Because bitcoin is based on a decentralized technology –blockchain, you must protect your possessions. There have always been concerns about which wallet is safer to use while holding your cryptocurrency, but this is not a one-size-fits-all situation. Both custodial and non-custodial wallets have advantages and disadvantages.
Undoubtedly, one of the most crucial considerations when building your crypto portfolio is how to keep it safe and secure. Unfortunately, unlike your traditional banks, cryptocurrency is not protected with fraud protection by any authority. Therefore, it is up to you to securely protect crypto assets.
There are several approaches to dealing with protecting your crypto asset. The most typical method is to entrust the security of your funds to a centralized exchange, CEX.
This is the simplest option to hold your assets because you maintain them on the trading platform where you purchased them, and they allow you to easily swap your assets. However, this is not a smart practice because you are not in control of what happens with your assets, and there have been cases of attacks on exchanges by hackers.
Because both custodial and non-custodial wallets do not ensure the absolute protection of your crypto assets, it is critical to consider the optimal security option that does not involve keeping your funds online. As a result, you need to manage your investment without worrying about it being stolen or losing sleep over it.
Indeed, the most practical way to protect your crypto asset from digital theft is using a hardware wallet.
What is a Hardware Wallet?
A hardware wallet is a cryptocurrency storage device that protects the user's private key with a tamper-proof electronic hardware device. Hardware wallets are specifically built to hold private keys securely. They are considered safer than mobile or web wallets because they do not need an internet connection. Hardware wallets are physically accessible by you, and the device encrypts access to your funds.
However, it is essential to know that hardware wallets do not hold your assets, as they are kept securely with the blockchain. But they provide security and utility by interacting with the blockchain. Also, the hardware wallet ensures that your private keys are never lost or stolen from your device. This is because private keys are kept in a unique location in the device memory, where they cannot be altered.
In addition, Hardware wallets are an essential part of the blockchain ecosystem because they secure cryptocurrencies while also facilitating transactions. Similarly, they can work with multiple blockchain networks at the same time. This allows you to manage Ethereum, Solana, Cosmos, Binance Smart Contracts, and other networks on the same device quickly backed up with a single recovery phrase.
How Does it Work?
When you use a wallet application on a computer or mobile device, the transaction is immediately sent to the hardware wallet. The transaction details are then displayed on the screen of the hardware wallet. If you confirm that the information is correct, you proceed by pressing a button on the hardware wallet.
The hardware wallet then signs the transaction with the private key associated with your seed phrase, which completes the process. The data can no longer be decoded because the transaction is encrypted. The signed and encrypted transaction is then sent back to the wallet application to the blockchain network.
The hardware wallet is typically a tiny plug-in device (usually USB-shaped) and is a portable key that allows you to safely access your crypto assets from anywhere. Also, without creating new accounts, a hardware wallet can give you access to various dApps to carry out transactions.
Importantly, hackers and other malicious parties cannot access the seed phrase because it is kept separate from computers and the internet by the hardware wallet. Hardware wallets are made up of specialized, highly secure hardware that can only be used for the purpose for which they were created. In addition, the hardware wallet returns a secure encrypted and signed transaction, which is the same as the data available on the blockchain.
Advantages of Hardware Wallets
- You have complete control over the private keys and the funds. So, you don't need to rely on third parties for key management and cryptocurrency management, as with software wallets.
- These are resistant to viruses and malware that can infect the device and steal private keys. As a result, they enable the safe and efficient storage of large amounts of cryptocurrencies.
- Your data is completely secure. Hardware wallets enable you to add extra layers of security. PIN settings of choice, as well as two-factor authentication (2FA). These methods prevent a third party from using the device if it is stolen or lost. To gain access, a password or PIN is required. Your account cannot be accessed without your digital signature. Also, when the wrong combination is entered too many times, the device will automatically reset.
- These are compatible with the vast majority of operating systems. You can also back up your cryptocurrency investments and secure data.
- Hardware wallets are also user-friendly. And besides, you never have to enter the seed phrase manually. Instead, plug in the hardware wallet and enter the PIN to unlock it.
- They are portable and come in USB form to be easily carried around.
Should you Consider Hardware Wallets?
Given the advantages of a hardware wallet, it is considered the safest method to provide security for your crypto assets. However, you must ensure that you purchase a dependable device in good working order from a reputable source. It is crucial you are buying it directly from the official providers, not from marketplaces retailers, or third parties. However, there are numerous possibilities for hacking, theft, and scams if necessary precautions are not taken. There are multiple possibilities for hacking, theft, and scams if necessary precautions are not taken.
It would help if you also decided what level of security you require. Others will feel the need to strengthen this security and have a device that offers higher levels of security, biometrics, or even the isolation of the device from possible sources of attack, such as USB chargers.
Popular Hardware Wallets
The hardware wallets listed below are among the most popular and trusted today.
Ledger Nano X
Nano X is the latest product from a reputable hardware wallet manufacturer –Ledger. It has better security features than other wallets and can store more cryptocurrencies. The Nano X connects to your devices via Bluetooth or USB. You can also use the Ledger Nano X to buy, sell, stake, swap, and manage non-fungible tokens.
Trezor Model T
Trezor is a user-friendly hardware wallet for storing bitcoin and other cryptocurrencies. Trezor gives a larger touchscreen LCD panel to support wallet functions, which is much more convenient and secure. Furthermore, the Trezor firmware is open source, whereas the Ledger's is not. Trezor also has a 12-word recovery phrase. Trezor, like the Ledger, accepts the most popular cryptocurrencies such as bitcoin, ether, and litecoin.
Ledger Nano S
The Ledger Nano S is Ledger's first-generation hardware wallet and one of the first hardware wallets ever created. Compared to the Nano X, it lacks Bluetooth connectivity, has a smaller display, and can only hold three crypto applications at once.
Exodus
Exodus is a multi-currency wallet with a simple user interface and a built-in exchange. It is a simple and easy-to-use crypto wallet that provides over 150 assets. The wallet's extensive feature set makes it a viable option for anyone, but it is especially suited to newbie crypto investors. One of Exodus's most popular features is switching between many cryptocurrencies.
Final Takeaway
Given its potential, cryptocurrency will always be appealing to hackers. However, adhering to good storage and security practices will reduce the likelihood of an attack. Therefore, while keeping your cryptocurrency in a hardware wallet is not required, it is firmly advisable.
As a result, when considering a hardware wallet, you must do your own research into the available options. There are numerous devices on the market, each with its own set of features, cryptocurrencies supported, and learning curves.
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