So your crypto buddy showed you his new hardware wallet and you couldn’t see what was so great about it. The various pieces of paper with your private keys scattered around the house are doing a great job. So, why re hardware wallets a big deal? More importantly, do you need one?
In this article, we’ll be discussing that and a lot more!
What are crypto hardware wallets?
Crypto hardware wallets are basically physical devices that you can use to store your private keys and seed phrases. Some devices even allow you to generate seed phrases.
In addition to storing your keys, they’re used as an intermediary between you and the chains you’re interacting with. So outgoing transactions have to go through the hardware wallet and be approved by you – physically there in the presence of that hardware wallet. (bye-bye remote hackers!)
What threats DO crypto hardware wallets protect you from?
One of the biggest threats crypto hardware wallets protect you from is remote hackers. Let’s say you have a software wallet like MetaMask. People can hack into your system, figure out your MetaMask wallet password and send crypto out of it. But with a hardware wallet, you need to enter the pin on the physical device to authorize transactions. This way, you’re safe from huge potential losses if someone finds out your password.
Having crypto lying around in a software extension is like walking around with your life savings in your back pocket. Sure you can access it wherever you want but so can the pickpocketers on the street. A hardware wallet, on the other hand, is like a strongbox. A little less portable, but it sure is safe.
Continuing with the cybersecurity argument, crypto hardware wallets are not used with centralized exchanges like binance or kucoin . No website is completely safe from hacks that leak private keys and transfer funds. And that is evident from the fact that the Mt Gox hack wasn’t the only hack in the crypto space. So trusting a third party with your private keys is not the safest option out there.
Having your private keys on a device that you own and using that device for decentralized trading platforms like dydx is better. Additionally, your keys are encrypted within the device so brute-force attacks will fail. Moreover, you’d connect it with your PC while carrying out transactions, leaving no time for hackers to accomplish anything.
To make things better, hardware wallets not susceptible to viruses. Or accidental data wipes. We’ve all been there, a hard drive fails and all the data is lost. With crypto hardware wallets, you’re safe from that. All seed phrases and private keys are present on the wallet. And you can access them by connecting the wallet with your PC.
What threats DON’T crypto hardware wallets protect you from?
One of the biggest threats crypto hardware wallets can’t protect you from is using untrustworthy websites. There are plenty of scams out there and if you decide to put your money into any of them, the wallet can’t protect you. For example, you could “sign a transaction” on a malicious website thinking you’re signing “mint NFT” but the contract itself reads something like, “give access to all my ETH, or NFTs”.
Of course, it’s all in the fine print and no one reads that – JK, you should! If you sign a malicious contract, even with yoru hardware wallet, they can end up transferring your favorite Bored Ape out of your wallet.
A hardware wallet’s job is simply to keep your keys safe and physically sign any transactions that need to be carried out. Anything you authorize goes through. Be careful what you authorize.
So, essentially, it doesn’t save you from errors you make on your end. But if you’re considering using hardware wallets, you’re probably not the kind to make a lot of errors.
Hardware Wallets and Seedphrases
Hardware wallets can not protect you if someone has access to your seedphrase. If someone has the seed phrase, they can restore your wallet from anywhere, onto a software wallet and use it. The idea behind this ‘override” is that by allowing the seed phrase to restore the wallet – you can access your funds if you lsoe the physical hardware device.
For the most part, this is a good thing – because you always want back up in case you lose your hardware wallet.
At the same time, it is very important you write down your seed phrase and keep it somewhere safe and offline. Don’t keep it in. your phone notes, email, photo or anything like that. Never let it touch the internet. Write it down. Leave it in a safe and only break it out if you need to restore your wallet.
Related article Coinbase vs Coinbase Wallet
How to secure crypto with hardware wallets?
Each hardware wallet comes with a set of instructions to properly set it up. Again, the most important thing is to write down your seed phrase and store it somewhere offline and safe.
The most popular wallets are the Ledger and Trezor brands. But with almost all hardware wallets, there will be a set of pretty basic instructions. Take your time setting up your hardware wallet.
You’ll likely have to download their software and/or browser extension, connect your wallet and follow an onscreen set up. You might even have to update the firmware in some cases. After that, you would need to set up a pin for your device.
Once the pin is set, the device will show you a seed phrase. Write it down and store it somewhere safe.
You can check out the list of supported currencies on your wallet’s website but chances are high that you find a wallet for your crypto right away on the platform. Once you find it, enable it (if it is disabled, which it should be for a new wallet). You would then be able to access the wallet and see its address.
Now send crypto to this address and your crypto is secured inside that address. If you need to transfer it somewhere after that, you can approve the transaction using your wallet (you need to physically enter your pin for the transaction to go through every time).
Best crypto hardware wallets
While there are many great crypto hardware wallets, two stand out as easy recommendations: Ledger Nano S vs Trezor Model One.
Used Hardware Wallets – Side Note
Don’t buy a used hardware wallet. There are scams out there where people sell them with a preloaded seed phrase. They wait for you to transfer in your crypto and then they transfer it right out.
It’s not worth saving the few extra bucks on Ebay – buy direct from the manufacturers.
Ledger Nano S
This hardware wallet is the go-to choice of many crypto enthusiasts—and for a good reason. It comes fully loaded with support for over 5500 cryptocurrencies at just $59. That’s half the price of Ledger Nano X which basically just has the added advantage of connecting via Bluetooth in addition to USB. Now, that is great if you’re fond of living a wire-free life or if you need to use it with your mobile.
But if you’re just starting out on a shoestring budget, Ledger Nano S has virtually every feature the higher-priced device has barring the Bluetooth functionality.
Trezor Model One
Coming in at just $77, it is an easy-to-use crypto hardware wallet that nobody can go wrong with—especially beginners. Sure, it doesn’t have the large full-color touchscreen display Trezor Model T boasts of, you don’t need that to carry out transactions.
Like the Trezor Model T, the Model S uses a 24-word seed phrase. While this doesn’t make it hack-proof, the seed phrase is more difficult to be compromised compared to most software wallets (since they only use 12-word seed phrases).
The only major drawback you would face is missing out on some cryptocurrencies like Cardano, Ripple, Monero, etc. Here’s a list of the cryptocurrencies supported by the two devices, so unless you see your crypto listed under Model T and not Model One, and you have a budget of more than $200, go for Model T. In all other cases, the Model One would be all you need.
Crypto hardware wallets are great for safeguarding your crypto. But they aren’t cheap. That said, what’s a few hundred dollars worth of spend if you can safeguard thousands (maybe even millions) worth of crypto?
We hope this article keeps you safe. Your future self, who didn’t get hacked, will thank you for buying a hardware wallet.
Check out our quick comparison of the most popular hardware wallets.