Hardware Wallet : All your Queries Answered !
Cryptocurrencies need good storage as you need to save them from malicious actors. Hackers, phishers, and other cybercriminals have numerous strategies to steal users’ crypto funds by stealing users private keys. That’s why you should have a strategy to protect your cryptos, like Bitcoin (BTC), Ethereum (ETH), or other altcoins with a wallet.
There is a wide range of cryptocurrency storage options available. All of them have their own security and usability trade-offs. Most newbies usually stick to storing their digital coins in the online wallets, provided by the exchanges. However, in these cases, the users are never in control of their crypto assets. As a user, you may not be able to recover your funds if the exchange gets hacked or goes offline.
There are many users (especially the beginners or the ones lacking skills in storing digital currencies themselves) who prefer custodial solutions as more secure than self custody. This is mainly because if the user makes a mistake, he/she can lose all the funds. That’s why to some users the thought of taking control of their cryptocurrencies is daunting.
Hardware wallets are unmatched when it comes to security. There may be zillions of questions popping up in your mind. What is a hard wallet for cryptocurrency? How does a hardware wallet work? Should you have one? Which hardware wallet to buy? If you are looking for the answer to all these questions and more, this guide will help you get all your answers.
There are two most popular hardware wallets: Trezor hardware wallets and Ledger Nano hardware wallets. These cryptocurrency hardware wallets can be bought from their sites as well as other websites (including Amazon.com) selling hardware Trezor wallets and Ledger wallets on the market.
What is a Hard Wallet?
It is a physical electronic device for securely storing your crypto-currencies. At the time of receiving or spending the digital coins, you have to connect your hard wallet with your phone, computer, and tablet. The most effective and popular hard wallets for the secure storage of your cryptocurrencies are Ledger Nano X and TREZOR T.
Hard wallets keep your private keys separate from devices that are vulnerable and internet-connected. This provides you with high security and convenience. They maintain all your important private keys in a secure offline environment inside the wallet. Even if you plug your hard wallet into a malware-infected computer, all the private keys remain protected.
The only way criminals can steal your coins is by stealing the hardware wallet itself. Even then they can take your wallet but not your coins because they are protected with a PIN code. It is recommended that the user always creates a secret backup code. It helps in retrieving the coins.
How to Add Funds to a Bitcoin Wallet?
You can’t buy or sell Bitcoins or other cryptocurrencies directly through most wallets. You can add funds to your hard wallet only by buying digital coins from an crypto exchange first and then sending them to your own hard wallet.
What are Good and Bad about Hardware Wallets?
- It is the easiest way through which you can store your Bitcoins and other cryptos securely.
- You can easily take backup and also secure.
- Setting it up is easy and therefore the margin of error is less. Even for less technical users, these wallets are easy to use.
- For extra security, you can use multiple hard wallets.
- These wallets are not free. They cost anything between US$50 and US$200.
- Some users may find using them challenging.
Hard Wallet vs. Soft Wallet
A soft wallet is software that stores cryptos and user data on a cloud or a server. You need an internet connection to access, use, and manage soft wallets. In the case of hard wallets, they are physical electronic devices that are not connected to the internet. In comparison to soft wallets, hard wallets are more secure.
In the case of software wallets, Bitcoins and other cryptos can be siphoned off by hackers and other cyber criminals by targeting the same stored in your desktop computer or laptop by accessing the private key. Hackers can’t reach your cryptos in case of hard wallets because the private keys are generated and stored offline.
Hot Wallet vs Cold Wallet
Hot wallets are cryptocurrency storage wallets that are can be accessed only by connecting to the internet. They are usually easy to set up and access. Hot wallets can store more tokens. As they are connected to the internet, they are more prone to hackers. Any soft wallet, which is mainly software-based, is available free of cost.
Cold wallets don’t remain connected to the internet. That’s why they provide you more security. However, they are not able to store many cryptocurrencies like hot wallets. Hard wallets are also called cold wallets. Some of the most effective, secure, and popular cold storages are Ledger wallets, Trezor models, etc. They are available at a price range between US$60 and US$160. You may visit Ledger site and also visit Trezor site for more information.
