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Hardware Key Managers Explained

Hardware key managers provide both physical and cryptographic security measures to effectively safeguard and manage a user's cryptographic keys. As a result, these devices help significantly reduce the risk of a variety of online attacks and are an essential tool for combating the rising tide of cybercrime.

By Cryptopedia Staff

Updated May 17, 20213 min read

Gemini-Hardware Key Managers Explained

Summary

As an increasing proportion of our lives shifts online, the importance of protecting the access points to our digital assets has never been more critical. Hardware key managers provide both physical and cryptographic security measures to effectively safeguard and manage a user's cryptographic keys, thereby protecting the sensitive information and assets those keys grant access to. And while these robust security devices are limited in their ability interface with the external world, when properly implemented their security capabilities are unrivaled. As a result, hardware key managers help significantly reduce the risk of a variety of online attacks and are an essential tool for combating the rising tide of cybercrime.

The importance of protecting the access points to our digital assets has never been more critical. And, with the vast majority of cryptocurrency thefts resulting from mismanaged access credentials rather than attacks on the underlying blockchain network itself, an increasing number of individuals and organizations are relying on hardware key managers to keep their sensitive information safe.

Simply put, a hardware key manager is a portable, physical device designed to manage and protect a user’s private cryptographic keys — from the moment they are created and used to the moment when those keys need to be replaced or destroyed. Among crypto enthusiasts, hardware wallets are the most widely recognized type of hardware key manager. 

While there are convenient software solutions which serve the same purpose as a hardware key manager, these options are oftentimes more easily exploited than the offline protections a hardware key manager can provide. As the blockchain industry continues expanding, a variety of key management and cryptocurrency custodianship services have appeared but many crypto enthusiasts believe in the guiding tenets of decentralized self-determination  and are reluctant to relinquish control of their digital assets to centralized, third-party service providers who may mismanage their funds or fall victim to a cyberattack. 

Hardware key managers have become an essential tool for cyber-defense, not only for protecting digital assets but also for safeguarding sensitive information and business processes. Below, we cover the essential components of a hardware key manager.

How Hardware Crypto Key Managers Protect Sensitive Info

Effective encryption key management systems must provide the following types of protections:

  • Logical security: A key manager’s cryptographic capabilities are the most important features of the device. Its key encryptions are the primary defense against unauthorized users who do not possess the necessary credentials to decrypt sensitive information.

  • Physical security: Hardware security keys must include physical safeguards that mitigate the risk of unauthorized access to information controlled by the private key. Therefore, while there are hardware key manager variants that allow for Bluetooth connections and other wireless transmissions to a primary device, hardware key managers which connect via analog plug-ins, like USB ports, are generally more secure.

  • Personnel security: In order for key management systems to be effective, users within an organization must be assigned specific roles or credentials for pre-established levels of information access, and individual users must not share their encryption keys with anyone or store their keys anywhere that could become compromised. This is more of a best practice than a hard-coded design feature, but no hardware solution is impervious to human error and this aspect of key security therefore deserves just as much focus as the others.

It’s important to note that one hardware key management system may utilize multiple types of cryptographic keys. Therefore, when dealing with online ecosystems which involve the secure management of encrypted data across private, public, or cloud environments with their own approach to key management, effective key management becomes much more complex. 

Managing the Cryptographic Key Lifecycle

A hardware encryption key manager is meant to manage and protect the entire cryptographic key lifecycle — from the moment a key becomes operational up to when the key becomes obsolete and is destroyed.

The National Institute of Standards and Technology defines the cryptographic key lifecycle with the following stages:

  • Pre-operational: The cryptographic key material has not yet been formed into a usable key or made available for normal cryptographic operations. 

  • Operational: The key has been created through a cryptographically secure random bit generator and is available for use. Once a key is created, it can be activated immediately or set to be activated at a later time, either automatically or manually. 

  • Post-operational: The key is no longer in normal use, but access to the key is possible.

  • Deletion: If a key is no longer in use or has been compromised, a user with administrative privileges can opt to remove the key from the key storage database of the encryption key manager, making it impossible to recover the key.

Hardware Key Managers vs. Hardware Security Modules

At a glance, hardware key managers sound very similar to hardware security modules (HSMs), and the two terms are oftentimes confused or used synonymously. Both devices play a crucial role in cryptographic key security, and while the lines between the two are increasingly blurred due to emerging hardware solutions which incorporate hybrid approaches, there are still some general differences between key managers and HSMs:

  • Individual Use: There are a variety of hardware key managers designed for either individual or organizational use. However, the vast majority of HSMs are intended for enterprise-level network security and therefore less immediately relevant to most crypto enthusiasts from a user perspective.

  • Key Exports: Most HSMs are unable to export their encrypted keys to external environments. But, many hardware key managers are capable of delivering keys to other users, integrating with HSMs, and facilitating key transfers to external environments designed to support Key Management Interoperability Protocols (KMIPs). As a result, hardware key managers are typically more effective from an external key management perspective.

  • Access Hierarchies: Advanced enterprise hardware key managers are able to group and categorize keys in accordance with specific business policies or clearance levels, while each HSM typically stores all its keys in one secure module. As a result, hardware key managers can more easily facilitate hierarchical credential-sharing and key protection.

Protecting and Managing Cryptographic Keys Offline

Successful key management is critical to the security of any high-value digital ecosystem. While software and cloud-based solutions have provided scalable and convenient defensive measures, hardware key managers continue to retain several crucial advantages. Whether you are trying to ensure the security of your crypto assets or are a systems engineer intent on protecting your network processes, the secure creation, replacement, and destruction of encrypted keys are just as important as the protection of existing cryptographic keys. To that end, hardware key managers provide the invaluable ability to manage this entire key lifecycle in one place.

While hardware key managers are designed to store and safeguard encrypted data in a safe environment, in order to access the protected keys these devices will still need to be able to interact with a broader external network. However, by strictly limiting and defining how hardware key managers can interface with the external world, these devices significantly reduce the risk of a variety of online attacks and are an essential tool for combating the rising tide of cybercrime.

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