Air-gapped Wallets: Who Are They Worth It For?

An air-gapped wallet is a hardware wallet that is never connected to another device by cable, Bluetooth or network. Payments travel back and forth as a QR code or on a microSD card. It makes most sense for larger holdings that rarely move, and for multisig. For your first wallet and small amounts it is usually more effort than it is worth.

What "air-gapped" actually means

The term comes from IT security: between two systems there is a gap of air, no cable, no radio. For a bitcoin wallet this means: the device that holds your private key has no data connection to a computer, phone or the internet.

It still has to sign transactions. For that it needs another device that knows the blockchain, prepares the payment and broadcasts it to the network afterwards. Usually that is wallet software such as Sparrow on a computer or an app on a phone. This software only knows your public keys. It can show balances and draft payments, but it cannot spend anything.

There are two common ways to move data between the two devices:

• QR code: The software shows the payment as a QR code, often as a short animation of many frames. The wallet reads it with its camera, signs and shows the result as a QR code of its own. The software reads it back with a webcam or phone camera.
• microSD card: The software saves the payment as a file on the card. You insert the card into the device, it signs and writes the signed file back.

The device gets its power from a battery, from replaceable batteries or through a cable that carries only power and no data.

The PSBT: the form that travels back and forth

What travels is a PSBT (Partially Signed Bitcoin Transaction). It is a standard format for a payment that is not yet fully signed. It states which of your coins are spent, who receives how much, how much comes back to you as change and how high the fee is. How inputs, outputs and change fit together is explained in the article How does a bitcoin transaction work?.

Because PSBT is an open standard, devices and programs from different manufacturers understand each other. That is what makes air-gapping so practical for multisig.

Well-known air-gapped devices

Many devices can work without a cable. They differ in whether air-gapping is the only way or one option among several.

Prices and models are compared in the hardware wallet comparison. How the Coldcard holds up in everyday use against Trezor and Bitbox02 is shown in Coldcard vs. Trezor vs. Bitbox02.

A special case: devices without memory

SeedSigner goes one step further. The device does not store your seed. Every time you start it, you scan the seed as a QR code from a sheet or a metal plate (SeedQR) or type in the words. When you switch it off, the seed is gone again. Jade can work in a similar way in QR mode.

The advantage: a stolen device reveals nothing. The disadvantage: the SeedQR is your complete seed in another form and must be kept just as safe as the words. Every signing session takes the seed out of its hiding place, and that is a moment in which it can be seen or photographed.

Which attack air-gapping prevents

A USB cable is a data line in both directions. Your computer talks to the device over it, and any software on the computer could try that, including malware. If the device's firmware has a bug in how it handles USB or Bluetooth, an attacker could use it to send commands the manufacturer never intended.

Air-gapping closes that line. All that reaches the device is what you deliberately put on the card or hold in front of the camera. That is a narrow, visible door instead of an open line.

In concrete terms, air-gapping makes these harder:

• Direct attacks from an infected computer on the device, through drivers, the USB protocol or radio.
• Unnoticed data leaving the device. Without a cable the device cannot secretly send anything back, except through the QR code or file you transfer yourself.
• Dependence on manufacturer software and drivers. You don't need a manufacturer app on your computer that talks to the device.

What air-gapping does not prevent

This is where the most common misunderstanding lies. Air-gapping protects the line, not the device itself and not you.

Tampered devices (supply chain)

If the device was altered on its way to you, no air gap helps. A doctored device can generate a seed that is known in advance and present it as random. The attacker then simply waits until you deposit money.

Protection: buy only from the manufacturer or an official reseller, use the seals and the manufacturer's authenticity check, and load firmware only from the official source. With SeedSigner you build the device yourself from standard parts and verify the software before installing it.

Malicious or faulty firmware

Malicious firmware does not need a cable to leak your key. It can hide information in the signatures themselves, which leave through the QR code or card perfectly normally. These signatures end up publicly on the blockchain, and only the attacker knows how to read them.

What helps: open source firmware that can be reviewed independently, updates only with a check of the manufacturer's signature, and multisig with devices from different manufacturers. Some devices also support an "anti-exfil" protocol, in which the software contributes its own randomness to every signature and so prevents the device from hiding data in it.

Malware on your computer

The computer prepares the payment. If it is infected, it can write a wrong recipient address into the PSBT. The device signs what is in the PSBT. It doesn't know whom you actually meant to pay.

Protection: always check the address on the device's screen, not only on the computer. The same goes for receiving addresses: have the device show a new address before you give it to anyone.

Your own mistakes

No device protects you from a photographed seed, a seed in the cloud, a phishing site asking for your words or a lost backup. Anyone who types their 24 words into a fake support site loses everything, no matter how well the device is isolated. How to secure your seed and backups properly is covered in Storing your seed phrase safely.

The price: convenience

Air-gapping costs hardly more money than a regular device. It costs steps.

• Every payment takes longer. Card in, card out, or scanning QR codes in both directions. With practice that is a minute or two instead of seconds. In a dimly lit room or with a poor webcam, longer.
• Updates are manual work. The new firmware goes onto the device on a microSD card. You check the signature yourself or let the device check it, instead of clicking "Update" in an app.
• More terms. PSBT, xpub, derivation path, wallet descriptor. The software does less for you than the manufacturer apps of Trezor or BitBox.
• More parts that have to work. microSD cards become unreadable, cameras struggle with small screens, batteries run flat. None of this puts your bitcoin at risk as long as the seed backup is in place, but it can delay a payment.

If you pay with bitcoin several times a week, you will feel it. If you move coins two or three times a year, hardly at all.

Who is an air-gapped wallet worth it for?

The question is not whether air-gapping is more secure. It is a bit more secure. The question is whether that bit closes the biggest open gap in your setup. For most holders the biggest danger lies elsewhere: in the seed backup, in phishing, in inheritance.

A simple rule of thumb: if losing your holdings would be a real blow to you and you rarely move your coins, an air-gapped wallet is a good choice. What your holdings are worth today and what they would be worth at the Power Law floor, you can calculate here:

Air-gapping and multisig

Air-gapping brings the most in a multisig wallet. There, two of three devices sign, and each of them receives the same PSBT in turn. With QR codes or microSD cards you can mix a Coldcard, a SeedSigner and a third device without all of them needing the same driver or the same app. A bug in one device is then not enough for a theft. How multisig is set up and which backups it needs is explained in Multisig wallet: more security through several keys.