Topic: IRS now wants to Hack Hardware Wallets (Read 604 times)

That's a big assumption to make. First world governments frequently "go rogue" and ruin the lives of any citizens they decide are causing too much of a problem. The US government is undoubtedly spying on you constantly and collecting huge amounts of data about you, unless you are taking active steps to maintain your privacy. A very basic step in that process is not letting the government know exactly how much money you own and exactly when and where you spend it.

Exactly. We live in a surveillance state, but they have no right to blanket monitor everyone's financial activities. If I'm not doing anything illegal, then why am I being monitored? Whatever happened to innocent until proven guilty?

You will probably have a hard time finding a single company whose business is data driven in any conceivable way in the US that is not closely cooperating with the government. There is so much information out there who is cooperating with the government, I don't believe there is a single one resisting the pressure government puts onto them should they not cooperate.

You are also right with the open source software not being safe necessarily just because it is open source. Same for the TOR network where they spy a lot by setting up infected exit nodes or, put differently, their own exit nodes. You have to pay tremendous attention to effectively protect your privacy.

Oh I would worry,,, I know the government has a lot of information on us but I would really not like them to know exactly where I keep my Bitcoin and for how long and for how much. It should be enough for them that if I sell for my local currency, then I can pay taxes, that is fine they can track my bank account. But why should they track my wallet?

What's that going to do if your government has you on their records the moment that you were born, I mean they all have us the moment that we were thrown in this world, if they suspect that you are hiding something especially with their precious taxes, you will be easily located.

It is unnecessary. The passphrase is only stored on the device if you choose to attach it to a secondary PIN. You can also enter a temporary passphrases which is not stored anywhere and the keys it generates are wiped whenever you unplug your device.

I wouldn't recommend that. Not many people create and hide paper wallets with nothing on them, and that is pretty strong indication you are using an additional passphrase. It would be wise to have a small amount of bitcoin under the non-passphrased seed phrase which you can give up in such a scenario.

In such a scenario, then they just through you in jail until you tell them what they want to know. Whether your wallet is hardware or paper is irrelevant.

On Trezor it is 50 characters, on Ledger it is 100 characters. On Electrum, there is no upper limit I am aware of set by the wallet, so the upper limit would theoretically be the maximum input size for the HMAC-SHA512 function, which is a string with length just less than 2¹²⁸ bits.

It is true, open source doesn't mean something is automatically safe, and we saw many examples of malware spreading like open source fake wallet clones.

All phone operators worldwide are closely connected with governments so you can't consider any information or your location with based station to be secret for anyone.

It's disgusting that the state are that desperate to know everyone's worth that they stoop down to such low levels to find it. Attempting to crack wallets without permission, is something a "normal" person would likely go to prison for.

This doesn't only just apply to closed sourced software, though. Open source hardware wallets now need to be monitored more frequently for changes in code, since they could try, and sneak something in without anyone noticing. We shouldn't be complacent, and trust something just because its open source.

Yeah, I don't believe that they intend to take anything, unless they can lawfully take it by coming to the conclusion that someone hasn't declared the correct amount of tax.

I guess it's only robbery if they actually take anything. Their intentions might be to try, and break in, and determine whether someone has been paying the correct amount of tax or just general surveillance, because as we know from the Snowden leaks they love to monitor pretty much everything that they can, and they don't mind breaking some laws to do that.

Absolutely, if someone has evaded the government completely then I would be extremely impressed. Since, our world revolves around using mega companies such as Google, Facebook, and other Monopolies its just easy for them to gain access. I believe there was several USA phone service providers who were sharing data with the government, and that was also exposed by Snowden.

I wouldn't worry too much about it at this point because if you think about it, the government probably has all the information needed to control and spy on you already, even before your introduction to cryptocurrency so no point worrying, they won't probably go rogue suddenly if you are living in a first world country.

Some hidden and some not so hidden. All these states ask banks to look at the underlying companies who own money transactions but the truth is there is a lot of "good states" who are as dark as the non-state rogue actors.

If we think Ledger and Trezor etc do not already share our data directly,,, we are such fools:)

To be completely honest with you, I think it would be easier for them to confiscate coins from a hardware wallet IF the paper wallet has a strong enough password.  One requires brute forcing, the other may require only a coding or hardware flaw.