How does a hardware wallet work?
Cryptocurrencies are stored on blockchains. They are not stored on hard wallets. The hardware wallets merely store the private keys (consisting of a very large random number). Your wallet’s private keys help in authenticating yourself on the blockchain, enabling you to access cryptos. You simply have to plug the hardware wallet into the desktop/laptop/mobile system and then give the pin to unlock. Some wallet devices also come with a small screen, making it easier for accessing and interacting with the wallet in a better way. Once the hardware wallet is unlocked by using the PIN, you can transact and verify with keys on the wallet.
Should I have a Hard Wallet?
Yes, you should have your own hard wallet for securely storing your bought digital coins.
In the case of software wallets, the private keys are stored on internet-connected computers or smartphones. These are vulnerable to a wide array of cyberattacks. If there is malware in your computer, laptop, or smartphone then they can detect cryptocurrency-related activities and drain the Bitcoin users’ funds.
This is where hardware wallets come in handy. They are small electronic devices themselves that store cryptos without being connected to the internet. Even if someone manages to get hold of your hardware wallet, he/she needs to match the PIN code. In fact, there are certain products that get locked if an incorrect PIN is given a certain number of times.
If you are staking, hodling, lending, or trading cryptocurrencies, you should keep them in cold or hardware wallets.
Which hardware wallet to buy?
Hardware Bitcoin wallets are physical devices that supports Bitcoin and other cryptocurrencies for storage purposes. Here are some of the most popular and leading options of user friendly and secure hardware wallets:
Ledger Nano X
It is the newest hardware wallet of Ledger having advanced features. Besides providing you with the best security to the cryptos, they come with Bluetooth connectivity for connecting to iOS devices. As all the transactions are signed with the help of Nano X, you can secure it more than an application on phone.
Ledger Nano S
It is one of the most affordable hardware crypto wallets having a touch screen. It’ll cost you just around US$59. This device (having a colored touchscreen) was released in August 2016.
It is the 2nd generation hardware wallet, created by SatoshiLabs. It belongs to that series of wallets that started its journey back in 2014 with TREZOR One. To date, it is the most popular cryptocurrency cold storage solution.
It is the first-ever hardware wallet. Trezor One offers a secure storage option for Bitcoins. In addition, this small, thumb-sized device provides you the ability to spend cryptos with the convenience of a hot wallet.
All the above-mentioned hardware wallets provide you with top levels of security. You can save all kinds of cryptocurrencies including Bitcoin Ethereum, Ethereum Classic, Cardano ADA, Bitcoin Gold, ERC20 tokens, and many other supported coins and digital assets.
How to use a hardware wallet with Coinbase?
You can buy Bitcoin and other altcoins on Coinbase and move them to a hardware wallet of your choice. Let’s check the steps involved:
Step #1: Choose a cold wallet.
Step #2: Click “Send” on Coinbase below the account type of the digital currency that you want to send.
Step #3: Enter the Bitcoin address of the wallet that’ll receive the sent cryptos.
Step #4: Enter the amount of Bitcoin you want to send.
Follow these steps and you can successfully transfer digital coins from Coinbase to your hardware wallet.
“Your hardware wallet has been deactivated”: What does that mean?
It is nothing but a scam known as Ledger KYC Scam. It first claims that your hardware wallet has been deactivated and then asks you to click a link in the message for verification. Don’t click that link because it’s a phishing scam in the name of KYC regulations. If you click on the link, it’ll take you to a fake Ledger website, which will then trick you into downloading malware. So, avoid making any mistakes and don’t fall for the scam.
What happens if you lose your hardware wallet?
Even if you lose your hardware wallet, don’t panic. You can easily and securely recover all your cryptocurrencies. Simply remember the 12, 18, or 24-word recovery seed.
If any person with the wrong intention gets the hardware wallet, he/she can’t do anything because it’ll require the PIN to open it. So, relax.
Always remember that all your digital coins are stored not on the hardware wallet but on the blockchain network. The wallet simply stores the private keys. You simply have to import the recovery seed into another wallet to get back access to all your coins in the accounts, balances, and transaction data.
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