I received a PM from a member asking my thoughts on using a hardware wallet vs. Samourai. I figured I’d post the answers here to benefit everyone reading.
Do I really need a hardware wallet?
Some will disagree, but I don’t think it’s as necessary as hold dogma. Compared to running a wallet on your computer, hardware wallets (HWW) protect against two vectors:
Malware infecting your computer and stripping your private keys.
Your computer breaking or getting stolen, and you losing your keys with it.
That’s about it. While protecting against these two threats is important, it’s not everything.
With a HWW, you still have to worry about $5 wrench attacks:
Plus, you have to trust that the wallet manufacturer will keep their software up to date. Many are not open source. If the wallet producer goes belly-up, you better hope you can import that wallet into another one, and that you know how to do that.
So, HWW are not perfect solutions and don’t necessarily mean your coins are bulletproof.
Then, why are HWW pushed so hard by crypto influencers?
Besides shilling affiliate links to questionably legal Chinese exchanges, there really aren’t many ways to make money in the crypto niche. You can sell a trading course for four figures, but that doesn’t appeal to the Average Joe. HWW are a great way to profit off the fear of losing your precious cryptos.
What do you recommend instead?
Use a dedicated wallet phone. Specifically, a de-googled Android with Samourai Wallet. The easiest way to get started is to buy a Google Pixel 3a on Craigslist ($150-$200) and install GrapheneOS.
Is this as secure as a HWW?
Rewinding to what HWWs do, using a separate phone as a wallet protects against the same vectors. It’s a separate device (so no risk of physical loss) and you likely won’t get malware since you’re only using this phone for one purpose. When not in use, just turn it off and rest assured your coins are safe.
The only caveat is that yes, your phone will go online when you use the wallet to transact (which only takes a few minutes). But realistically, it’s not like turning on the wallet means hackers are going to rush in and steal your keys. Samourai also operates over Tor so your connections are kept private. Plus, Graphene is seriously secure and won’t download any software unless you tell it to.
What if I lose the phone?
Samourai gives you a passphrase protected recovery seed just like every other HWW. Simply fire up the app on another phone and you can re-import your wallet within minutes. The app is also PIN-protected.
Why Samourai Wallet?
Samourai is a privacy-focused wallet that has a ton of power-user features that other wallets do not offer. The most important of these being - Whirlpool.
Whirlpool is a mixing client that takes your coins, mixes them with others, and spits out equal outputs. This breaks all links with your previous transactions. Here is a visual representation of a Whirlpool mix:
5 unequal inputs go in. 2 unequal (new mixes) and 3 equal (remixes). 5 equal outputs come out. By utilizing Whirlpool you eliminate all backward looking connections to your coins.
Why is that important?
Let's do an example. Pretend you buy BTC on Coinbase. They know exactly who you are (thanks to KYC), exactly how many coins you bought, and where you sent them to.
Let's say you sent 0.5 BTC from Coinbase to your HWW. Then, you send 0.1 BTC to your favorite wrongthink content creator, Roosh V.
At that point, Coinbase can guess with high certainty that it was you who sent a donation to Roosh. It doesn't matter that there's two hops between Coinbase and Roosh. It's very, very likely that the donation to Roosh came from you. Plus, that transaction is permanently filed on a public ledger, forever.
Now, instead pretend you send from Coinbase to Samourai. After sending your coins through Whirlpool, Coinbase has no idea where those coins went. After one mix, your coins could be one of five. Now imagine everyone in your mix remixes. That means that your coins could be any one of 25 (5^2) outputs!
So, using Whirlpool guarantees that whoever you bought your coins from won’t know where they went after your purchase.
To learn more, read this:
https://github.com/Samourai-Wallet/Whirlpool
Why not Wasabi wallet?
Wasabi sucks. Its lead maintainer has said it should not be used on dark net markets. Do you really trust a wallet whose creator doesn’t trust his own product?
OK, I’m ready, what do I do now?
For starters, you can run it right on your phone if you use Android since it’s available on the Google Play store. But. Then Google has a record that you downloaded it. Not good!
The best technique is to download the .apk file directly on a de-Googled phone. The easiest way to do this is to buy a used Google Pixel 3a ($150-$200) and put GrapheneOS on it:
https://grapheneos.org/
If you’re worried about the difficulty of porting a custom Android ROM like Graphene, don’t worry there’s tons of videos on YouTube walking you through step-by-step.
OK you’ve sold me on Samourai. But why can't I mix on Samourai, then send to a HWW?
You can. However, you might give up your security by paying a fee. All Samourai outputs look the same, in 0.01, 0.05, and 0.5 BTC denominations. By sending a UTXO out of Samourai, you pay a fee, which turns that 0.5 BTC ingot into an 0.499925 BTC coin. That makes it identifiable, especially if you send a bunch of transactions at the same time.
This article goes on to explain problems with sending to a HWW as well as how to turn a Samourai wallet into “cold storage,” and how to send to a HWW if you really have to:
Simple answers to your Bitcoin questions
www.bitcoinqna.com
Additionally, Samourai gives you free remixes. If you use the RoninDojo or Whirlpool GUI, you can remix your UTXO's for free for eternity. This means your coins will gain even more anonymity, as the number of possible mix outputs increases.
Does that mean I can buy BTC on Coinbase, send it to Samourai, and my coins will be completely private?
Absolutely not.
No matter what you do with your BTC, Coinbase still keeps a record of every time you buy BTC. It doesn’t matter if you mix your coins. They still have that record, and they still know that YOU bought BTC. They can’t track what you do with said coins, but you’re still on record as being a BTC buyer.
