You probably own a physical wallet or purse to keep your cash and other vital tidbits like bank cards, business cards, receipts, etc. But if you own crypto, you need a hardware wallet wallet too.
Like physical cash, cryptocurrencies are valuable assets. But they are intangible; you cannot touch them. Still, like other assets, you must protect them from theft.
What is a hardware wallet, and why should you use one?
A hardware wallet is a physical device that encrypts the private keys to your crypto on the blockchain and stores them offline.
It is not connected to the Internet, so it is considerably safer than an online wallet in the event of the crypto platform being hacked.
It also stores private keys as encrypted text which no one can transfer out of the device to decode into plain text.
Also, a hardware wallet requires a PIN, called a backup or recovery seed phrase, to grant access. This is a series of 12 or 24 random words that your wallet generates.
The blockchain uses the first four words as backup identification that you type into any hardware wallet to regain access to your coins.
So even if the wallet gets lost or stolen, no one would be able to access your coins without the PIN. You can then use your seed phrase to regain access to your coins.
Some popular types of hardware wallets
Hardware wallets vary in shape and size and might look like USB sticks, hard drives, or mini ATM cards.
Some popular types of hardware wallets include:
- Ledger Nano X
- Ledger Nano S
- Coolwallet S
- Trezor Model T
Before you buy a hardware wallet, look out for the following:
- History of the wallet maker: Has the company existed in the business long enough to have high credibility and expertise?
- The device security: Is the device secure enough to withstand a wide range of attacks?
- Wallet integration and support: How many crypto platforms and coins does the wallet support?
- Wallet interface and user experience: How user-friendly is its interface? Is it easy to upgrade its firmware? Is the process of resetting PINs and recovering crypto hard or easy?
Are hardware wallets 100% safe?
Hardware wallets are not 100% safe, but they have a good security record from hack attacks common with online wallets.
Still, you could lose coins in a hardware wallet if any of these happen:
- Malware on the crypto exchange swaps a recipient address and tricks you into sending money to the wrong wallet.
- A hacker clones your backup seed or steals your private keys because of a technical error in the device or your carelessness.
However, hardware wallets remain one of the best ways to keep your crypto assets safe. For the most part, it is up to you as the owner to secure it in the best ways possible.
Keep your recovery or seed phrase in a safe place, preferably not in a disk drive or cloud storage, because you will need it to restore your private keys if you format or lose your wallet.
Always re-check and re-confirm a wallet address before sending money to it. Even if hackers cannot gain access to your wallet, there are other ways that they can scam you.
A popular tactic they use is to change the wallet address you copy into your clipboard when you want to transfer funds.
This tricks you into thinking you are sending money to an authorized recipient; meanwhile, the funds are going to a hacker.
So, ensure you verify the source of the address. You do not have to check the characters in the address one by one. But you could confirm that the first and last four letters on the site where you got the address and what comes up in your wallet display are the same.
A hardware wallet is an offline storage for the private keys which allow you to access your crypto on the blockchain.
It offers better security than an online wallet because it is not connected to the Internet. So, a hacker will have a hard time stealing your keys.
However, hardware wallets are not 100% secure due to technical issues and user carelessness.
Fortunately, evolving technology means that newer hardware wallets can withstand more attacks, making them a great option that combines security and ease of use.