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Securing Crypto Wallets: Security with a good UX
In part 1 we discussed the dangers around securing wallets, and why it is important. In this post we'll look into the practical side: what you should do for better security, and where you should focus your efforts.
It is important to realize that in the real world, something always leaks. People get phished. Devices get compromised. Screenshots end up in cloud backups. Passwords get reused. If your system depends on a single secret, device or seed phrase, eventually that secret becomes someone else’s.
That’s why Strong Customer Authentication (SCA) is such a useful mental model. It’s built around proving the user is the rightful owner using multiple independent factors, commonly framed as something you have, something you know, something you are.
The goal: strong security that still feels like a consumer app
Here’s a practical approach you can adapt whether you’re building a wallet, an exchange, or a Web3 app that moves value:
- Bind identity to a trusted device (“trust anchor”). After onboarding (often following identity verification), generate a device-specific private key + public certificate on the user’s device. Sensitive actions must be authorized by that device certificate, not only by the blockchain private key. Even if an attacker somehow gets the seed phrase, they still can’t transact without the trusted device (or an equivalent high-assurance flow on a new one).
- Use biometrics or a secure PIN for the moment that matters. Make unlocking and transaction approval require Face ID/fingerprint or a secure PIN, backed by the phone’s secure enclave/TEE so it’s hard to bypass remotely. This adds a strong “user presence” proof without adding much time.
- Confirm the exact transaction details (“dynamic linking”). Display recipient address, amount, and asset clearly, and make approval tied to those details, so a swap or hidden change can’t ride along silently. This is designed to reduce blind-signing and “invisible” malware tricks.
- Prefer phishing-resistant approvals over copy/paste codes. App-based approvals bound to a device are inherently harder to phish than SMS/email codes, because the confirmation happens in a secure app context rather than in a webpage where users can be tricked into typing secrets.
- Use KYC as a recovery and re-enrollment safety net. KYC isn’t only compliance—it can strengthen security by binding a real-world identity at onboarding, generating trust anchors from that identity, and requiring re-verification for new-device enrollment. That blocks a common nightmare scenario: an attacker tries to re-register a stolen seed phrase on their own device.
That’s the should be the basis of a modern wallet security model: device possession + biometric/PIN + transaction clarity, with identity verification backing the risky edges (onboarding, recovery, re-enrollment).
Why re-enrollment is more important than onboarding
Most teams obsess over login and forget the dangerous moment: when a user changes phones.
Attackers love recovery flows because they’re often the easiest path to “becoming” the user. The source text makes the key point clearly: if re-enrollment on a new device triggers robust identity verification, then even a stolen seed phrase doesn’t automatically grant control, and attackers hit a wall.
That’s what founders should aim for: a recovery experience users can complete, but where attackers can’t automate attacks.
The identity-bound wallet
When you combine these pieces, you get something that looks a lot like mobile banking, except it’s Web3.
The future flow can go something like this: the user verifies identity (eID/passport), keys are generated inside a secure enclave, a certificate ties identity to the wallet’s public key, and transactions require the presence/signature of that certificate. If the user restores on a new device, identity re-verification enables recovery, without making seed phrases the only lifeline.
This should be the goal: security, usability, and compliance at the same time, with the complexity pushed under the hood.
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Why this is worth doing
Strong authentication isn’t just a checkbox, it’s leverage:
- It cuts off common takeover paths (phishing + leaked credentials become far less effective).
- It protects brand trust in a market where “drained wallet” stories travel fast.
- It positions you ahead of rising regulatory expectations around KYC, SCA/2FA, and monitoring.
Crypto wallets promises ownership of assets. But ownership without safety doesn’t scale.
The good news is we don’t need to invent the answer from scratch. We can take what finance learned: SCA, device-based trust, strong recovery, and implement it in a way that feels like a modern consumer app. Interested in knowing more? Take a look at our other blog posts.