One of the most crucial aspects of keeping your cryptocurrency safe is ensuring that your private key is out of reach and out of harm’s way. It is usually recommended that you avoid keeping it in any device such as a computer, whose security can be compromised by malware.[no_toc]
Hardware wallets are said to be among the most secure storage options for your cryptocurrency. They are a cold storage solution that offers matchless security for your crypto funds.
How do they work? How can they achieve this level of security? Read on to find out everything you need to know about hardware wallets.
What is a Hardware Wallet?
A hardware wallet is a physical device that bears a close semblance to the flash disk.
Typically, a crypto user will have their private keys stored on a computer, mobile device or in the hands of wallet service providers. However, computers, mobile devices and online platforms are highly susceptible to malicious attacks by hackers.
Hardware wallets allow users to bypass the dangers of hot crypto storage by keeping user private keys on-device and out of the reach of malicious entities. But at the same time, they are more convenient than paper wallets as they provide easier access to funds for transactions.
A hardware wallet will generate a new private key on the device but offline and display a corresponding public key to facilitate transactions. In spite of being on-device, the keys remain safe even when you use the device on a malware-infested platform or device. This is by virtue of their built-in encryption procedures that secure the keys from unauthorized access.
For additional protection, the devices require a PIN code for access and in most cases, have physical buttons for transaction verification.
Essentially, a hardware wallet has two main components. The first is a web, desktop or mobile client connected to the internet, with all the capabilities of a hot wallet. However, it can only create transactions but not sign them. A second component that completes the equation is the hardware which you use to verify and sign transactions before they are completed.
Hardware wallets are usually compatible with multiple web interfaces and are capable of supporting various cryptocurrencies. Transacting using a hardware wallet is as simple as plugging it into an internet-enabled device and following the appropriate procedure for the wallet in question.
In case of device loss or damage, hardware wallets usually have recovery phrases which you can use to restore funds. You will need to save this recovery phrase during initialization or after so as to have a backup of your wallet.
Best Hardware Wallet Providers
Create a Hardware Wallet on Ledger Nano S
The Ledger Nano S is one of the most popular hardware wallets and has been in existence since 2016. Currently, the wallet supports over 1,180 cryptocurrencies and is thus a great choice for users who require access to a wide variety of coins.
It was one of the earliest products of Ledger, a French company which has existed since 2014. The company has its headquarters in Paris as well as offices in San Francisco and Vierzon.
The Ledger Nano S is small and compact, resembling a USB flash drive in both size and shape. It has a rotating metal sleeve that protects its inbuilt display. Its display is slightly smaller than those of some of its competitors.
The device is compatible with Windows, Linux, Mac OS and Chrome OS and can also connect to your Android device via an OTG cable.
Step 1: Initializing Your Device
Plug in your Ledger Nano S into a computer and set a secure PIN to protect your wallet.
You will receive a 24-word recovery phrase. Write it down on the card provided in the box and store it somewhere safe.
Step 2: Installing Ledger Live
Next, install the Ledger Live desktop app which will allow you to interface with your wallet and transact.
The Ledger Live interface is intuitive and should be easy to use even without the device manual. That’s it! Your Ledger Nano S is ready to use.
The Ledger Nano X is the latest offering from the Ledger Company and features significant improvements over the Ledger Nano S.
Some of the most outstanding highlights include Bluetooth capabilities, a built-in battery and a higher capacity to support more apps.
It also has a slightly larger screen, which unlike its predecessor is an edge-to-edge LED display. The wallet already supports more than 1,100 digital assets with more being added constantly.
Though it supports Bluetooth, the only data you can access or transfer by this means is public data. Critical data such as your private keys and seed are securely stored under cryptographic security on the device.
Just like the Nano S, it has the rotating metal cover to protect its screen.
Step 1 – Initialization
The Ledger Nano X has a familiar setup process, especially for someone who has used the Nano S. To begin with, install the Ledger Live app on a Windows 8 (64-bit), Mac OS 10.8 or Linux PC or an Android 7 or iOS phone.
