If you’re one of those blockchain geeks who want to cash in on the crypto craze, you’re at the right place. But wait, have you ever thought about what happens if you fall prey to a crypto scam or some hacker eyes your digital wealth? We’re here to tell you how exactly you can get a secure gateway to all your crypto needs.
Say hello to the wallet of the future. It might not be able to hold your swanky cards or cash, but your virtual currency will be safe. Meet crypto hardware wallet!
What is a Cryptocurrency Hardware Wallet?
Crypto hardware wallets like Trezor and Ledger have become the hot picks for crypto owners. Why? Because of their robust security and unmatched convenience. But what exactly is a hardware wallet? We are here to demystify exactly that and make the concept not so tricky for you, so let’s get started.
A hardware wallet is a secure device native to cryptocurrency that stores a user’s private keys in a secure hardware device. Remember private keys? A supercritical piece of information used to authorise outgoing transactions on the blockchain network. The main principle behind a crypto hardware wallet is to provide complete isolation between the private keys and your easy-to-hack smartphones or computers.
A cryptocurrency hardware wallet does not store your coins. Your hardware wallet only offers storage and protection for your private keys!
Also, before moving ahead, let’s do away with the obvious question: why not just utilise a USB?
The answer is that a USB stick can only hold your private keys; to complete the transaction, you’ll need a wallet. Even though a website is utilised in the process, transaction signing happens inside the wallet, which means your private keys are never transmitted out of it.
- A cryptocurrency hardware wallet is a device, physical medium which stores the public and/or private keys for cryptocurrency transactions.
- Apart from this basic function of storing the keys, a crypto hardware wallet more often also offers the added functionality of encrypting and/or signing information.
- A Crypto hardware wallet is by far the safest way to store and handle your assets, but deciding which crypto wallet is best might be difficult.
How Do I Own Cryptocurrency?
Cryptocurrency is not like any other asset. It’s completely digital, so it’s intangible (of course!). And, unlike traditional investments, which are often stored in a bank or brokerage account, crypto investments require the use of a ‘wallet’ to store them. When you buy cryptocurrencies, you get a wallet address with public and private keys where you can keep your money on the blockchain.
The public key is an incoming-only address that may be freely publicised so that people can send money or tokens to the correct address. Consider it an anonymous version of your email address. Giving it to someone allows them to only send emails to it, not from it. On the other hand, consider the private key as your email address’s password. It’s required to gain access to your crypto.
Actual cryptocurrency tokens are only a representation of a blockchain balance. What you truly have is a private key that enables you to conduct transactions using a specific ‘address’. To put it another way, cryptocurrencies are only yours if you have the private key that lets you access them, which you can find in your wallet or elsewhere.
How do Hardware Wallets Work?
Sure, knowing about all the technobabble about what is hardware wallet might have been fun, because you’re one step closer to becoming a full-time crypto enthusiast. But do you know how a crypto hardware wallet works? If not, we’re here to save the day.
Users can manage several accounts with most hardware wallets, and some even connect to their Google or Facebook accounts. Trezor, Ledger, KeepKey, and Prokey are some of the most popular hardware wallets.
Hardware wallets and physical devices act like cold storage for your confidential keys. Because your private keys are protected by a PIN and the information is not available on the Internet, hackers will have difficulty extracting private keys. A good thing for you!
A cryptocurrency hardware wallet bridges the gap between the digital and the physical. It creates digital keys offline and keeps them in the hands of their rightful owners. The keys can be employed in many ways, including two-factor authentication, digital signatures, or controlling crypto assets.
For adding to your understanding, we also have an example of how Digital BitBox, a robust hardware wallet works.
What Are Various Types of Crypto Hardware Wallets?
If you want to trade cryptocurrencies, you should make a list of the finest hardware wallets available. These cold storage wallets ensure that currencies are kept safe and are suitable for people who want to remove a large number of coins from circulation.
