What is a Crypto Hardware Wallet and How Does it Work?
4 October 2022
A crypto hardware wallet is a must if you want to buy, trade or hold cryptocurrencies.
The digital currency world is decentralised, meaning it has no central authority or institution monitoring transactions. Due to this, users need to be aware of some risks associated with digital currencies and take measures to protect themselves.
Crypto hardware wallets are considered one of the best methods of storing cryptocurrencies. If you have cryptocurrency, you must take steps to keep it safe and secure from cybercriminals who might try to steal it from you. You can do so through crypto hardware wallets. You’ve probably heard about crypto wallets. But have you ever thought about what they are? What do they store? How do they work?
This article has all the information and insights you need to help you choose the best wallet and keep your coins safe. So let’s dive right in!
What is a Crypto Hardware Wallet?
A crypto hardware wallet is a physical device that stores your crypto coins and tokens offline. They are generally regarded as the most secure method of storing digital currency. When you store your coins in a hardware wallet, they are not accessible via the internet (instead, they are stored offline on the device itself). You need to switch the device on to access the coins and enter a PIN or passphrase.
How Does a Crypto Hardware Wallet Work?
Cryptocurrency hardware wallets that closely resemble USB sticks store private keys. Private keys are used to authorise transactions on the blockchain, and they’re stored in your hardware wallet’s software.
When physically plugged in, these devices work by generating their own random numbers using a secure element. These generated numbers are then encrypted with your password, which you can use to sign transactions with any compatible crypto wallet app or website.
Crypto theft happens more than you might think. According to statistics collected by Crypto Aware, around $450 million worth of cryptocurrency has been stolen from users since the beginning of 2017! That’s a huge number, considering only around 2000 different types of cryptocurrencies are currently available!
You need a hardware wallet because they provide security and privacy by keeping your private keys offline in an air-gapped environment (i.e., disconnected from the internet). This ensures that anyone who wants access can only do so physically (which is highly unlike for cybercriminals).
Hardware wallets are also an efficient way of storing large amounts of crypto. This stems primarily from the fact that they don’t require additional or special software on your computer or phone. All transactions are conducted directly between users through their private keys stored on the hardware.
Also, a hardware wallet is tamper-proof. Most hardware wallets have an indicator to show if they’ve been tampered with. This makes it easier to identify if someone has broken into your device or stolen your coins.
Are Crypto Hardware Wallets Safe?
The biggest risk associated with storing digital data is the potential for hackers to break into your account and steal it. Now, the easiest way to do this is over the internet. But since crypto hardware wallets are not connected to the internet, they are more secure than software, paper and web wallets.
Crypto hardware wallets also offer an extra layer of protection against hackers by protecting your private keys with a PIN code that you must enter before any transactions can be made (on your device).
Note – The private keys are the code needed to access your account. If someone gains access to your private keys, they can take all the money from your account. With hardware wallets, the private keys are stored offline. So, the safety of your crypto is not compromised.
Lastly, crypto hardware wallets are more secure than software because they store all data on the device rather than in the exchange’s database. This means that even if a hacker hacks the server, he will be unable to access any of your data.
Pros & Cons of Crypto Hardware Wallets
As observed, crypto hardware wallets are a secure way to store your coins and tokens. However, they are not perfect. Let’s examine some pros and cons of using a hardware wallet.
Hardware wallets are hack-proof. With online wallets, your data and coins are at risk of being hacked. This is not the case with hardware wallets.
Hardware wallets are easy to use. All you need to do is plug in your device and follow the instructions. No complicated setup or lengthy instructions are required.
Hardware wallets for crypto are easy to buy and store. You can buy them online and easily transfer and store them.
Hardware wallets are portable. This is especially useful for frequent travellers who don’t have access to a computer all the time.
Hardware wallets are cost-effective. You don’t have to pay a subscription fee to use a hardware wallet.
You need internet access to set up the device. You can’t set up a hardware wallet if you don’t have internet access. You’ll need to use a computer or laptop to set it up.
It’s difficult to transfer your coins. You may need assistance from a crypto expert to move all of your coins to the device.
There may be compatibility issues. Not all hardware wallets work with all coins and tokens.
Hardware wallets for crypto may appear expensive as opposed to free sign-ups on software wallets.
Theft of the hardware is a possibility.
Top 6 Crypto Hardware Wallets
Ledger Nano S – This is arguably the best crypto hardware wallet. It is compatible with most major coins and tokens and is easy to use.
Trezor – Trezor is another great option for those who want to keep their coins safe. It is easy to set up and use.
KeepKey – This is a more expensive option, but it is one of the safest ways to store your coins.
BitBox – BitBox is another popular hardware wallet for storing crypto coins and tokens. It is easy to set up and use.
CoolWallet – This is a wallet designed specifically for cryptocurrencies. It comes in a small and portable design.
Cryptosteel – This unique hardware wallet for crypto allows you to store your coins on steel. It is water and fireproof!
Cryptocurrency is a huge industry that is only expected to get bigger over the next few years. If you’re considering investing in this space, you must take the necessary steps to keep your coins safe. One of the best ways to do this is to get a crypto hardware wallet. There are many hardware wallets, and you can choose as per your convenience and requirement. But, do not forget to weigh the pros and cons before picking one.
FAQs on Crypto Hardware Wallet
Q1. Where can I buy a crypto hardware wallet?
Ans:Crypto hardware wallets can easily be purchased online on any e-commerce platform.
Q2. Are crypto hardware wallets safe?
Ans:Yes, crypto hardware wallets offer higher safety and security compared to software and paper wallets.
Q3. Can hardware wallets be hacked?
Ans:In reality, it may be impossible to hack a hardware wallet because they store data locally on the hardware and are not connected to the internet. Also, it is impossible to access the data stored without punching in the right pin.
Q4. Are crypto hardware wallets costly?
Ans:Yes, hardware wallets may cost higher than your regular wallets. But, if you deal in high-value currencies, it may be a worthwhile investment.
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Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.
Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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