private keys in my email or my
Speaker 1: job books, like, what could possibly go wrong? Well, the
Speaker 1: Internet is a scary place. So hardware wallets add another
Speaker 1: layer of protection that keeps your keys safe from hackers.
Speaker 1: There are still ways that hardware wallets can be compromised,
Speaker 1: but it's much more challenging than with an online wallet
Speaker 1: that might have an error in its code or something
Speaker 1: where a third party provider that's working with the wallet
Speaker 1: has a security flaw. We've seen with a lot of
Speaker 1: these hacks, people connect their digital wallets using a link
Speaker 1: that they think is safe, that is from you know,
Speaker 1: an official crypto source or someone in the industry, and
Speaker 1: it ends up exposing their wallet and their assets get wiped.
Speaker 1: It's a really scary thing. So this really plays into
Speaker 1: this idea of you know, not your keys, not your coins,
Speaker 1: where if you are not in physical, solitary protected possession
Speaker 1: of the things that able you to access your crypto,
Speaker 1: they're not really yours. Right, So that if if you
Speaker 1: have your crypto stored in one of these digital wallets
Speaker 1: they're describing and somebody hacks that, well, you know, tough
Speaker 1: cookies for you, there's sort of no recourse or real
Speaker 1: ability for you to get that back. Well, with some
Speaker 1: of these digital wallets, you do manage your keys, they're
Speaker 1: self custody wallets, and that would fall into the category
Speaker 1: of this, these are your keys, this is your crypto.
Speaker 1: But what a lot of people go for our digital
Speaker 1: wallets that are managed by you know, exchange. For example,
Speaker 1: both Finance and coin base have wallet options where you
Speaker 1: put your crypto in them, but the exchange itself controls
Speaker 1: and manages the keys. And so some people would say, well,
Speaker 1: those aren't your keys, that's not your crypto. You know,
Speaker 1: your crypto is vulnerable, even though you may trust this
Speaker 1: exchange and you know they haven't stolen from you in
Speaker 1: the past or anything like that. And even if it's
Speaker 1: not a question of them stealing from you, even if
Speaker 1: we were talking about companies that have developed a pretty
Speaker 1: reputable track record, there is still the possibility that they
Speaker 1: could themselves be compromised. Is that the concern? That is
Speaker 1: a concern? You know, there are other options to Like
Speaker 1: people have been putting their crypto into lending platforms. Uh
Speaker 1: So we saw that with Voyager and Celsius, and then
Speaker 1: when these platforms had to freeze withdrawals, people were not
Speaker 1: able to access their holdings or get their money back out.
Speaker 1: So with all these factors coming together, people are turning
Speaker 1: to hardware wallets. They want these cold wallets that give
Speaker 1: them more control over their crypto and keep it more secure. Here. Now,
Speaker 1: one of the things that's interesting about this idea of
Speaker 1: a hardware wallet, you know, you describe them as like
Speaker 1: they could be a USB stick, they could be something
Speaker 1: that looks more like a traditional credit card. This could
Speaker 1: also just be something you've written down in a piece
Speaker 1: of paper that's like, these are my keys and nobody
Speaker 1: else has access to them. So it doesn't necessarily have
Speaker 1: to be like a device. You're referencing an O G
Speaker 1: paper wallet, So people do do that. You know, that
Speaker 1: is like considered to be a type of wallet. It's
Speaker 1: a very cool, but yeah, the big issue is what
Speaker 1: if I lose this piece of paper? What if I
Speaker 1: lose you know, these devices, so you always have to
Speaker 1: have backups or maybe have another trusted person you know,
Speaker 1: what your keys are. But yeah, I mean these hardware wallets,
Speaker 1: they're really great and that they're these nice small devices.
Speaker 1: They're easily transportable, but they can be easy to lose,
Speaker 1: and people also don't like paying money to get them.
Speaker 1: It's like, give me, give me free security that is
Speaker 1: super robust and you know, super convenient. Those three things
Speaker 1: are rarely true at once, Right, the most secure solutions
Speaker 1: for something are often the least convenient because that source
Speaker 1: of the point. You want to make it hard and
Speaker 1: annoying for somebody to hack you. And as as I
Speaker 1: listened to you talk about this, I'm reminded of the
Speaker 1: very similar conversation that folks have about password security. And
Speaker 1: you know the fact that a best practice is using
Speaker 1: not just two factor authentication or multi factor authentication, but
Speaker 1: using physical multi factor authentication in the form of like
Speaker 1: a USB thing that you plug into your computer, and
Speaker 1: if that's not there, you don't do it. And then
Speaker 1: people either don't want to do that because it's annoying,
Speaker 1: and if you switch computers and you don't have it,
Speaker 1: you can't log into your thing or you lose the thing.
