What is an Air-Gapped Wallet?

What is an Air-Gapped Wallet?

An air-gapped wallet is a cryptocurrency wallet completely disconnected from the internet and wireless communication. It uses QR codes or micro-SD cards to facilitate transactions. Air-gapped wallets are considered more secure than others but require careful user responsibility. They are suitable for the long-term storage of significant cryptocurrency holdings.

History and Objective

The concept of air-gapped wallets originated from the need for enhanced security in cryptocurrency storage. While it’s challenging to attribute the idea to a specific individual or organization, the principles of air-gapped wallets align with the broader notion of offline storage and secure key management.

The development and popularization of air-gapped wallets can be attributed to the growing concerns surrounding the security of online wallets and the increasing value of cryptocurrencies. As cryptocurrencies gained mainstream attention, the need for more robust security measures became evident. Traditional online wallets were vulnerable to hacking, malware attacks, and phishing attempts. In response, air-gapped wallets emerged as a solution to protect private keys and transactions from online threats.

Cryptocurrency enthusiasts, developers, and security experts recognized the value of keeping private keys offline and began exploring different approaches to achieve this. The introduction of hardware wallets, such as the Ledger and Trezor, played a significant role in popularizing the concept of air-gapped wallets. These hardware devices provided a secure environment for storing private keys and signing transactions offline, effectively creating an air gap between the wallet and online networks.

Over time, air-gapped wallets expanded to include other forms of offline storage, such as dedicated air-gapped computers or smartphones. The emphasis on offline storage and transaction signing has become a fundamental pillar of cryptocurrency security. As the crypto industry continues to evolve, developing air-gapped wallet solutions remains an ongoing process, with innovations and advancements aimed at providing users with the highest level of security for their digital assets.

How does Air-Gapped Wallet work?

Air-gapped wallets utilize scannable QR codes or micro-SD cards to facilitate transactions while remaining disconnected from the internet and wireless communication. In the case of Bitcoin transactions, the process typically involves the following steps:

1. Creating a Partially Signed Bitcoin Transaction (PSBT): Users set up a transaction on an online device, specifying the recipient’s Bitcoin address and the amount to be sent. However, the online device lacks the user’s private key and can’t fully sign the transaction. Instead, a Partially Signed Bitcoin Transaction (PSBT) is generated, containing all the transaction details except the digital signature.
2. Signing the transaction: The unsigned transaction is transferred to the air-gapped wallet by scanning a QR code or via a micro-SD card. The air-gapped wallet, which holds the private key, signs the transaction in an offline environment. It’s crucial to note that the air-gapped wallet remains disconnected from the internet and wireless communications, ensuring the safety of the private key.
3. Broadcasting the transaction: The fully-signed transaction is transferred to the online device using a QR code or micro-SD card. The online device then broadcasts the signed transaction to the Bitcoin network, which is processed, confirmed by miners, and recorded on the blockchain.

While air-gapped wallets offer enhanced security by keeping private keys offline, it’s important to note that they are not entirely foolproof. User error, unsecured internet connections, and malware-infected computers can still pose risks. However, utilizing a dedicated air-gapped computer and following best practices can minimize these vulnerabilities.

Air-Gapped Wallets Pros and Cons

Pros

• Enhanced Security

  Air-gapped wallets offer higher security than online wallets as they keep private keys offline, reducing the risk of hacking, malware, and phishing attacks.

• Protection Against Online Threats

  By remaining disconnected from the internet and wireless communication, air-gapped wallets protect against online threats that can compromise the security of online wallets.

• Offline Transaction Signing

  Air-gapped wallets enable offline transaction signing, ensuring private keys are never exposed to potential online vulnerabilities. This adds an extra layer of protection to the transaction process.

• Reduced Attack Surface

  The offline nature of air-gapped wallets minimizes the attack surface for potential hackers or malicious actors, as there is no direct connection to the internet or wireless networks that can be exploited.

• Suitable for Long-Term Storage

  Air-gapped wallets are particularly well-suited for long-term storage of significant amounts of cryptocurrency, as they offer a secure and reliable way to store and manage private keys.

Cons

• User Responsibility

  Air-gapped wallets require a high level of user responsibility and technical knowledge. Users must follow proper security practices, maintain backups of their keys, and ensure physical protection of their wallet devices. Failure to do so can result in the loss of funds.

• Limited Accessibility

  Due to their offline nature, air-gapped wallets can be less convenient and accessible than online wallets. Users need to physically interact with the wallet device and transfer transactions using QR codes or micro-SD cards, which may not be as seamless or user-friendly for some individuals.

