Now more than ever it is absolutely critical to keep your cryptocurrency safe and secure. We are living in the era of cryptocurrency right now and with this increased attention comes increased risks. Hackers are always on the lookout for some easy money and you have to take extra care that your money doesn’t end up in the wrong hands.
To do this you must put all your money in a cryptowallet. Cryptowalletsbasically store your public and private address, using which you can send, receive and store cryptocurrency. There are two kinds of wallets that you can use:
- Hot Wallet.
- Cold Wallet.
While hot wallets are easy to use transaction wise, they are extremely insecure and it is not advised to store a large number of your cryptocurrency in hot wallets. Cold wallets, on the other hand, are extremely secure. If you are looking to store and save large amounts of money, then you should definitely use a cold wallet. However, it’s not all sunshine and rainbows and there is a major problem with cold wallets.
The problem with cold wallets
The main issue with cold wallets is that you cannot directly spend your money from them. The only way that you can spend is by re-importing your private key into a hot wallet but by doing this you’re negating all the precautions that you had taken by making a cold wallet in the first place. What is the point of making a cold wallet when you are going to import your private keys into a hot wallet anyway?
What we are looking for is a wallet which will give you the security of a cold wallet but at the same time make transactions super simple. A wallet which will not only protect your cryptocurrency from malware and hackers but will also make sending and receiving money stupidly simple. The solution to all this is a hardware wallet.
What are hardware wallets?
A Hardware wallet is a physical device which holds your private key. You can physically carry around your hardware wallet like a normal wallet and use it as and when you please. They have a USB cable which you can use to plug into your laptop/desktop to do all your transactions.
Pros of hardware wallets
- Since it’s a cold wallet your private key will be safe and secure. The keys are stored in the protected area of a microcontroller and cannot be transferred out of the device.
- They are designed to be sleek and can be carried around easily.
- Transactions are extremely easy. All that you have to do is to plug in the wallet and then follow the instructions given to make your transactions. The UI interface of the wallets are very user-friendly. Plus, all the transactions that you will make will be safe and secure.
- Resistant to malware, virus and hacker attacks. As of writing there have been no instances of hardware wallets ever been hacked.
- Can store multiple addresses for you to send funds over.
- Most of the time the software is open-source so if you want to know how the hardware wallet works and keeps your private keys secure you can simply take a look at the code itself.
- In case your wallet falls into the wrong hands the wallets are pin code protected. On entering the wrong pin code 3 times your wallet will automatically shut down.
- If in case your wallet shuts down for whatever reason, you recover your money by using the restoration details that come with each wallet.
Cons of hardware wallets
- Since it is a physical object, there are chances that it might get bruised or damaged via external stimuli. (Seed Phrase overcomes this)
- You may not be able to store all kinds of cryptocurrencies in your hardware wallet. The Ledger Nano supports bitcoin, Ethereum, ERC20 Tokens and other altcoins, however, the Trezor only supports bitcoin and dash (when connected to Electrum).
- Like all products, they are still susceptible to design flaws. There is a possibility that hardware wallets have a fundamental design flaw which can get exploited in the future.
- When you are buying a hardware wallet you have to blindly trust the company developing your wallet. If the company gets compromised for whatever reason, you stand to lose all your cryptocurrency.
- You will also have to blindly trust the company delivering your wallet. There is a chance that you might get a used, second-hand wallet instead of a new one. Using a second-hand wallet is a HUGE no-no.
Which hardware wallets should I use?
As of right now, there are two hardware wallets that are ruling the market:
Trezor is a Prague-based company and they have built one of the easiest and most convenient hardware wallets ever. It is insanely simple to use and the sleek design means that you can carry it around with your very comfortable. Trezor is compatible with Windows, Mac OS X and Linux. In order to use it you can simply plug in the USB drive to your laptop and connect to your chosen interface.
The interfaces that can work with Trezor are:
- My Trezor (aka wallet.trezor.io), you can simply install the google chrome extension and make interactions a lot simpler.
With My Trezor and Multibit it can use only bitcoins while with Electrum it can use bitcoins and dash.
So, after connecting with your chosen interface, you will notice this in your laptop:
You will have to enter the pin number which will be randomly generated by your wallet every single time and will be displayed on the screen of your wallet like this:
The number will randomly generate for every single transaction. This gives an added layer of security to your cryptocurrency. In case, you have some keylogger in your computer recording your activities for malicious purposes they won’t be able to get access to your wallet because the pin will keep changing.
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After you have put in your pin code you will have to put your passphrase which is known to you and only you. When you are done, you will gain complete access to your wallet and you can send receive funds as and when you please. If you are sending someone money, your trezor will ask for your confirmation by showing this message on its screen:
You can cancel or deny the transaction.
And that’s pretty much it! Simple isn’t it?
- Extremely simple to use.
- Very sleek design.
- Can be used on all devices provided the platforms are compatible (Windows, Mac OS X or Linux).
- Never exposes your private key.
- Randomly generate pin code keeps the device safe and secure.
- Costs $99 which is a bit steep.
Ledger Nano S
Ledger is a Paris-based company and they have taken the crypto world by storm because of their amazing Nano S hardware wallet. It saves your data within a smart card and protects it from malware and hackers. In order to use it, simply plug it into your laptop. The interfaces that can work with Ledger Nano are:
- The Ledger Wallet (download the Chrome extension for ease of use)
- Green Address.
If this is the first time you have logged in, you will see this screen:
After that, you will have to choose and memorize your 4-digit pin-code. You will need to input the pin code each time you log in.
Now you will be given a list of 24 words which you will NEED to write down and memorize. In case you ever forget your pin, in order to recover your wallet, they will ask you questions like:
“Enter the 17th word in your recovery sheet.”
So for moments like that, you will need to jot these words down. Along with the Ledger Nano box, they will also give you a sheet of paper where you can write down the names and store it for later use.
Now that you have created your Ledger wallet, simply log in using the pin code that you made in the beginning. The user interface is very simple to understand. Now, when you are sending money to someone else using the Ledger Wallet you will have to use your security card that comes along with your wallet. It looks something like this:
Follow the table given in the security card to fill up the code that they want for the transaction. Eg. For the card shown above, the code corresponding to “A1Nm” will be “466E”.
What this security card does is that it completely removes man-in-the-middle attacks. Since the code will be unique every single time, no hacker can possibly gain access to your addresses.
- Compatible with more software interfaces than Trezor.
- Extremely easy to set up.
- It just costs $65.
- You can use it transact with Bitcoin, Ethereum and Ethereum Classic and other altcoins.
- Simple to use with a very friendly interface.
- Can be easily carried around.
- Has U2F support.
- The Security card creates a unique code for each transaction and saves you from man-in-the-middle attacks.
- The physical page with your restoration details can be lost easily.
- Since the pin code is generated one time only, it is advised to use only your private computer which is free from keylogging malware.
- The security card can be lost if not kept securely.
- It has no ability to create hidden accounts.
If you are a seasoned user of cryptocurrency then it goes without saying, you need to have a hardware wallet. Not only do they keep your funds safe and secure, it makes transactions very simple as well.