Also, a hardware wallet may be required to comply with country-specific legislation based on the investor’s investing plan, in addition to cost, community wallet ratings, and the number of currencies supported. So, here we are with our top 10 picks for a hardware wallet, because we want you to get nothing but the best.
- Ledger Nano X
How to Choose a Hardware Wallet for Cryptocurrency?
Now that you have understood the basic gist of the hardware wallet let’s give an insight into which hardware wallet to choose for cryptocurrency. So, let’s dig into it, shall we?
Hopefully, by now, you’ve learned what is hardware wallet, so let’s take it one step further now and get to know what all you should consider when you plan to purchase one. Also, as a bonus, we’ll tell you about some of the best hardware wallet for cryptocurrency so that you can start your crypto wealth-building ASAP.
A cryptocurrency hardware wallet protects your currency and allows you to transact with it, which should be your main consideration when looking for options. So, when going on a shopping trip to buy yourself a new hardware wallet, view your available options through the prism of three main safety mechanisms that most hardware wallets rely on: PINs, recovery phrases and passphrases.
Which Crypto Hardware Wallet to Use?
Here are the best bitcoin wallets of 2022:
- Ledger Nano X
- Trezor Model T
How to Use a Cryptocurrency Hardware Wallet?
- Each hardware wallet is unique, but usually the steps are the same:
- Connect a smartphone or computer to the hardware wallet.
- You will need to set a PIN code when configuring the device to add an extra layer of protection and security. Your hardware wallet’s app will give a wallet address for receiving and sending cryptocurrency.
- Now, confirm the transaction by entering the PIN on the device when sending tokens from your hardware wallet to another address.
- In the last step, wait for the confirmation.
Pros and Cons of a Hardware Wallet
Using a cryptocurrency hardware wallet is the most secure way of storing your digital currency. When you use a crypto hardware wallet, your private keys become inaccessible to online threats.
A hardware wallet generates a set of private keys that you should maintain safely offline. The wallet itself is protected by a PIN, and after multiple failed access attempts, the device will be erased, preventing physical theft. So, please do not forget the password yourself!
Furthermore, hardware wallets allow you to physically sign transactions, adding an extra layer of protection to each transaction.
Some advantages and disadvantages of a cryptocurrency hardware wallet include:
|Unmatched security- considered the safest option by crypto experts||High cost- crypto hardware wallets are the most expensive option for storing your virtual currency|
|Suitable for long-term storage of large crypto balances||Complex technology which is potentially difficult for beginners|
|Immune to digital attacks and hacking if kept offline||Lacks convenience and is not suitable for day-to-day transactions|
|Provides direct control over your crypto|
Hardware Wallet Vs Software Wallet: What’s the Difference?
Now that you know what is hardware wallet, let’s discuss software wallets too, because there are two types of crypto wallets, in case we missed telling you this earlier.
Software wallet is a straightforward desktop program or browser extension that eases sending, receiving, and storing cryptocurrency. Because your virtual money is stored online, software wallets are also referred to as ‘hot’ wallets. Generally, software wallets are unique to each crypto, while a crypto hardware wallet often has support for many currencies.
Software Wallet- A Good Choice?
If you’re going to use a software wallet, make sure to back up your data regularly. You could lose the private keys to your wallet if a problem with your web browser or hard drive occurs, resulting in a permanent loss of your cryptos. That’d be a serious nightmare, and we don’t want that to happen with you on your journey to the crypto universe.
Also, before you choose between a software wallet and a hardware wallet, have a look at the three primary types of software wallets.
|Web-based Wallets||Desktop Wallets||Mobile Wallets|
|Web-based wallets, like MetaMask, serve as a browser extension and can send ETH transactions. They make it simple for consumers to interact with decentralised applications and DeFi protocols.||Desktop wallets, such as the Electrum wallet, are designed to be used on a desktop or laptop.||Mobile wallets, like Blockchain.com, allow you to store cryptocurrency, send and receive transactions, and sweep the private keys of an existing wallet into the app by scanning a QR code with your cell phone.|
Whether you choose a crypto hardware wallet or a software wallet, always remember that each has its trade-offs. Because they are stored offline, paper and hardware wallets are immune to a cyber-attack, but they are limited in usefulness and can be lost or deleted.