Speaker 1: We as a species seemed to be quite bad at
Speaker 1: balancing this trade off between security and convenience. So how
Speaker 1: are folks who work in and around bitcoin and crypto
Speaker 1: helping consumer adoption? Like, what are the strategies they're trying
Speaker 1: to use here? Yeah, I mean, you really touched on
Speaker 1: this idea that people choose the path of least resistance.
Speaker 1: They're gonna want to get that app that you can
Speaker 1: download easily online and you know, jump on board with
Speaker 1: it and just immediately start, you know, using it. With
Speaker 1: hardware wallets, you might have to order it online wait
Speaker 1: a few days. But we have seen moves by hardware
Speaker 1: wallet makers to make these devices more accessible. Ledger, for example,
Speaker 1: which is a really big startup based in France, they
Speaker 1: create a hardware wallet. You can buy their product at
Speaker 1: best Buy. You can drive on over there, get it
Speaker 1: in less than an hour, you know, and have it
Speaker 1: and start using it. So they're kind of making these
Speaker 1: very consumer friendly products. They ran a promotion after a
Speaker 1: big hack involving a Salana based wallet. You know, they're
Speaker 1: doing a lot of outreach on Twitter. They're making these
Speaker 1: devices look cute with different designs, and then you have
Speaker 1: people within the industry advocating for the use of these
Speaker 1: hardware wallets. We saw after this Alatta wallet hack, the
Speaker 1: Salona Foundation urged people to get hardware wallets, start using
Speaker 1: hardware wallets. So we've really seen a lot of people
Speaker 1: in the industry come together to encourage safer, more secure
Speaker 1: usage of crypto. Coming up. How the crypto industry is
Speaker 1: approaching the need for better security measures. With Bloomberger porta
Speaker 1: Hannah Miller. Now I want to go back to something
Speaker 1: that you said a little bit ago, which is that
Speaker 1: hardware wallets are still potentially vulnerable. I remember in I
Speaker 1: think it was late twenty Ledger, who you mentioned, the
Speaker 1: French startup, were themselves compromised in kind of slightly diabolical way,
Speaker 1: which is that their servers were affected by a breach,
Speaker 1: and then that you know what they described as an
Speaker 1: unauthorized third party We're able to access their software which
Speaker 1: they used to power some of those wallets, which could
Speaker 1: have potentially compromised those wallets. Now that's a degree of sophistication,
Speaker 1: but as we heard our colleague Jeff Stone on the
Speaker 1: Cybersecurity Desks say, it's also not outside the realm of
Speaker 1: possibility that these things are going to happen. If you
Speaker 1: have nation state hackers operating out of places like North
Speaker 1: Korea who realized that hacking crypto is a good profitable
Speaker 1: way forward, this is like the level of risk that
Speaker 1: folks who are using crypto in any form need to
Speaker 1: get comfortable with. Can you keep up with the technology
Speaker 1: that hackers are using to get into new spaces, Yes,
Speaker 1: of course. I mean, you know, hikers are always hiking
Speaker 1: in the exactly the same way. You know, the problem
Speaker 1: is education in the space, and you know, people are
Speaker 1: understanding that how many people are really prepared for going
Speaker 1: up against North Korean hackers? Though, Like I just I
Speaker 1: feel like across the industry that seems like something that's
Speaker 1: not discussed at that level very often. Yeah, it is
Speaker 1: definitely a thing that's becoming more prominent within the industry.
