Hardware Wallets Reviewed and Explained
If you want to make sure your cryptocurrency stays safe then you should consider purchasing a hardware wallet like:
Why use a hardware wallet?
Exchanges are great when you want to buy or sell cryptocurrency. However they are not the best option for storing your cryptocurrency. The worst case scenario example that could happen is Mt. Gox. It was a Japanese cryptocurrency exchange that filed for bankruptcy after it was hacked and client funds got stolen.
Mt. Gox was the largest crypto exchange at the time. It handled the majority of bitcoin purchases. So this goes to show that large exchanges are not necessarily immune from security breaches. Moreover a lot of customers that used Mt. Gox never got their cryptocurrency back.
We personally are very cautious about which crypto exchanges we use and recommend to others. (If you would like to know which exchanges we recommend here is our top list of exchanges).
There are a few select exchanges that take security very seriously. Or have some sort of safety net to protect customers. However you can never feel 100% secure. Hence why we always suggest you purchase a hardware wallet.
Different types of wallets
To put you in the picture, there are different types of wallets not just hardware wallets. The choice can be broken down between hot wallets and cold wallets.
There are quite a few different types of hot wallets. However the main difference is that hot wallets are connected to the internet. This makes them far less secure.
On the other hand cold wallets store crypto offline. This is also known as cold storage. As a result they are far more secure than hot wallets. The best type of cold wallet you can get is a hardware wallet.
A hardware wallet is a small USB like device with a screen and a couple of buttons. You can either plug the device into your computer or connect it to your mobile phone. To clarify this would depend on the model of device you choose.
The manufacturer of the device also provide an application that you can download onto your computer or mobile. Like this your computer can communicate directly with the device. It will allow you to properly manage your funds while keeping them secure.
The benefits of using a hardware wallet
There are a number of benefits of using a hardware wallet. This is because of three reasons.
Firstly they provide exceptional security. Hardware wallets are just software. They are like a mini computer. Except they are stripped down to only support the bare essential functions.
All they do is facilitate transactions to send and receive crypto on the blockchain. Additionally they store your public and private keys.
Like this it is less complex. As a result of its simplistic design it has less ‘loop holes’ or vulnerabilities that hackers can exploit. For this reason it is very hard to directly attack the hardware wallet.
They are robust against malware, cyber-attacks and phishing sites. Essentially an all-round secure device. In fact you could use a public computer with your hardware wallet and not have any issues with security.
Ease of use
Secondly hardware wallets are convenient and easy to use. It does take a bit of time to adjust to the process, but it is straight forward to learn. Once you learn how to use the device there is no going back.
Additionally you can access your funds and transfer from anywhere around the world. You can send or receive funds from any company or any individual that has a wallet.
Supports many cryptocurrencies
Another thing about hardware wallets is that they support many different cryptocurrencies. So you can manage all your assets from one place. Instead of having different cryptos in dedicated wallets designed just to support one type of crypto.
Managing multiple wallets can be tricky. This is firstly because you would need to have a system for safely storing various passwords and seed phrases offline.
Secondly you would need to update the wallets as and when required. This is a big task in and of itself. This is because sometimes wallets can end up with issues when you make updates.
These wallets have not been designed with regular people in mind. At times you need some development knowledge to sort out some problems.
I am speaking from past experience here. In fact I have lost funds from using these wallets. A friend of mine managed to retrieved his funds after 6 hours trying to do so. At least he managed!
On the other hand a hardware wallet makes things much easier. All you need is the device and a computer or mobile phone and the application that syncs the two together.
Additionally when the application needs updating it does not come up with issues. The process is straight forward and hassle free.
The hardware wallets we recommend on this site support 1000+ cryptocurrencies. This also includes the more popular ones. Additionally the manufacturers are constantly adding support for new cryptos on their devices.
The interface of the application will list all your different cryptos. Moreover it will give a real-time value of your whole portfolio. Including a breakdown of the value of the different assets.
Not Your Keys, Not Your Coins
‘Not your keys, not your coins’ is a statement this is said quite often within the crypto community. It is said to emphasise the reality of the crypto space. You can lose all your crypto if you do not have your seed phrase in your possession.
Your next question is probably going to be; what is a seed phrase? A seed phrase or key are a series of words used to access your wallet. However exchanges do not give you a seed phrase. So as such, to a degree, they own your crypto.
In the case of the exchange failing you may not get back your crypto. This is exactly what happened with Mt. Gox. It is the problem with third party liability. As a result you want to ensure you have your seed phrase in your possession. It can be either written on paper or in a different format that you can store safely offline.
