In the face of an ever-changing cybersecurity environment, it’s more important than ever to keep digital assets safe.
There are several ways to store your cryptocurrency and digital assets, such as NFTs, but few are as secure as a hardware wallet. Hardware wallets offer a number of advantages over software wallets, but why is it exactly? Find out below.
What is a cryptocurrency hardware wallet?
A hardware wallet is a device that stores access to your cryptocurrencies.
The device is separate from the computer or phone, which makes it an independent piece of hardware. It stands as an upgrade to software wallets, which can be downloaded to an existing device, such as your computer or phone.
More specifically, a hardware wallet stores your private keys on a dedicated device with software designed specifically to protect your private keys. This brings a number of advantages, which will be explained below.
1. Private keys are stored offline
Software wallets carry the risk of being connected to the Internet. If you use a device connected to the Internet, you run the risk of having information collected by the device. Most hardware wallets offer a service called cold storage.
If your software wallet is compromised, there is no insurance to back up those lost assets. This means that storing critical information such as private keys is a critical component of keeping assets safe. Cold storage is an ideal solution for this as the keys are stored on a device disconnected from the internet.
2. Lower risk of viruses
Being disconnected from the internet and using non-Apple or Windows-based firmware, the risk of viruses and malware being threats to your private keys is close to zero when using a hardware wallet.
One feature that some hardware wallets come standard is called “air-gapped transactions.” This simply means that the device itself is never actually connected to the internet or your computer and is therefore much less vulnerable (if not impermeable) to infection by a virus.
In addition, most viruses are designed to attack platforms such as Windows or Apple, which offer more traditional attack vectors.
A hardware wallet can bring some degree of peace of mind. They are simple to use, highly secure and can be purchased at reasonable prices. It handles the software and security side in a cryptocurrency store, leaving you free from worries like micromanaging your internet security and browsing a bunch of different cryptocurrency-related programs that may not necessarily be in your wheelhouse.
Hardware wallets simplify the security of your crypto assets, leaving you free from worries.
4. Risk reduction during the trip
A hardware wallet is safer if you are a frequent flyer. Public Internet connections and networks without guaranteed trust can pose a common security risk. Laptops connect to the Internet with a security risk, but they are also higher risk attack surfaces. Malicious actors can access a laptop’s USB ports, even when it’s locked, posing a security risk. Hardware wallets are PIN protected and have additional protections depending on what you buy.
Also, should you lose your hardware wallet to
some unfortunate fate, you can use a seed recovery step you receive with the hardware wallet to recover your private keys and save your encryption. This phrase should be written on paper and stored in a physically safe place and is sometimes called a paper wallet. Remember not to keep your paper wallet and hardware wallet in the same place.
5. Check on hardware device
With a hardware wallet, all your transactions must be verified with user inputs before transferring. Without access to the hardware wallet, it is impossible to send any cryptocurrency from the wallet.
In this sense, the hardware wallet can rightly be interpreted as the “signature device”. As in, it is the device that signs transactions and makes them valid to be transmitted to the respective blockchain. Without a signature, a transaction is invalid. Without a hardware wallet, a transaction cannot be signed.
Conclusion: Hard to Ignore the Benefits of Hardware Wallets
So why own a hardware wallet? For the risks it mitigates by providing users with a cost-effective solution to the problem of hot storage. Hot storage is any wallet connected to the Internet, such as software wallets used on a computer or mobile device. Being disconnected from the internet keeps your private keys untouchable by unexpected actors who can access your device through an internet connection.
Hardware wallets have a failsafe if you lose physical access to them due to unfortunate circumstances. This failsafe is a paper wallet with a passphrase that gives you emergency access to your private keys, so you can save your lost cryptocurrency until you can replace it. All of these factors combined provide peace of mind when navigating the uncertain world of cybersecurity.
There are, of course, some downsides to hardware wallets. Perhaps the biggest hurdle for hardware wallets is price. They tend to range from $70-$300. It probably won’t make much sense to buy a hardware wallet if you only own $10 worth of cryptocurrencies. The other is complication. While hardware wallets have become much easier to use, there is still a bit of a learning curve.
If you’re not sure where to start, we’ve got you covered. Read our review of The Best Bitcoin and Crypto Wallets in 2023 to get a comprehensive list of the highlights, costs, and cryptocurrencies supported by each hardware wallet.