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What is a Hardware Crypto Wallet?

hardware wallets
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Using hardware crypto wallets is the best way to keep your private keys safe, making them popular among serious crypto investors.

Crypto wallets help you interact with blockchain technology. They support buying, selling, storing, mining, staking, and everything that’s possible with the specific blockchain they are meant for.

However, some crypto wallets like Guarda, Trust, and Ledger are multi-currency. They allow accessing many blockchains from a single user interface.

Based on the internet connectivity, one can divide crypto wallets into two categories:

Hot Wallets

These are the most popular and easily accessible of the two. Typically, they are freeware that one can use on desktop and mobile platforms. Just download the application, register for the service, and that’s it.

These wallet providers can keep the private keys to themselves or hand them over to the user (self-custodial). Arguably, the latter is known for its least reliance on any 3rd-party. However, some users still prefer custodial wallets to minimize responsibility.

While hot wallets are seen as less secure (and they actually are compared to the cold ones), almost all the hacks involve crypto exchanges. This is the case where an investor stores the crypto on an exchange, relying on the exchange company for the security of the assets.

And depending on the size of the exchange, they are lucrative targets for the cybercriminals who make quick work of the ones practicing poor security protocols.

Conclusively, if you’re a beginner in this realm or can store the private keys somewhere safe–you don’t need a hardware wallet. You can easily survive with hot wallets.

But, if you’re a serious crypto investor expecting top-notch security for your funds, it’s probably the time for an upgrade to…

Hardware Wallets

Hardware (or Cold) wallets take the most dangerous thing–the internet–out of the equation. Still, this isn’t entirely true for all, as some still connect to the network while transacting.

hardware wallets

Hardware wallets are further divided into two:

Non-Air Gapped

These use the internet while transacting via a USB cable and otherwise remain offline. Moreover, they come with physical buttons to verify the transaction details.

The most common examples of non-air gapped wallets are Ledger Nano X, Trezor One, etc.

Air-Gapped

The other type transfers the information wirelessly, coining the term fully air-gapped. They exchange information via QR codes/Bluetooth/NFC and never connect to the internet.

These types of wallets are perceived as more secure, but a few experts don’t agree and see the switch to fully air-gapped wallets as unnecessary.

Finally, air-gapped or non-air-gapped is a time-consuming debate that often leads to no clear conclusion.

So instead, we’ll take the hardware wallets as a whole and see how they work vis-à-vis hot wallets to see the difference.

How does a Hardware Wallet Work?

A hardware wallet works a lot like a hot or software wallet. The only thing which works differently is the validation of transactions.

While the hot wallets show you the details on the host device and ask for approval there itself, a cold wallet does all of this on the integrated applications (like Ledger live for Ledger devices), which fill in for a workable user interface.

However, the last few steps of actually validating any transaction happens on the hardware device, which makes the real difference.

Another major differentiator is the fact that the private keys remain offline even while connecting to the respective application.

So technically, a hardware wallet acts as an added security measure and is used for authentication while the integrated applications still play a crucial role.

Although the hardware wallet manufacturers don’t recommend it, you can pair these hardware wallets with some of the hot wallets. In this case, the hot wallets act as the integrated user interface, replacing the wallet’s native application.

How to Secure a Hardware Wallet?

Protocols for safeguarding the crypto assets in the hardware wallet are similar to what applies to any self-custodial hot wallet.

You just need to ensure the security of the seed phrase and any extra authentication like a PIN. Besides, the device itself should be protected from any unauthorized physical access.

However, you need not worry if the pin-protected device gets stolen unless you have the recovery seed phrase. That way, you can restore the funds on a similar new device or any other compatible wallet.

Conclusion

Finally, hardware wallets are the keeper of the private keys and make the overall security robust. In addition, you can also use these devices with compatible hot wallets giving you the best of both worlds.

So now that you know about them, it’s time to look at some of the best hardware wallets.

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