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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.
Hardware wallets are considered the safest method to store your cryptocurrencies by most in the industry. These futuristic items secure your Satoshis in a couple of different ways. First, the device encrypts the access to your coins. This encryption provides you with an extra layer of security when you do 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 will need to 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 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 their cryptocurrency often, you will require a smaller device that provides you with the portability your lifestyle requires.
No matter what size or style hardware wallet you choose, you will need to 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 location that is secure and dry. The good news is that even if your wallet gets destroyed or stolen, you can still access your crypto via a backup seed.
Seed phrases are a group of random words that grants 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 need to understand the distinctions between keeping your Bitcoin in cold storage and a hot wallet. These terms simply refer to the internet state of the device. Mobile wallets such as your favorite crypto Dapp require an internet connection to function. This internet connection also functions as 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, it’s still smart to own a hardware wallet to secure your holdings. 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.
Current best options are:
General Tips for Securing Your Hardware Wallet
In general, there are some important guidelines you should follow 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 where 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 keep your device updated, 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.
Unfortunately, the overall newness of the crypto sector has left many people in a state of confusion as to how to best protect their earnings. Recently, there has been an uptick in hardware wallet scams in the market. These scams usually follow a few easily recognizable strategies.
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 n your watch list.
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.
Another more elaborate Bitcoin hardware wallet scam involves selling used devices online. Scammers will open the devices, make note of 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, then, all of a sudden, 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 resealed 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 where 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 the life savings of this individual.
Top Wallet Providers In The Market
There are currently two manufacturers that 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.
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 offer 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 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 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 miniscule design and advanced features. On top of a Chrome extension, the device integrates with Copay, Electrum, Mycelium, MyEtherWallet, and GreenBits.
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.
If you are the type of investor that 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.
David Hamilton is a full-time journalist and a long-time bitcoinist. He specializes in writing articles on the blockchain. His articles have been published in multiple bitcoin publications including Bitcoinlightning.com
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