Alright, I’ve been thinking about it, and no matter how much I do, I don’t get the point of hardware wallets.

For me, there are a few use cases (I’m disregarding illicit ones) for cryptocurrencies in general:

Investing into them long-term. Holding some part of your wealth in Bitcoin or whatever you think is best for that. You don’t plan on selling any of it for 10 years+. You may or may not have the extra conviction to have full control over your assets. Investing into them, but on a shorter timeframe. You want to hold some of your wealth there, but eventually, you might want to withdraw some, but not all the time. Holding some of it and borrowing against it to pay daily bills. Using it for paying for stuff on the internet. It’s kind of an edge case right now, but it does happen. Transferring money between countries with no common or dysfunctional banking systems. Trading, either on centralized exchanges or on decentralized exchanges.

Point 3 isn’t really possible with self-custody anyway, your assets are collateral, that means it will be in some custodial wallet. This is out for a hardware wallet.

Point 4 you want convenience. Connecting a hardware wallet every time you make a transaction is annoying, and you’ll probably not hold a significant portion of your wealth in such a wallet. For a small wallet for active transactions, a hot wallet (custodial or self-custodial) seems most reasonable, no point in a hardware wallet.

Point 5 is similar to the former point. You’re holding the money for a short time, a hardware wallet would be more of an inconvenience and you don’t gain much from it. But I can see how it can feel cole for some, I don’t see the point in it.

Point 6, a hardware wallet makes little sense. Tradinc on a centralized exchange is custodial anyway, and decentralized platforms like Hyperliquid, you can use with a hardware wallet, but this isn’t the place for long-term investments, so the size argument probably is key here again. I don’t see the big benefit there.

Point 1, a hardware wallet makes no sense to me. You don’t need a hardware wallet to put money into it. You’re not withdrawing for years anyway, and you need to backup your key whatever you do (which is not trivial). If self-custody is important to you and you don’t trust banks, a paper wallet – multiple backups, in multiple places, safely stored, ideally not recognizable as keys to a wallet – makes much more sense than a hardware wallet. If you have a hardware wallet lying around in your house it telegraphs to anyone finding it that you have it, and they might coerce access from you. Since you’re not withdrawing anyway, you don’t need the convenience they give of actually accessing the wallet. And if in the future, in many years, you REALLY want to withdraw, then you can still import it into a hardware wallet.

Point 2, to me, is the only one where a hardware wallet could conceivably make sense. But for that case, the non-long-term part of your holdings, which you hold for months or a couple years, just choosing the convenience of an ETF seems so much better in any way. You don’t have the responsibility to secure them (that’s your broker’s responsibility), you don’t have any risk of losing it, and you can sell anytime, if you need the money. If you don’t trust banks, you can split your holdings in the long-term part (see Point 1), and just hold parts of it in an ETF, which also diversifies the ways you might lose access to your assets (if the bank blocks you from it, you still have the fallback of the self-custodial part, and if you happen to lose all your backups, you can always recover your broker…).

If self-custody is not important to you, ETFs are the way to go for both points 1 and 2, anyway.

Long story short, my question: do you have any tangible use cases where a hardware wallet would be necessary or beneficial (in contrast to a paper wallet, which does make sense in some cases)?

I don’t see any sense in the product category…

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