During my time in the crypto industry, I have experimented with a number of wallets and hardware solutions, each with their own merits and limitations. Today I want to look at the ColdCard hardware wallet combined with the Wasabi software wallet which I believe is the best combination for storing BTC.

 

It is worth noting that the user experience for Bitcoin wallets remains poor at best. It is one of the weakest elements of the stack although I expect it to improve over time. The ColdCard is a more versatile but higher learning curve wallet compared to the likes of Ledger Nano or Trezor.

 

What it does offer is improved security for your coins which ultimately, is what matters for the long hold.

The coldcard

Also lovingly known as the Bitcoin Calculator, the ColdCard is a fully open source hardware and software wallet for Bitcoin. It does not hold any Altcoins and is thus much loved by Bitcoin maximalists and it’s design is purely focused on securing the top dog.

 

Where ColdCard differentiates itself is in the layering of security. For a Ledger for example, your coins are secured by your safe keeping of 24 seed words which ultimately are your coins. Whoever holds those seed words can regenerate your coins across all altcoin accounts and send them. The Ledger device creates a random set of 24 words but you have no impact on the words it generates.

 

The Ledger hardware itself is protected by a secure element which stops brute force extraction of the seed from the hardware. It also has a pin number which in the event an attacker gets access to your device, all then need is the pin and they could send your coins.

 

Finally, all actions via the Ledger on Ledger live connect to Ledgers nodes and services. That means that you are leaking data and your public keys to Ledger every time you use your coins. They cannot steal them but they are the ones providing and sending your data to the blockchain network.

 

These are all single points of failure.

 

The Coldcard is different.

Layered security

It starts with the packaging. Each Coldcard bag is unique and corresponds directly to a unique device. If someone along the shipping route from factory to you tampers with the device, you can trivially confirm.

 

The device casing is clear plastic and the secure element is connected to the casing. If anyone opens it up to swap in a new element, the whole thing breaks and is destroyed.

You start up the device and it provides you with your 24 seed words. However the device also allows you to add ‘entropy’ in the form of dice rolls. Basically, it takes a random set of 24 words and then allows the user to further randomize it by inputting as many numbers between 1 and 6 to the hash function. This acts to prevent the device algorithm from being hacked and attackers being able to brute force 24 seed words. It makes your seeds truly unique to you.

The pin number

Cold Cards have two pin numbers, each one 1 to 6 numbers long.

 

After you input the first pin (the prefix) it will present you with two anti-phishing words. These words are unique to your pin. If you create a new pin, it will give you new words. This ensures that if the device is tampered with, you will not recognize the words and this will not accidently put your pin into a fake device.

 

The second pin is then entered, granting you access to your wallet.

 

Now what is a really valuable trick is that you can actually setup multiple wallet types which may be useful for segmenting your funds. This is achieved by separate PIN combinations AND additional passphrases. To simplify, below are the use cases:

 

If you enter a Duress PIN (i.e. a fake PIN) you will enter a ‘fake wallet’. This is to protect you in case somebody attacks you physically and demands your coins. You enter the fake pin and it will only grant them access to a wallet where you can put a small number of ‘sacrificial coins’.

 

If you enter the Brink PIN – The device will destroy itself. You coins are safe on your 24 words but are now safe from an attacker getting them off the device. The Coldcard is now worthless.

 

If you enter your real pin, you can also add an additional Passphrase. This is similar to adding more ‘randomness’ and unlocks an infinite number of secret wallets. Thus, even if your attacker gains access to your 24 seed words, without the extra Passphrase, they still cannot access the coins. This is extremely powerful and akin to 2FA. This feature alone is the #1 reason Coldcards are the absolute goat!

 

You can see how the device offers you many options and personal preferences on how to secure your coins. It is clearly more complicated and has a steeper learning curve. However, with practice, it is best practice and is also geared up for Multi-sig security, a topic for another day.

The Cold in Coldcard

Now the reason Coldcards are named as such, is that to use them, you do not even need to connect them to your computer. I use mine connected to a portable battery charger, it never needs to connect to the internet.

 

The way it achieves this is using what is called a Partially Signed Bitcoin Transaction (PSBT) and linking to the Wasabi Wallet via an SD card.

 

On the Coldcard, you insert an SD card and drop a skeleton file of your wallet onto the SD card and then plug this SD into your computer. Wasabi wallet can now import your wallet and you can see all your UTXOs, coins and transactions.

 

Once you get to this stage, it all feels much more normal and similar to what you are likely used to. No coins can be signed and sent however, that still requires signing on the ColdCard.

 

Within Wasabi, you can now construct a transaction by picking the UTXO you want to send and creating the PSBT. This contains all the information needed except requires the signature of the Coldcard.

 

Drop this PSBT file onto the SD card, slot into the Coldcard and hit sign to finalise the PSBT. It is now ready to be broadcast. Slot the SD card back into the computer, broadcast it via Wasabi and you have now created a fully secure Bitcoin transaction without ever putting your device on the internet.

 

You can also link Wasabi to your own full node to take advantage of the security and privacy provisions that provides.

 

Summary

Overall, you can clearly see this is much more complicated than a Ledger. It highlights a few things. First, Bitcoin user interface stinks. Its horrible. The trade-offs for convenience such as leaving coins on exchanges and using closed source hardware like Ledger are clearly favorable for the masses.

 

It also highlights just how complex the underlying technology is to be used properly. The Coldcard is an order of magnitude more secure and is the best way to store coins long term. That said, it is not easy and takes practice. Once you get over the learning curve it is actually an extremely good system but takes some iterations.

 

As always, if you have any questions about the Coldcard or how to manage BTC coins best practice, just shout. Nobody understands this stuff first time, myself included. It will get there, it just takes longer than most people have the patience for.