A Bitcoin hardware wallet, that acts in the same way as a bearer bond? We take a look…
Before Coinkite launched the low-cost calculator-styled Coldcard wallet, it specialised in something a little smaller: the Opendime, a Bitcoin hardware wallet – also available in Litecoin variant – which aimed to allow for trustless in-person transactions, something cryptocurrencies traditionally struggle to accommodate.
Pay the Bearer On Demand
The idea behind the Opendime is simple: to create something which acts like a bearer bond, guaranteeing that only its physical holder has access to the funds it represents, but for Bitcoin rather than fiat currencies. In doing so, has come up with an interesting approach – but one with its own flaws.
Traditionally, the majority of cryptocurrency transactions occur ‘on-chain’: an entry is placed in the distributed ledger to indicate that a value has been transferred from one address to another. It’s a process which requires connectivity, and one which can be both slow and expensive: at the height of its scaling challenges, an on-chain Bitcoin transaction could cost upwards of $30 in order to be completed within the next few blocks. Various solutions, including second-layer transaction systems like the Lightning Network, address some but not all of the problem, but the Opendime takes a different path.
Imagine buying an object in cash: you meet the seller, agree the price, you hand over the money and you receive the goods. Quick, private, and trustless. The Opendime, Coinkite promises, brings that to Bitcoin: the device, which looks like a compact USB flash drive, contains a Bitcoin address which you can load but not withdraw: hand the Opendime over to the seller, and the deal is done.
Like cash, there’s no way to reverse the transaction without physically taking the drive back: you’ve never had access to the private keys associated with the address, unlike attempting the same transaction using a paper wallet of which you could have kept a copy or already scanned the private key. Like cash, the transaction is private: the blockchain sees the transaction which loaded funds onto the Opendime’s address, but not the device itself being passed person-to-person. Like cash, there are no fees involved: until the coins need to be moved off the Opendime, its off-chain nature means there are no transaction fees.
Theory Meets Reality
It’s a neat concept, but one which sadly falls short of its promises. When unpacking an Opendime – which are only sold in packs of three – and inserting it into a PC, you’re met with the wallet generation process. A guide walks you through dragging a random file onto the Opendime for entropy, and then the wallet’s private key and public address are generated. The latter is written as a QR code and HTML page which appear when the drive is plugged into any PC; the former remains locked behind the on-board microprocessor’s secure enclave.
A device that can only receive Bitcoin but never spend it isn’t much use, though, so there is a way to access the private key: popping a small resistor off the board, aided by a small hole in the PCB through which you can stick a pin and push. Once the resistor is separated from the board, which in theory also requires the protective shrink-wrap coating to be cut away, the private key is to be considered compromised – something the Opendime itself will tell you in its HTML page if you connect it to a PC post-unlocking.
Sadly, it’s here the first problem raises its head: a review unit, carried on a keyring for a couple of weeks, spontaneously unlocked itself. Externally, the device looked fine: the resistor appeared to still be attached, the shrink-wrap coating had not been disturbed, and if you were receiving the unit as payment you’d have no reason to consider it unlocked. Given that once an Opendime is unlocked you’re advised to sweep the funds into a different wallet and dispose of the device, the failure rendered the device useless – and Coinkite’s support department ignored repeated emails about the issue.
Cost is Key
Even if you’re lucky enough to have an Opendime which doesn’t unlock itself, there’s a bigger problem: cost. At $37.50 for a pack of three (excluding taxes and shipping, which bring the cost per Opendime landed in the UK up to around £15), there’s an effective $12.50 transaction fee attached to each time you hand an Opendime over in payment.
With Bitcoin fees at the time of writing sitting more than comfortably in the 40 satoshis per byte (40 sats/b) range for next-block inclusion, paying with an Opendime is many times more expensive than simply making an on-chain transaction – and with second-layer solutions like the Lightning Network aiming to reduce those costs and speed up the confirmation process, the Opendime’s relevance may already be waning.
The Opendime is, undeniably, a clever concept, and one which calls to mind the ‘cred-sticks’ of cyberpunk science fiction. In practice, though, the devices are too expensive, too cumbersome, and too unreliable to recommend. Coinkite’s support for the gadgets is also woeful: if you find yourself with a faulty unit, expect to be ignored at best and excoriated by the company’s founder via social networking at worst.
There is, perhaps, a case to be made for the Opendime’s privacy-boosting potential, allowing a single wallet to be passed along through multiple owners without on-chain transactions and without the need for trust between recipients – but only if the status of the device can be checked on a compatible computer at each stage of the process and, if it is found to have succumbed to the same failure as the test unit, the funds swept onto a replacement Opendime via an on-chain transaction.