Moreover, an initialized hardware wallet hints out that it contains a seed inside.  If a professional finds your initialized hardware, they will most likely think it is not an empty seed.  Otherwise, you would have not owned a hardware wallet in the first place.  Therefore, spending resources to crack it may be worth it.  A seed printed or hand-written on a paper that retrieves an empty balance without the proper passphrase gives absolutely zero hints that it may have a balance inside.

I am not sure there is a limit on the number of characters a passphrase could have.  However, you can only imagine how long a 70-char random passphrase brute forcing has to take.  After enough time spent trying to brute force it, I think it is likely they will give up.

I wonder, is it absolutely impossible that even an open-source hardware wallet does NOT temporarily store a passphrase inside its memory that may be retrievable if a weak security point is found through physical tampering?  I reckon getting the right strong password of a paper wallet is a harder job.

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Regards,
PrivacyG

Yes I know about ledger and they are my biggest concern for hardware wallets along with safepal hardware wallet who is even more shady and they can easily have some hidden chinese backdoor.

Let's imagine scenario of some government agency busting your home and finding hardware wallet and your paper wallet that are not connected with each other.
What do you think would be easier way for them to confiscate your coins, from paper wallet or hardware wallet?
They don't need to hack paper wallet but they already have private key written on it.

I would agree with this and maybe this is not the perfect solution, but it is most simple for average users.

Old Trezors may also become obsolete or need updates. Don't forget that these state led agencies also buy hidden stakes in these companies. We may not even get to know if an organization like the CIA or NSA is involved in any particular way when it comes to hardware wallets.

This makes it now even more and more important to trust only open source wallets,,, and also as much as possible all the Ledgers and Trezors you ever bought, if you used your personal details you can be sure their databases are not only now vulnerable to hacker attacks (as we have already seen happen) but also to government requests.

I was particularly talking about Ledger, see one of my previous posts:
Moreover, the previously mentioned issue does not apply in the case of importing paper wallets.  IRS wants to unlock your hardware wallet after getting their hands on it.  They want to either alter your device or have backdoors in order to get to your keys.

As a result, encrypted paper wallets are way more safe than hardware wallets as long as the passphrase(s) are stored securely.  You cannot alter a paper in an attempt to get a passphrase out of it that does not exist.  In consequence, getting their hands on your paper wallet will be in vain.

Upon importing the seed or private key, its safety depends solely on the user's behavior.  Main threat implies a closed-source piece of hardware storing a seed and passphrases.  A paper wallet combined with a legitimate open-source hardware wallet like Trezor is definitely the best combo for hardware cold storage today.

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Regards,
PrivacyG

The proper way to spend funds from a paper wallet is by creating a transaction, and signing it offline. If you're truely paranoid you can verify the signed transaction with different software on a different offline computer before broadcasting. If you're worried about hardware backdoors: you can probably find a computer older than Bitcoin for a few bucks on Craigslist.

FYI all chips in your airgap computer are closed source, they can have backdoors, and you still need to import paper wallet at some point of time or take it with you in your grave and afterlife.

Trezor HW is open source, they are not storing passphrases anywhere, and they are actively working on open source secure element for their next generation hardware wallet.

Very true.  However, the closed-source components may store basic yet crucial information about your hardware wallet such as passphrases and seeds.  Paper wallets do not have a memory to store sensitive information on without your knowledge.  In consequence, a backdoor-enabled device may enable a security agent to see what a paper wallet would not be able to show.

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Regards,
PrivacyG

As if that's a new thing, they have been spying on their citizens remember? They also have been instilling dictatorship in third-world countries for a long time, have a lot of black sites to torture prisoners and innocent people, and hacking hardware wallets of their citizens is just a walk in the park compared to all that they did so no surprises there. If it ever comes to that point, you better hide your HW somewhere like a drug trafficker.

You still need to use paper or metal plate even for hardware wallets because this devices worth nothing without your backup phrase.
Airgapped computers are not the best solution for most of the people and average tiktok generation with short attention span, and they can also have even more backdoors, because they have more chips and other electronic parts, including more complex operating system.
I have nothing against airgap and all options are viable and possible but masses want something simple and shewed up.

Yes but brings up the next problem: all users have to be equally educated about which wallet to use and why. If there are people using a hardware wallet who interact with those using an open source secure wallet both parties are exposed. In a sense you would have to ask the other party if she sends the Bitcoin from an open source wallet or else you refrain from transacting with each other. The hard part is to get all users develop the understanding of the advantageous of open source wallets. Frankly speaking, is that even possible?