Speaker 1: People are getting worried, and that's why I think we've
Speaker 1: seen a lot of interest grow in blockchains to purity startups,
Speaker 1: even as fundraising has declined within the crypto industry more broadly,
Speaker 1: there are still strong interest in security startups. Ledger, for example,
Speaker 1: is looking to raise you another huge round. We have
Speaker 1: seen some other smaller companies come to prominence, So people
Speaker 1: are wanting to tackle these issues. You know. One of
Speaker 1: the people I spoke to for my wallet article is
Speaker 1: with how Born, a blockchain security firm, and they are
Speaker 1: so active and just advising startups working with major crypto
Speaker 1: companies to build better security solutions. So this is something
Speaker 1: the industry is actively working on. Why are they working
Speaker 1: on it now? Is it a response to the sort
Speaker 1: of the threat or potential of regulation, is that the
Speaker 1: people are finally tired of losing hundreds of millions of
Speaker 1: dollars at a time. Yeah, I think just these hacks
Speaker 1: keep happening there, keep happening to, you know, just regular
Speaker 1: people who might not know a ton about crypto. There
Speaker 1: is a lack of consumer protection and regulation around this area.
Speaker 1: So I think people are coming together and kind of
Speaker 1: preparing for greater regulation and just greater focus on the
Speaker 1: industry in general. I mean, hacks get reported on all
Speaker 1: the time. Crypto Twitter is super active in talking about them.
Speaker 1: There's just a bigger spotlight on the industry and issues
Speaker 1: within it. The last time that we talked about this,
Speaker 1: you know, one of the things that you said was
Speaker 1: just like, nobody should ever click on any links, and
Speaker 1: which there's advice I try to give to my friends
Speaker 1: and family as well, but they're like, but the whole Internet.
Speaker 1: I'm like, yeah, I know. It's a problem in terms
Speaker 1: of other than you know, folks having the ability or
Speaker 1: the relative degree of savvyists to switch over to you know,
Speaker 1: solutions like o G paper wallets or or hardware wallets.
Speaker 1: What are some of the other types of consumer friendly
Speaker 1: guidance you have seen out there or at least not
Speaker 1: consumer unfriendly. I would say, yeah, no, I would say
Speaker 1: that people just need to be more suspicious us. I've
Speaker 1: seen a lot of people on crypto Twitter, you know,
Speaker 1: sounding the alert when a hack happens. Um, We've seen
Speaker 1: you know, security firms like Curtic they run these crypto
Speaker 1: alert accounts that actually, you know, tell people when a
Speaker 1: hack is happening. So I think just really paying attention
Speaker 1: to what's going on and really thinking before you click,
Speaker 1: because a lot of these websites that have these links
Speaker 1: mimic those of real crypto platforms and really down to
Speaker 1: the letter. So it's it's something that people have to
Speaker 1: really pay attention to. And you know, there are even
Speaker 1: you know, security courses you can take online that help
Speaker 1: educate you on how to to best navigate the industry
Speaker 1: and things like that that could be helpful for for
Speaker 1: users to take advantage of, you know, long story shorts.
Speaker 1: It's a question of when somebody will try to come
Speaker 1: for you with something fraudulent or scam as opposed to
Speaker 1: if yes, I'm not pleasant notes, I think I think
Speaker 1: we shall leave it there. Thank you so much, Hannah,
Speaker 1: always a pleasure. Thank you You can find more of
Speaker 1: Hannah's reporting on the Bloomberg terminal, on Bloomberg dot com
Speaker 1: or on Twitter. She's at h G. Miller twenty nine.
Speaker 1: On the next episode of Bloomberg Crypto. Singapore established itself
Speaker 1: early on as a hub for crypto and for blockchain technology. Now,
Speaker 1: like many regulatory regimes around the world, it's dealing with
Speaker 1: the aftermath of several high profile collapses. We'll dive into
Speaker 1: these issues that are being faced by Singaporean regulators. This
Speaker 1: is Bloomberg Crypto, a daily podcast from Bloomberg and I
Speaker 1: Heart Radio. For more shows from I Heart Radio, visit
Speaker 1: the I Heart Radio app, Apple Podcasts, or wherever you
Speaker 1: get your podcasts. Send us your comments, questions, or suggestions
Speaker 1: for the show to Crypto at Bloomberg dot net or
Speaker 1: find us on Twitter. We're at Crypto. The supervising producer
Speaker 1: of Bloomberg Crypto is Vicky Verglina. Our senior producer is
Speaker 1: Janet Babin. Our producer is Sharon Barriro. Associate producer is
Speaker 1: Ty Butler. Desta wonder At is our engineer. Original music
Speaker 1: by Leo Sidron. I'm Stacy Marie Schmal. We'll be back
Speaker 1: tomorrow