Exchange Users are Moving to Crypto Hardware Wallets: Here’s Why

Picture this scenario: as an aspiring crypto connoisseur, you could acquire your first satoshis through a trusted organization or a P2P transaction with some internet stranger. What would you do?

Needless to say, most people would pick the trusted organization any day. That’s exactly why crypto exchanges spread like wildfire in the world of cryptocurrencies.

Nothing beats the convenience of an exchange. So how come ever greater number of people are moving to cold crypto wallets each year? Let’s find out.

Why Hardware Wallets are On the Rise

Despite its usefulness, the concept of crypto exchanges is an oxymoron: people have to trust a centralized entity to manage their decentralized finance interests.

Idealistic contradictions aside, an exchange puts all users assets into a single, centralized storage.

The result is a honeypot to which unscrupulous actors are drawn like moths to a flame. After all, a single breach is all it takes to compromise millions of users.

Unsurprisingly, centralized exchanges have repeatedly made the headlines for cybersecurity failures.

Last year WazirX, the largest cryptocurrency exchange in India, lost $235 million of customer funds to a criminal group.

The same event unfolded in Japan, where $308 million worth of Bitcoin was siphoned off the DMM Bitcoin exchange.

The year 2025 is already looking grim, with a record shattering breach draining $1.4 billions crypto assets from the renowned exchange ByBit in February.

The convenience offered by exchanges appears to be a double edged sword: while it makes things easier for customers, it does the same for hackers too.

Hardware wallets flip the script on this paradigm by letting users take full custody of their assets. With no single point of failure, even a breach in the manufacturer’s infrastructure bears zero risk for the customer.

What Makes Crypto Cold Wallets a Good Seed Phrase Protectors

Transitioning from exchanges to self custody is a major crypto milestone, turning users into truly sovereign members of the ecosystem. By owning the keys (i.e., the seed phrase), they own their assets directly.

A seed phrase is a string of 12 to 24 random words that captures the private keys of all your wallets using cryptography. Instead of remembering a dozen private keys, a single seed phrase is all you need making its safe storage all the more critical.

The “cold” in cold wallets indicates a setup where the seed phrase is kept completely isolated and disconnected from the internet.

Typically, the seed phrase is encrypted and stored in an external device that functions independently of the user’s personal devices. Furthermore, this device is kept disconnected from all networks: thus, rendering remote breaches physically impossible.

The Next Generation of Crypto Hardware Wallets

Of course, not all cold wallets are made equal. Today’s top of the line hardware wallets like Cuvex offer a powerful setup where an NFC card stores a heavily encrypted version of the seed phrase, which can only be decrypted temporarily using a secure pin.

First, a digital app creates the user transaction, which is then forwarded to the hardware wallet.

The wallet then requires the external NFC card to decrypt the key in a secure chip, sign the transaction, and return the signed transaction to the digital app. The transaction is then pushed to the blockchain through the app.

The result is an air gapped crypto storage solution where it’s physically impossible to breach the walls of your crypto wallet.

For more details, visit www.cuvex.io to see how self custody can be both secure and convenient.