Press the button next to the USB port on the device until the Ledger logo appears. Read the instructions that appear on the screen.
Press both buttons simultaneously to “Set up as new device” and do the same to “Choose a PIN Code.”
Step 2 – Write and Confirm Recovery Phrase
Write down the 24-word recovery seed phrase on the Recovery Sheet that comes in the box and store it safely. Once you are done writing down the phrase, confirm it by following the instructions on the screen.
Your device is now ready to use. To access the dashboard, press both buttons simultaneously.
After completing the setup process, you can pair the device with your mobile phone, install apps on it for the specific coins you want to use and add accounts.
Trezor One wallet has been in existence since 2014 and was the very first Bitcoin hardware wallet in the market.
It is a relatively small device, almost the size of a key and supports over 700 cryptocurrencies and ERC-20 tokens. However, it does not support Ripple (XRP), Cardano (ADA) or Monero (XMR).
The device does not have physical buttons, unlike most others. For security purposes, it comes with a holographic cover for the USB port which would alert the user to tampering.
Trezor One is a product of a company known as Satoshi Labs which was founded in 2013. Satoshi Labs is a highly reputed company in the Bitcoin community, with an active presence.
It is also responsible for a popular Bitcoin mining pool known as Slush Pool and CoinMap, which shows places where Bitcoin is accepted globally.
Let us find out how to set up your Trezor One hardware wallet:
Step 1: Setup
The very first step when setting up Trezor One is creating PIN code for your account. Note that you will be required to enter this PIN anytime you want to spend from the wallet. with every incorrect guess, the wait time is raised by the power of two.
Step 2: Writing the Recovery Phrase
You will also be required to write down the 24-word recovery phrase. Optionally, you can add an extra word (passphrase) to the recovery phrase to enhance security further. But you must remember this word because you cannot recover the wallet without it.
Once you are done with this, go to wallet.trezor.io, which is the wallet interface for Trezor One. From here you can send coins to other users and generally transact on your wallet.
Trezor Model T hardware wallet is described as the next generation crypto hardware wallet by its manufacturers.
Much like the Trezor One, Trezor Model T sports a unique shape so that you will never mistake it for a flash drive. It only weighs 16g and can connect via USB-C to both your PC and mobile phone.
A beautiful LED screen with high resolution makes it superior to the Ledger Nano S in terms of image quality. At the same time, being full color and offering touch capabilities places it ahead of the Trezor One.
It supports over 500 cryptocurrencies and can work with Dropbox for account management, account and transaction labeling as well as message signing. However, it does not support Stellar (XLM) and Ripple (XRP).
The packaging comes with a magnetic dock for your device which enhances its storage options and reduces the chances of damaging the device. Additionally, it has a Micro SD slot for storage.
To setup your Trezor Model T, follow these instructions:
Step 1: Install Trezor Bridge
The first step in setting up Trezor Model T is downloading the Trezor Bridge since the device comes without firmware. As such, at the time of initialization, you will get the latest firmware version for your device.
That is all you need to do to start using the Model T. Unlike most other hardware wallets, this one allows you to start using the device without backing up your wallet with the recovery phrase.
You will however get prompts and reminders to do so for security purposes, as you will need this phrase to access your funds in case you lose or damage your device.
KeepKey hardware wallet is one of the most premium-looking hardware wallets out there. It sports a wide digital screen and metal body with a sleek and clean design.
It is also one of the largest hardware wallets, with a higher focus on functionality than convenience. It is almost the size of a portable hard disk drive, greatly limiting its portability.
However, this means that the screen is large enough to allow for comfortable viewing and transacting, unlike on most other hardware wallets.
In spite of its futuristic looks, it has been around since 2015, which is long enough to establish a reputable name in the market. KeepKey is compatible with Windows, Mac OS, Linux and Android on mobile devices.