The purpose of private keys is to authorise transactions on the blockchain. If a hacker gets hold of your private keys they will have access to your bitcoin and other cryptocurrencies. They will be able to steal them and you will have no way of getting them back.
This is where hardware wallets come in. They are a great solution to keep your private keys safe. However at the same time they allow for a better user experience for purchasing, storing and selling cryptocurrency.
When you use a hardware wallet it will separate your private keys from the computer or smartphone you use. Meanwhile it will securely effect the transaction. All you have to do is check the wallet address you are sending or receiving to is correct.
As a result it is very difficult for a hacker to steal cryptocurrency. The only way this would be possible is to steal the physical hardware wallet itself. They would also need to know your pin number.
Otherwise the hacker or thief would need to find your secret seed phrase to have access to your wallet.
Hardware wallets are the standard best practice with any crypto enthusiast that knows what they are doing. This is because hardware wallets do not expose you to third party liability. The third party being the exchange.
Ideally you should purchase your hardware wallet before you buy any cryptocurrency. If this is not the case, you should purchase it right after you buy.
How hardware wallets work
It is like having a bank account
Hardware wallets are no different to having a regular bank account. With banks accounts you can access your account online with a password. Similarly an application for a hardware wallet needs a password. You also have a pin number to input on the device itself.
Your bank account number is instead called a wallet address. It is a string of numbers and letters that you can share to anyone to make payments to you. This address is also called a public key.
The applications display funds very much like an online bank account would. In other words it displays a breakdown of the different crypto assets you have. You can select to view the different crypto accounts. Here you will see a breakdown of the funds that you received and sent.
How to make transfers
To make transfers you need to access your hardware wallet. To do this you would need to open the application on your computer that will connect with the wallet.
For example in the case of Ledger, the application is called Ledger Live. Trezor has its own application that you can access from the Trezor website. After that you will need to plug in the hardware wallet to your computer.
Receiving cryptocurrency in your wallet is easy. All you need to do is press the receive button and you will be able to copy your wallet address. You can then give it to the third party to make the payment.
To clarify you have to make sure you select the right cryptocurrency you want to receive. Each cryptocurrency will have a different wallet address.
On the other hand if you want to send cryptocurrency the process is a little different. To clarify it is not so different from your end. It just needs you to approve the transaction so you will get more prompts from the application and wallet. You also need to verify the wallet address is correct.
The way the hardware wallet processes it however is quite different.
When you send a transaction the hardware wallet asks you to verity the transaction. It then sends back the verified transaction. It announces the transaction to the blockchain. So then all you have to do is wait for verification when its input it into the blockchain.
Hardware wallets do not store crypto
So as such hardware wallets do not actually store cryptocurrency. The device only helps you interact with the blockchain. It helps to verify you are the owner of a wallet so you can make transfers.
To clarify this is why private keys are so important. This is because the hardware wallet will provide proof of ownership by using the private key. However it does it in a way that does not actually expose your private key. It keeps it hidden for security.
Best hardware wallets
The best hardware wallets that we feel comfortable to recommend at this point in time are Ledger and Trezor. This is because these two hardware wallets have been tried and tested. They have been in the market for years.
As a result the teams have had time to develop their products further based on user feedback. They have improved their products and made them great to use.
Both companies have a couple of different models of hardware wallets. That is to say they are designed with different users in mind. They also are priced differently.
Ledger has the Ledger Nano S and Ledger Nano X. On the other hand Trezor has the Trezor One and the Trezor Model T.
Ledger specifically is independently certified from ANSSI. ANSSI is a French Network and Information and Security Agency. It gave both Ledger hardware wallet models the highest level of certification.
Additionally Ledger is the most popular hardware wallet on the market. It support 1500+ cryptocurrencies.
Trezor was the first hardware wallet that came onto the market. It supports 1600+ cryptocurrencies.
Moreover Trezor allows you to increase your wallets security by including a passphrase. This is an additional word which you can add as an extra layer of security. The seed phrase allows you to create additional wallet addresses to confuse thieves from stealing your crypto.
Sourced from Explain xkcd
Hardware Wallet Tips
There are stories of hardware wallets that got tampered with. Consequently there are also some best practices when you buy hardware wallets.
Firstly you should always buy from the manufacturers themselves. Whether it is for Ledger or Trezor. If you do not use the manufacturer then you should check on their websites for authorised resellers.
Secondly when your package arrives make sure you check the box is intact. Additionally make sure that if there are any seals inside that they also intact. If you see anything that has been tampered with do not use the device. Contact the supplier and let them know.