• Risk of Physical Loss or Damage

  Since air-gapped wallets typically involve physical devices, there is a risk of loss, theft, or damage to the wallet device itself. Proper physical security measures, such as storing the device safely, are essential to mitigate this risk.

• Complex Setup and Usage

  Setting up and using an air-gapped wallet can be more complex than other wallet types. Users may need to install specific software, configure offline devices, and manage the transfer of transactions between offline and online environments, requiring a higher level of technical expertise.

• Lack of Immediate Transaction Confirmation

  Unlike online wallets, where transactions can be confirmed instantly, air-gapped wallets may require additional steps and time for transaction verification and confirmation. This delay may not be suitable for users who require immediate transaction processing.

Air-Gapped Wallet Types

Air-gapped wallets can come in various forms, each offering its own approach to offline storage and transaction signing. While there is no definitive list, here are some common types of air-gapped wallets:

• Air-gapped hardware wallets

  Air-gapped hardware wallets are purpose-built devices designed to securely store private keys offline. They are specifically designed to facilitate transactions without ever exposing the private keys to online environments or wireless communication. These hardware wallets typically feature a digital screen that displays transaction information and physical or touch buttons that enable users to manually approve transactions. By keeping the private keys offline, air-gapped hardware wallets offer an added layer of security for cryptocurrency transactions.

• Air-gapped computers

  Users also have the option to dedicate an entire computer to function as an air-gapped wallet. This computer is purposefully disconnected from the internet and is solely used to store private keys and sign offline transactions securely.

Unsigned transactions are typically transferred to air-gapped computers using a USB stick, and the signed transactions are transferred in the same manner. This approach may be more intricate and demands a higher level of technical proficiency from the user. 

• Air-gapped smartphones

  Air-gapped smartphones can be utilized as wallets, similar to air-gapped computers. These smartphones can be reset to factory settings and set up without an internet connection. Wallet software is then installed using methods such as SD cards.

Vulnerabilities and Security Gaps

While air-gapped wallets are commonly believed to be more secure, some research has raised doubts about their safety.

Although air-gapped wallets keep private keys offline, they still require interaction with a computer for transferring cryptocurrencies. These wallets use software applications supporting PSBTs for Bitcoin or other cryptocurrencies. Users create “unsigned transactions” in the companion application, encoded in QR codes or stored as files on microSD cards.

The hardware wallet signs the transaction using its private keys and displays the signed transaction on the computer through QR codes or microSD files. The computer application then broadcasts the signed transaction to the network. However, using a computer introduces potential vulnerabilities, and the security of transactions via microSD cards might be less robust than QR codes. Thus, while air-gapped wallets offer added security, users must be mindful of potential risks during the transaction process.

Despite the lack of a physical connection, air-gapped wallets exchange information with the computer, making them vulnerable to potential threats. Even hardware wallets can be exposed to malicious data transmitted from the internet-connected computer, raising concerns about the risk of wallet malware infection. This means that hardware wallets must possess the capability to meticulously inspect transactions to fully avoid the chance of exploitation.

If the air-gapped wallet becomes infected with malware and fails to detect it, the fact that it is air-gapped would not safeguard the user’s funds. Hackers could exploit the wallet through malicious transaction files, QR codes, or data sent via Bluetooth or USB ports. These exploit methods could enable attackers to modify co-signers for a multi-sig wallet or change the receiving address for a transaction. While the sophistication of the air-gapped wallet’s software may influence its ability to prevent such attacks, being air-gapped itself does not provide additional protection in these scenarios. Users must remain vigilant and take precautions to safeguard their cryptocurrency funds effectively.

MicroSD cards pose potential risks as they can be compromised by a hacker-installed program to monitor or manipulate PSBT files for Bitcoin transactions. The miniature computer within the MicroSD card and the USB drivers used to interact with it on the computer are susceptible to hacking as well.

QR codes are not immune to attack vectors either. Malware or backdoors may exploit phone camera images, camera firmware, software rendering QR codes, or other vulnerabilities. Though unlikely, surveillance cameras, especially those with infrared vision, could capture QR codes from transactions.

Air-gapped wallets face diverse vulnerabilities. Researchers have successfully demonstrated attacks using radio signals from a computer’s video card, electromagnetic emissions from USB devices, and sounds from hard drives.

While air-gapped wallets offer superior security, they are not invulnerable. Users must weigh the trade-off between security and ease of use, as both air-gapped and non-air-gapped wallets have strengths and weaknesses. Determining the best option depends on individual user preferences and risk tolerance.

Examples of Air-Gapped Crypto Wallets

There are many air-gapped wallets, each offering unique differences and functions to enhance cryptocurrency security. Hardware wallets, for instance, are dedicated devices with digital screens and buttons for secure transaction approval. Offline computers provide a separate system for storing private keys and signing transactions without an internet connection.