So, for most people just entering the crypto-verse, the simplest method to get started in crypto is to use an online wallet provided by a big exchange like Coinbase, which provides a good blend of security and accessibility. But as our main focus here was hardware wallet, stay with us a little more so you can know about the pros and cons of one and make an informed decision.
Did You Know?
In 2013, a Welshman named James Howells, threw out a physical hard drive with 7,500 Bitcoins on it! Now, after realising how much the value of Bitcoin has skyrocketed in all these years, he is trying to get his local city council to allow him to excavate a landfill. He hopes to find that drive now. After all, it’s worth millions now.
Why are Hardware Wallets Safer for Crypto?
A hardware wallet is a USB drive that securely stores a user’s private keys. This has a significant advantage over the popularly known hot wallets that it is not affected by viruses that may be present on one’s computer since private keys are never in contact with your computer or vulnerable software.
Word to Remember
A digital signature is a cryptographic tool for ensuring the integrity and validity of digital data. You can use a digital signature to prove that you know the private key associated with a public key without exposing the private key itself.
From its nascent stage in 2009, today the cryptocurrency industry has matured and come a long way with its fair share of ups and downs. Also, a good thing, the ecosystem and services surrounding it have kept pace with the boom.
While there has been substantial development, consumers must still exercise caution in a crypto ecosystem. Things such as wallets and exchanges should always be researched thoroughly before you step in. With the Mt Gox scam, history has witnessed the loss of millions of dollars. So, it is only logical to say that security should be your priority when venturing on your crypto journey. And to make it safer for you, we’ve introduced you to the enticing world of crypto hardware wallets. So just fasten up your seat belts, and your chosen crypto might shoot to the moon.
Hardware wallets are a simple way to create keys offline and keep them safe. They act as a layer of security and are not vulnerable to online attacks.
If you’re new to crypto, using a hot wallet (MetaMask, Coinbase, or Trust) in conjunction with a well-known and trusted exchange like Coinbase or Binance is absolutely acceptable. In that case, a hardware wallet may not be worth the price if you only have a little amount of Crypto assets. However, if you are a crypto enthusiast and have some serious investments, a hardware wallet is something you should buy ASAP.
Yes. Bitcoin is a type of cryptocurrency, and most crypto hardware wallets work with a broad range of cryptocurrencies.
Some of the primary factors that you should look out for when choosing a crypto hardware wallet include but are not limited to price, durability, reputable manufacturer & ease of use.
If you don’t keep your crypto assets in a crypto hardware wallet, you’ll have to trust your crypto brokerage with your private keys. Although it is not advisable to store your cryptocurrency on an exchange, US-based platforms such as Coinbase and Gemini are highly secure. But, even large exchanges, including Binance and Bitfinex, have been hacked in the past.
Even in negligible amounts, hardware wallets turn out to be a brilliant investment since they safeguard your private keys and provide peace of mind that software wallets do not offer.
Ledger Nano S, Trezor Model 1, SafePal S1
Hardware wallets, which are designed to be resistant to hacking, must be plugged into a computer and transactions are signed “in-device.” Because a user’s private key almost never leave the device, malicious cyber entities find it nearly impossible to steal funds from a hardware wallet.
They is nothing to prevent the loss of a recovery phrase. This is due to the fact that the private key is intended to be with the user of a noncustodial wallet.
Even though it depends, hardware wallets can range from $100 to $200.
– Purchase a hardware wallet.
– After that, launch the software on your device.
– A PIN code will be required as part of the installation process. Just make certain that you remember it.
– Then, get a good ledger app that allows you to access your wallet and go through the history of your transactions. You can choose between the Ledger Nano X, the Ledger Nano S, and more.
– Test it by sending or receiving crypto, if your request is granted, it is immediately available for use.
Read more about How Blockchain Works.