As the digital world rapidly evolves, people are getting more and more knowledgeable in computer software which some use as an advantage for their own gains. Online criminal activities skyrocketed along with online innovation, and more and more people are getting vulnerable to phishing scams, malware, and cyber-attacks. These online criminal acts frequently involve money— but in this case, cryptocurrencies.
That’s where hardware wallets come in.
Hardware wallets are crucial to the blockchain ecosystem, especially to big investors. They provide stern utility and security for cryptocurrency by providing a device that bears private keys offline. A hardware wallet is a small compact plug-in device where owners can safely access their crypto assets from anywhere in the world, providing an extreme layer of protection against online criminal attacks.
Technically, the cryptocurrencies you own can never be stored within the hardware wallet itself. They will always remain on the blockchain ecosystem. The main job of a hardware wallet is to store your private key offline. The private key is very important because it’s the way to open up the lock in your blockchain address where your assets really live.
Since the blockchain can be opened up anywhere, all you need to have is your hardware wallet to access your coins.
In a nutshell, hardware wallets are more like cold storage as they remove your private keys from the internet, reducing the risks of getting compromised by an online attack.
Creating a blockchain transaction means “signing” a unique message. And that “signature” would serve as proof of your ownership of the private key. It is not possible to fabricate this signature without the key, making it impossible for others to make transactions on your behalf.
A passphrase and a PIN secure the private keys kept on your hardware wallet. Hence, even when a thief lays a hand on your hardware wallet, it would still be impossible for them to draw out your keys.
Keys were never exposed to the cyber server, so they cannot be stolen. That’s the very reason why it’s considered by many as cold storage.
On chances that you lost your wallet, your assets are backed up with one seed phrase, also called the recovery phrase, which are words that represent your confidential data, allowing you to regenerate your private key. This could be used to move your private key to another hardware wallet.
How Hardware Wallets Work
Suppose you need to send a crypto transaction through a hard wallet.
You cannot make a transaction through the wallet alone. You need to use a computer for the preparation of the transaction. To utilize your wallet, connect it to your computer and download a program that can make contact with it.
The program will be considered a “bridge” that allows you to prepare your transaction for signing. After the hardware wallet receives a transaction from the program, it signs it on the hard wallet then sends it back to the program.
Best Hardware Wallets in the Market
At present, numerous companies provide hardware wallets on the market. Yet, three wallet leaders stand out among the rest. They are Trezor, Ledger, and KeepKey.
TREZOR Hardware Wallets
Trezor is a veteran open-source hardware wallet with a notable company reputation. Trezor hard wallets support about 1000 cryptocurrencies in the market.
As the trailblazer in the hardware wallet market, Trezor was given a reputation that grants them an edge over other hard wallets in the market. Trezor was created by Marek “Slush” Platinus, who built the first-ever mining pool for Bitcoin.
Setting the benefits aside, Trezor has one bothering downside— the whole wallet gets deleted once you upgrade the wallet’s firmware. This often scares newbies in the crypto space but be aware that a deleted wallet is not a hopeless case. Having your recovery phrase will enable to restore your wallet.
- TREZOR One. Trezor One, previously called “TREZOR,” is the oldest model of a hardware wallet and probably the most reputable. This wallet has a very simple and user-friendly design and interface. It supports a wide selection of good-performing cryptocurrencies like Litecoin, NEM, Ethereum Classic, Ethereum, Zcash, Bitcoin Gold, Bitcoin Cash, and Bitcoin. TREZOR One’s cost is around $55.
- TREZOR Model T. This basically has the same function as TREZOR One, but this wallet has a large touch screen which creates some difference. The TREZOR T model is roughly around $170 if VAT will be excluded.
Ledger Hardware Wallets
Just like Trezor, Ledger has been around for quite a long time and has gained a good reputation in the business. Accessing a ledger wallet is done through a free desktop application that authorizes users to send and receive cryptos, view balance, and have control over all ledger devices—Ledger Live.
- Ledger Nano S. This only costs around $59, making it an affordable hardware wallet. Nano S is astounding for having an intuitive user interface, a sleek ad design, and a wide variety of altcoins.
- Ledger Nano X. This device has the impressive power to manage around 100 cryptocurrency assets simultaneously. However, its Bluetooth wasn’t as smooth as they claim to be. Right now, this is a thorn to Nano X, yet it could be remedied in future updates. Ledger Nano X’s selling price is $119 without VAT.
KeepKey Hardware Wallet
KeepKey hardware wallet is designed largely, making it too big to carry in a pocket for convenience. Its size is nearly twice as large as Ledger Nano X and TREZOR One. Although people find its design attractive, KeepKey only holds a limited number of crypto assets which puts it at a disadvantage to the previously mentioned wallets. KeepKey costs $49.
Risk of Hardware Wallets
Hardware wallets are tangible, so they can be stolen or accessed physically by unwanted people. This is known as the evil maid attack.
If you notice such a thing happening, you should immediately use your seed phrase to quickly recover your cryptocurrency and redirect them to a new wallet. This will unload all the funds on your stolen wallet, allowing you to keep tight control over your coins.
Another risk you should be wary of is the $5 Wrench Attack. This refers to a physical threat made because you don’t want to hand over your wallet nor unlock it with a PIN code. You could avoid the danger of losing too much money through TREZOR’s additional layer of security called “passphrase.”
Aside from the PIN code, you will be required to enter additional passphrases. You can set up various passphrases that will only show certain amounts on your wallet. This is like making a dummy account where you put a small number of coins while your real account holds most of your funds. So, if someone forces you to open up your wallet, you can unlock the dummy pass, showing them only a portion of your coins.
Tampering is also a possible case that may bring a huge risk to your wallet. Manufacturers usually use a holographic sticker as proof that the hardware wallet was never opened.
Upon receiving your wallet, check if the sticker is intact, and it isn’t, don’t use your wallet. To minimize this risk, make sure to buy straight from the manufacturer’s website. Yet, if you want to buy from a reseller, you have to fully make sure that he’s a trustworthy and authorized reseller.
No one likes spending on things they can have for free. However, although there are free soft wallets in the market, the amount of protection you will get from hardware wallets is more worthy than the $50-100 amount you’ll pay for the actual device.
It is better to invest in your coin’s security now than suffer the consequences later.
