Hardware wallets are one of the safest ways to store digital currencies, especially for long-term investment.
Since the emergence of the first cryptocurrency, finding a safe and easy way to store this type of asset has always been one of the concerns of digital currency owners. Unlike bank accounts that are used to store fiat money (banknotes, etc.), cryptocurrencies can be stored in the exchange’s wallet or a software wallet, or a hardware wallet.
In general, if you have purchased digital currencies for investment and do not want to use them for a long time, it is recommended not to keep your capital in your exchange wallet for greater security and to use software (hot) or hardware (cold) wallet. Do.
Digital currency wallets can be considered similar to bank accounts but of a digital type, which allows the user to send, receive and manage digital currencies. If this wallet is in the form of an application or browser extension or on the web, we call it a software wallet, and if it is physical and tangible, we call it hardware.
Digital currency software wallets are developed for desktop and mobile operating systems, and along with all the advantages they offer, they have one big drawback: they store all user information on the servers of the developers of these applications, so if the servers are hacked, it is possible to lose them. Gone is all the user’s property.
On the other hand, using a hardware wallet removes this concern and puts all the responsibilities of maintaining and maintaining the asset on you. Earlier, we talked about the differences between cold wallets and warm wallets; now, in this article, we want to specifically get to know the hardware wallet and its advantages and disadvantages and introduce the best hardware wallets available in the market.
What is a hardware wallet, and how does it work?
A cryptocurrency hardware wallet is a physical device designed to safely and efficiently store digital assets. This type of wallet comes in various shapes, sizes, and features and is sold at different prices in the market, and is equipped with a USB port to connect to a computer, laptop, or phone.
These wallets store private keys (secret text string to access the cryptocurrencies stored in digital wallets) in an offline memory, without the need for a permanent connection to the Internet and at the discretion of the user, and thanks to additional security layers, the security of your digital assets are up to It provides a lot.
Advantages of using a hardware wallet
As mentioned above, a hardware wallet is a physical and encrypted device for the safe storage of digital currencies, which, unlike software wallets, is connected to the Internet only when used, and the user has complete control over assets and private and public keys.
Hardware wallets provide more security for digital assets by allowing users to store private keys offline. Private keys play the same role as bank card passwords for bank accounts.
This key is an excellent way to enter and use your balance in the digital currency wallet. Hardware wallets are designed to store private keys offline and keep digital currencies safe from cyber attacks, phishing, and malware. Hardware wallets hold your cryptocurrency’s private keys offline, protecting them from cyber-attacks.
In addition, even if someone can physically obtain your hardware wallet, they will not be able to spend or transfer your assets despite the PIN codes you have defined to log into the device; If someone enters the defined PIN incorrectly multiple times, the device will automatically reset to factory settings.
Storage of multiple cryptocurrencies in one place
You can store multiple cryptocurrencies in your hardware wallet. These wallets allow simultaneously managing numerous cryptocurrencies in various blockchains within a single device, and the entire asset, regardless of variety and number, can be secured with a seed phrase.
Most hardware wallets are compatible with multiple cryptocurrencies and allow you to store various digital assets on a single device.
to be portable
Hardware wallets are small and compact and often come in the form of a device with a USB port; Therefore, they are easy to carry, and you can take them anywhere in the world.
Platforms such as PancakeSwap, dYdX, Kyber, and Radar Relay enable direct transactions from one wallet to another, eliminating the user’s need for an exchange to transfer and move money. In addition to saving time, this also minimizes fees.
Disadvantages of hardware wallets
Along with all the advantages they offer, hardware wallets also have some disadvantages. In the following, we introduce the weaknesses of these devices.
Hardware wallets are usually more expensive compared to their software counterparts. This issue may be less critical if you keep much of your capital in digital currencies.
Inappropriate user experience
Setting up and using hardware wallets can be very difficult for beginners compared to the user experience of software wallets. Additionally, hardware wallets are unsuitable for everyday transactions, as you must physically connect the wallet to a device before accessing your coins.
In general, hardware wallets are suitable for people who plan to hold their assets for a long time and with the intention of investing.
No hardware is free from flaws and bugs, this also applies to digital currency hardware wallets, and the same issue can increase the vulnerability of cold wallets to cyber attacks. If there is a bug in the hardware wallet firmware, hackers can exploit that bug and gain access to your assets.
Hardware wallets are more vulnerable to water or dust infiltration than hardware wallets, or they can get lost. If these happen, the digital assets stored in the wallet will be lost.
How to choose the right hardware wallet?
As mentioned, hardware wallets store your private keys offline, and you will only need to connect the device to the Internet when making a transaction.
Since this product is responsible for protecting your digital assets, it is essential to choose the right hardware wallet carefully. Here are the points you should consider before buying a digital currency hardware wallet:
Security features: Look for a wallet with robust features such as two-step authentication and multi-signatures and backup options such as a recovery phrase (Seed).
System Compatibility: Before buying, make sure that the hardware wallet you want is compatible with the device and operating system you want to connect this wallet to.
Supported cryptocurrencies: Before purchasing a hardware wallet, determine which cryptocurrencies are supported by that wallet. Each hardware wallet keeps a limited number of digital currencies.
Ease of use: Rate the wallet’s ease of use and user interface. Some hardware wallets are suitable for beginners, and others for professional users.
Reputation: Research the hardware wallet manufacturer’s importance and ensure they have a good track record of providing security and after-purchase support for these products. Remember to check customers’ opinions and the manufacturing company’s originality.
Hardware wallet support
After purchasing and setting up a hardware wallet, you must ensure you can still access your digital assets if the product is lost, damaged, or stolen. As it was said, most digital currency wallets (both software and hardware) are equipped with the term recovery or Seed.
This is a 12 or 24-word phrase, and if you enter the words in the correct order into any other wallet, you will get access to your digital currencies. Be careful that keeping the Seed safe is very important; Because if someone can access your recovery phrase, they can withdraw or move the entire cryptocurrency.
How to send digital currency to a hardware wallet
In this section, we teach the steps and how to send digital currencies from the exchange to the hardware wallet. After you connect the wallet to a device for the first time, you’ll be prompted to choose a four-digit passcode to use the wallet on a computer. Next, the 24-word recovery phrase selected for you by the wallet will be displayed.
Write this phrase down on paper (offline) and save it in a safe place, then download and run the free hardware wallet app to create a file or folder for each cryptocurrency. Be careful that hardware wallets are only used to store digital currencies, and you cannot buy cryptocurrencies through them.
To send digital currency to your hardware wallet, connect this device to the computer first and then log in to your account in your preferred exchange. Click the “Send” option in the exchange wallet and enter your hardware wallet address. After confirmation, the business will show you the transaction details, and the process’s finalization may take some time.
Using hardware wallets may seem tricky at first glance, but these wallets offer many advantages compared to software wallets and ensure the security of your digital assets. However, we recommend that after buying and sending digital currency to a hardware wallet, you must make a backup version of it so that if your wallet is damaged, lost, or stolen, you can recover your assets.