It also works well with a number of software wallets including Mycellium, Electrum and MultiBit. The wallet has also been integrated with ShapeShift crypto exchange for easy crypto conversions. KeepKey only supports 54 coins and tokens, and Ripple (XRP) is not among these.
Here is how to setup your KeepKey hardware wallet:
Step 1: Initial Configuration
Download the KeepKey Client from Chrome App Store after connecting the device to your PC. Click on the “Initialize KeepKey” button and then label your device.
Set a PIN for your device (1 to 9 digits) and note down the 12-word recovery seed phrase on the recovery card that came with your device.
Step 2: Creating an Account
To start sending and receiving cryptocurrency on your KeepKey wallet, you need to create accounts. Click the Add button at the bottom of your screen and then select the cryptocurrency for which you want to create an account, name it and “Add Account”
That’s it! You can now start using your KeepKey hardware wallet.
Best Hardware Wallets in Your Country
There are numerous hardware wallets for users in the UK. However, one of our top picks is the Ledger Nano X. What makes it a great choice is the fact that it is the only hardware wallet with Bluetooth support.
This means that you can use the wallet to transact without having to connect it to a PC. In the current era, this level of convenience is far more important than a majority of other features.
A great choice of hardware wallets for US and Canada residents is the Ledger Nano S. It offers support for a much wider range of cryptocurrencies than any other hardware wallet.
In fact, it is the only hardware wallet which supports Ripple (XRP).
For residents of Australia, both the Ledger Nano S and the Ledger Nano X are great options. They support the most coins and offer lots of versatility.
But for a user whose main interest is functionality, KeepKey would also fit the bill perfectly. It is one of the few hardware wallets whose screen offers the most convenience in terms of size and visibility.
Differences Between Exchange, Hardware and Software Crypto Wallets
Though this review has focused on hardware wallets, there are a number of other different types of wallets. Let us analyze these different types:
Best Wallet on Mobile
In the present day, a majority of crypto users consider convenient access to funds as one of the top priorities. For this reason, mobile wallets are among the most popular forms of storage. But which one is the best?
There are tons of viable options when choosing a hardware cryptocurrency wallet. To make the right choice however, you need to weigh some important considerations.
One of these is the variety of coins that different wallets support. If you use multiple cryptocurrencies, you would need a wallet that supports a good number of them.
Another aspect has to do with personal preferences. As you might have noticed, each of the wallets discussed above differs in design and features from the rest. If portability matters more to you than any other feature, you might want to pick the smallest or lightest.
But if functionality is your key focus, you might want to choose the one with the highest usability in terms of design.
All in all, remember that the security of your funds will depend on how well you keep your device, its PIN code and recovery phrase. Observing the required security requirements will keep your funds out of harm’s way.
What will happen to my funds if I lose my hardware wallet or if it gets damaged?
You can restore your funds using the seed key that you generated during the initialization process when setting up your device. In order to do this, you can order for another device or use a compatible crypto wallet such as Electrum or Mycelium.
What happens if I forget my device PIN code?
To reset your PIN, you can restore factory settings and then recover your wallet using the 24-word seed phrase.
Can I use a USB flash drive in place of a hardware wallet?
No. A USB flash drive cannot replace a hardware wallet as it lacks the specialized architecture of the latter for offline storage and random private key generation.
What happens when someone steals my hardware wallet?
Every hardware wallet makes use of a unique PIN code to restrict access to authorized users. For someone to use the wallet to access your funds they would require either this PIN or your recovery seed.
Are there any known successful attacks against hardware wallets?
It is possible that a physically captured device could get hacked by tech-proficient attackers. But such instances are extremely rare.
Is it wrong to buy hardware wallets from online stores such as eBay?
It is risky to buy your hardware wallet from any other source other than the original manufacturer or an authorized distributor. There have been instances when people have bougth pre-initialized or counterfeit items by so-called resellers.