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Companies that are involved in producing hardware crypto wallets have multiple revenue streams. The hardware wallet industry has emerged as one of the most resilient sectors to the ongoing bear market, with events such as the FTX collapse bringing more uncertainty to the crypto community. This situation has also reminded investors of the importance of self-custody and independence from centralised exchanges, also called a CEX. 2022 was categorised as the cryptocurrency winter season that has brought even more cold wallet sales.

What is a hardware wallet?

Cryptocurrency wallets store users’ private and public keys while providing an easy-to-use interface to control crypto balances. This also supports cryptocurrency transfers through the blockchain. Some wallets allow users to perform specific actions with their crypto assets, such as selling and buying or interacting with decentralised applications. Hardware wallets fall under the cold wallet category, which are entirely offline and far more secure. A hardware wallet is an external device (usually a Bluetooth device or a USB) that stores your key. You can only sign off on a transaction by pressing a physical button on the appliance — this is important for any cryptocurrency assets you do not need instant access to. A hardware wallet is the best practice for storing them offline; however, it is the user’s responsibility to ensure that assets are secured, and it is entirely your responsibility that you don’t lose or have your hardware stolen.

The breakdown of a crypto hardware wallet

Most major centralised exchanges like Binance have increased their investment exposure to hard wallet companies; according to the CEO of Binance, Changpeng Zhao, CEXs may no longer be necessary for the future. If that is the case, then the crypto industry of the future will be quite unlike the existing one because the business model of hardware wallets is radically different from that of CEXs. One massive difference is how hardware wallets make money because cold wallets do not charge fees for most transactions by design. Selling devices cannot be the only revenue stream for hardware wallet companies as the devices are long-lasting and don’t often need upgrades.

How long does a hardware wallet last?

Since there is no clear answer to how long a hardware cryptocurrency wallet can last, it poses a difficult question of how hardware wallet companies keep running operations. According to a brand ambassador of Trezor, Josef Tetek, Trezor devices come with a two-year warranty. Insiders from BitAi Method support the functionality of the Czech Republic-based hardware wallet company —the first in the world to officially release a cold wallet in 2014. At a conference, Tetek said, “We regularly meet users who still use the first edition from 2013. Trezor devices are generally durable, and the fault rate is minimal.” The lifespan of a cold wallet cannot be estimated as the devices are designed to last for a long time with no expiration date.

What increases the demand for a hardware wallet?

According to reports, there has been an increase in demand for cold wallet devices, where hardware providers had to expand their support staff and introduce new support solutions, including self-help tools and chatbots, allowing them to more efficiently handle frequently recurring requests. The Ledger spokesperson said, “We have significantly scaled up our support team, which has been important to us considering recent events in the crypto industry and the increase in people moving to self-custody.”

According to industry executives, they believe that all companies involved in producing hardware crypto wallets have multiple profit streams, either indirectly or directly.

For instance, according to Tangem’s Kurennykh, the company has several revenue streams, with 70% of the company’s revenue coming from hardware wallet sales. The firm is also working on its non-custodial payment solution, which is anticipated to introduce an additional revenue stream. Some cold wallets also participate in affiliate or promotion programs cooperating with crypto services and exchanges. There is no revenue data from hardware wallet firms as they are private entities. According to industry experts, the FTX exchange collapse has driven vast sales and traffic to hardware wallet platforms. However, even before the collapse, the hardware wallet industry had been estimated to grow faster than exchanges.

Users’ main attraction to hardware wallets is that they reduce threats from hacking and online attacks, but they are also responsible for keeping their funds and keys secure. A cold wallet is suitable for those who want to retain complete control over their funds and for those storing large amounts of crypto over a long period. This article intends to educate and answer questions about hardware wallets that should be used as something other than legal advice. We encourage you to conduct independent research on hardware wallets and how they work if this is an avenue you are considering.