I see many people talking about Secure Element in hardware wallet like some mythical creature that will protect us from all evil, but in reality Secure Element is just a chip or microcontroller used in a similar way like in SIM cards, and they can potentially be exploited by malicious firmware updates.
In Hardware wallets they are used as second chip for storing private keys and seed words.
What are the benefits of Secure Element in Hardware Wallets?
- Seed words never leave device but they stay in Secure Element
- Secure updates
- Generating 'random' numbers
- No tempering
Secure Elements can be open source (can be verified and confirmed) or closed source (any firmware can be used including malicious), certified or not certified.
Current state of Secure Elements is Hardware wallets:
Let's see some examples how Hardware Wallets got exploited before in presentation
Exploiting Hardware Wallet’s Secure Element by Riscure and Sergei Volokitin