Paper wallets involve generating and printing private keys on physical paper, keeping them offline. Additionally, air-gapped smartphones can be factory reset and set up without an internet connection, using SD cards to install wallet software. Each type of air-gapped wallet provides an extra layer of protection by keeping private keys offline, making them less vulnerable to online threats.

Now, let’s check out some of the most famous and widely-used air-gapped wallets available today.

ELLIPAL Titan: 100% Air-Gapped Cold Wallet

The ELLIPAL Titan is a highly secure and 100% air-gapped hardware wallet offering robust cryptocurrency management and protection. It utilizes a secure element chip for private key storage, defending against hardware and software attacks, and supports multi-signature (multi-sig) wallets for added security. With a unique QR code scanning mechanism, users can verify transaction authenticity, thwarting phishing attacks and unauthorized transactions. In case of loss or theft, the wallet’s 12-word mnemonic phrase allows for easy recovery of private keys. The device boasts a large 4-inch touchscreen display for effortless navigation, can be managed via a mobile app, and supports 10,000+ cryptocurrencies on 51 blockchains, including major ones like Bitcoin and Ethereum. Additionally, anti-tampering sensors provide an extra layer of protection by detecting physical tampering attempts.

SafePal S1: Hardware Wallet By Binance Labs

SafePal S1, developed by Binance Labs, is a cold storage wallet offering secure cryptocurrency storage and management. It utilizes a secure chip and encryption to safeguard private keys, preventing unauthorized access to digital assets. Easily paired with the SafePal mobile app on iOS and Android, users can conveniently manage their cryptocurrencies. This popular air-gapped crypto wallet relies on QR codes for transactions and buttons for the signing mechanism. With support for unlimited digital assets on 54+ blockchains, no KYC or registration requirements, global shipping to over 180+ countries, and compatibility for storing NFTs and integrating with DeFi platforms, SafePal S1 provides a durable, portable, and versatile solution for safeguarding and accessing cryptocurrencies worldwide.

Keystone Pro: Top Air-Gapped Cold Storage Crypto Wallet

Keystone Pro is an air-gapped hardware wallet featuring an OLED screen for easy transaction management. It enables offline transaction signing via QR codes, enhancing security by eliminating internet connectivity. The wallet incorporates an EAL 5+ certified Secure Element (SE) chip with open-source firmware, providing the highest security certification to protect digital assets against physical tampering, side-channel attacks, and malware. Key features include fingerprint security for device protection, an intuitive user interface compatible with various platforms, multi-factor authentication (MFA) for added security, integration with 20+ top software wallets, support for 5500+ assets, and multi-signature functionality for secure transactions. Keystone Pro offers a comprehensive and secure solution for managing cryptocurrencies.

BitBox02: Best USB Offline Cold Wallet For Crypto

BitBox02 is a feature-rich hardware wallet equipped with a screen, touch sensors, USB ports, and backup options. It offers seamless management of coins through the user-friendly BitBoxApp, which comes with various functionalities. Additionally, a Bitcoin-only edition, BitBox O2, is available for exclusive BTC storage, offering tailored solutions. Despite its reliance on a computer or phone, BitBox O2 ensures robust security through innovative features like secure boot, anti-tamper detection, dual-chip architecture, and firmware attestation. With support for over 1500 digital assets, multisig wallet creation, and open-source firmware for security audits, BitBox02 guarantees a comprehensive and secure cryptocurrency management experience.

AirGap: Mobile solution

AirGap is a self-custody, cold storage solution for cryptocurrencies, offering high security and seamless usability. It follows a two-device approach: AirGap Vault, installed on an offline smartphone, stores private keys, while AirGap Wallet, on a regular phone, handles transactions without any access to secrets. AirGap supports multiple cryptocurrencies and offers features like staking and exchange within the app. The system relies on QR code communication, making it secure and user-friendly. Developed by a trusted Swiss mobile security company, AirGap is fully open source and enables recovery through recovery phrases. It provides a reliable and secure way to manage and safeguard digital assets.

Conclusion

Air-gapped wallets represent a significant advancement in the field of cryptocurrency security, providing a robust solution for the safe storage and transaction of digital assets. By keeping private keys entirely offline and disconnected from the internet and wireless communications, these wallets offer a high level of protection against online threats such as hacking, malware, and phishing attacks.

These wallets serve as a testament to the ongoing evolution and innovation in the cryptocurrency industry. As digital assets continue to gain mainstream acceptance, the importance of secure storage solutions like air-gapped wallets will only continue to grow. They represent a crucial tool in the arsenal of any serious cryptocurrency holder, providing a high level of security and peace of mind in an increasingly digital world.