Hardware Wallets
What is a Bitcoin Hardware Wallet?
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A Bitcoin hardware wallet is a device that enables you to store your cryptocurrency safely offline, also known as cold storage. These units function similarly to a digital bank account. Just like a mobile wallet, you can send, receive, and track your balance directly from your hardware wallet.
Most in the industry consider hardware wallets to be the safest method to store your cryptocurrencies. These futuristic items secure your Satoshis in a couple of different ways. First, the device encrypts the access to your coins. This encryption provides an extra layer of security when you have your hardware wallet online.
Importantly, someone can’t just steal your hardware wallet and access your cryptocurrencies. Most devices include an additional PIN code requirement. In this manner, your crypto gains an extra level of security against theft or losses. Notably, if you lose your PIN, you must restore your wallet using your factory-issued backup PIN.
What are Bitcoin Hardware Wallets?
The main variance between your traditional crypto wallets and hardware wallets is that the latter has a physical form. Since hardware wallets exist in the real world, there are some additional factors to ponder when purchasing one. You will want to decide on a hardware wallet that fits your lifestyle. If you are an active person who utilizes cryptocurrency often, you will require a smaller device that provides you with the portability your lifestyle requires.
French President Emmanual Macron Showing Off A Ledger Bitcoin Hardware Wallet
No matter what size or style of hardware wallet you choose, you must ensure that you store your new device securely. Remember, your hardware wallet can be lost, stolen, or destroyed if not stored properly. To avoid these concerns, it’s recommended that you maintain your hardware wallet in a secure and dry location. The good news is that even if your wallet gets destroyed or stolen, you can still access your crypto via a backup seed.
Backup Seeds
Seed phrases are a group of random words that grant you access to your cryptocurrency within a crypto wallet. They are extremely popular in both hardware and mobile wallet applications, and for good reason. Always store your backup phrase in a secure location. If you lose your backup phrase and your hardware wallet, your crypto is gone forever.
Cold Storage vs. Hot Wallet
To understand the importance of hardware wallets, you must understand the distinctions between keeping your Bitcoin in cold storage and a hot wallet. These terms refer to the internet state of the device. Mobile wallets like your favorite crypto Dapp require an internet connection. This internet connection is a potential attack vector for hackers seeking access to your holdings. Hardware wallets only communicate to the internet when you directly attach them to the network. In this way, hardware wallets are the most secure option for crypto enthusiasts.
Keenly, the largest crypto holders utilize hardware wallets to protect their vast empires. In particular, the Winklevoss twins have been quoted as stating they keep their crypto in hardware wallets with the seed phrase distributed across multiple bank security boxes. Considering they are Bitcoin billionaires, this strategy makes sense. While you may not hold millions in crypto, owning a hardware wallet to secure your holdings is still smart. Luckily, these devices are now more affordable than ever.
How Do I Get a Bitcoin Hardware Wallet?
Today, there are all types of cryptocurrency hardware wallet manufacturers. You will want to stick to the most reputable brands to ensure that there are no unforeseen attack vectors or hardware issues. Critically, you don’t want to purchase a hardware wallet from a company that may be out of business in a few months. Also, a brand-new manufacturer may have some bugs to work out in their product.
A few of our top recommendations for purchasing a hardware wallet can be found HERE.
General Tips for Securing Your Hardware Wallet
In general, you should follow some important guidelines to keep your crypto safe on hardware wallets. The first thing you want to do is obviously ensure your device is physically secure. If your house burns down and both your wallet and key phrase are in your house, your day just got worse.
Additionally, you will need to keep the firmware on your device updated. Companies release updates commonly to patch security issues. If you fail to update your device, you could fall victim to an outdated attack vector. Also, never leave your hardware wallet plugged in. It defeats the purpose of owning a hardware wallet if you leave it connected to the internet.
Wallet Scams
Unfortunately, the overall newness of the crypto sector has left many people in a state of confusion as to how to protect their earnings best. Recently, there has been an uptick in hardware wallet scams in the market. These scams usually follow a few easily recognizable strategies.
Bitcoin Hardware Wallet Scam
Never Buy a Used Hardware Wallet
Given the important role your hardware wallet will play in your blockchain investment strategy, it’s recommended to stick with new devices. Used hardware wallets can be altered or even pre-hacked prior to you receiving the unit. Additionally, only reputable manufacturers should be on your watch list.
Phishing Attacks
The first and most common is phishing attacks. Never give your wallet backup phrase out to anyone. Scammers will often pose as the manufacturer of your device and ask for information, such as your backup phrase, as a means to verify or assist you in some way. Once you give someone your backup phrase, you have forfeited your Bitcoin.
Scratch Cards
Another more elaborate Bitcoin hardware wallet scam involves selling used devices online. Scammers will open the devices, note the backup phrase, and then sell the unit. In one case, a person purchased a used wallet from eBay. Everything was great for the first week, but then suddenly, the person's crypto disappeared.
Further investigation revealed what had occurred. The scammers had a preconfigured backup phrase hidden on a fake scratch card. He re-sealed the hardware wallet in its original packaging and instructed the new owner to backup his new device with the faulty seed phrase.
The new owner believed they were the first person to open the box and proceeded to load it up with multiple Bitcoins. The hackers were then able to simply use the backup phrase to regain access to the device and send all of the Bitcoin elsewhere. Sadly, the scammers made off with this individual's life savings.
Top Wallet Providers In The Market
Currently, two manufacturers dominate the Bitcoin hardware wallet sector – Trezor and Ledger. Both firms offer some unique features and styling to suit your needs. Additionally, both companies have an excellent reputation and have provided their products to the market for years. It should be noted that while these may be the most popular, there are various other high-quality options on the market that may better suit your needs.
Trezor Hardware Wallets
The Trezor line of Bitcoin hardware wallets features a sleek design that resembles a car alarm beeper. This user-friendly layout is simple to navigate and easy to store. Additionally, Trezor's line of hardware wallets offers a wide variety of interoperability. Users can store Bitcoin, as well as multiple other altcoins, including ERC-20 tokens. Trezor devices include advanced features, such as an advanced Android application to monitor your holdings. Users of these devices also enjoy a Chrome extension and access to MyEtherWallet online login portal.
Trezor T Bitcoin Hardware Wallet
Trezor T
Trezor offers a range of products to the market. Their premier wallet is the Trezor T. This compact device features many upgrades from their original model. There is an easy-to-navigate touch screen, and the device includes a USB-C connection and a microSD card slot.
Ledger Hardware Wallets
Ledger is the most popular wallet provider in the market at this time. The company has provided reliable hardware wallet services since 2012. Ledger wallets are best known for their minuscule design and advanced features. On top of a Chrome extension, the device integrates with Copay, Electrum, Mycelium, MyEtherWallet, and GreenBits.
Ledger Nano S
Ledger Nano S
Ledger's most popular product is the Nano S. This unit resembles a USB with a small LCD display. The display allows you to see vital information and enter your pin to access your Bitcoin. Notably, the Nano S supports over 1100 different cryptocurrencies, including all ERC-20 tokens. Currently, there are over 180,000 ERC tokens in use, so this feature provides a lot of value to the unit.
For a premium Ledger product, there is also the Nano X.
Summary
If you are the type of investor who plans to save up large amounts of crypto, or you are just security-minded, a hardware wallet is the smart choice for you. However, you will need to remain vigilant. In the world of peer-to-peer blockchain transactions, there are no refunds or canceled payments. If someone steals your Bitcoins because you didn't keep it safe, there is little recourse for you to follow. Crucially, keeping your crypto safe is your responsibility.
