Choosing a hardware wallet for your software cash
Tags: Hardware Wallet, Crypto, Bitcoin, Cryptocurrency, Blockchain

Choosing a hardware wallet for your software cash

Total capitalization of all the cryptocurrencies reached its current peak in January 2018. At one point, there were $829m worth of crypto coins. All this money is distributed on the virtual wallets of cryptocurrency holders, and anyone who wants to use cryptocurrencies, needs to get one as well.

The question is: how do you choose a cryptocurrency wallet? After all, its security and reliability determines if your coins are safe.

There are two major kinds of cryptocurrency wallets: hot and cold ones.

How cryptocurrency wallets work

To help you choose a hardware wallet, I want to start in the beginning and explain what types of cryptocurrency wallets are there and why hardware wallets are a good choice.

So how do cryptocurrency wallets work?

Here’s a simple example:

When you register a Bitcoin account, you get two codes. A public address and a private key.

The public address is kind of like your email. You can share it with anyone from anywhere in the world, so that they could send you cryptocurrency. The private key is kind of password that you can’t show anyone under no circumstances. Because as soon as someone with bad intentions gets a hold of your private key, you lose control over your wallet and all the money in it.

And that’s what might happens if your wallet is hosted on online exchanges or in some apps.

Remember, all of the transactions on cryptocurrency blockchains are irreversible. So if anyone transfers your coins using your key, there’s no way to restore them.

Basically, a cryptocurrency wallet is just an account, an app or a device that that lets you access and manage your crypto money. There are two major kinds of cryptocurrency wallets: hot and cold ones.

Hot and cold wallets

Hot wallets

Hot wallets are usually web-based solutions that require internet for access. They are considered to be the least secure wallets due to numerous hacks and vulnerabilities both on online exchanges and on computers.

The good thing about hot wallets though is that they tend to be much more user-friendly and are often free of charge. So if you’re really into cryptocurrencies, you can use a hot wallet for day-to-day transactions of small sums. But for the majority of your savings use cold wallets.

Cold wallets

There are three types of cold wallets at the moment:

Desktop wallets;

Mobile wallets;

Hardware wallets.

I think the first two are pretty self-explanatory. These wallets exist in form of software stored on your computer or on a mobile device. The difference with hot wallets is that you can work with them offline. But they still aren’t as safe as hardware wallets, since computers and phones are easily destroyed, hacked and stolen.

Among all the hot and cold wallets, hardware wallets are considered the safest.

Hardware wallets

Hardware wallet is the most expensive way to store cryptocurrency. But they still get increasingly popular. The main reason for it is that these devices provide the highest level of security for your cryptocurrency.

As of now, there hasn’t been a single proved and recorded incident of a hacked hardware wallet, so the track record holds pretty strong. Right now the only way to get money out of your hardware wallet is to physically make you share the details to unlock it.

How do hardware wallets work?

Hardware wallet is the device that secures your private key and most often requires you to physically press a button to complete any transaction.

The setup processes differ slightly, but usually it goes like this:

You plug in your new hardware wallet into a computer, create a pin code and write down a series of 12–24 random words that appear on your wallet’s screen.

These words will serve as your recovery seed, should you lose your wallet. Usually, ‘recovery seed booklets’ are included into packages. You need to keep those hidden, because anyone who knows the word combination that unlocks your hardware wallet — can control your funds using a similar device.

Once the wallet is set up and plugged into a computer, you’ll have access to the dashboard. There you’ll see your public address and will be able to manage your funds. The important thing is that to send money to someone from this dashboard, you’d need to press a button on the hardware wallet. This is a countermeasure against software hacks. So even if someone hacked your computer, they won’t be able to transfer money from your account.

The three market leaders working on hardware wallets right now are companies Trezor, Ledger Wallet and KeepKey. Let’s look at each of those closer.

Trezor

Trezor was the very first hardware wallet. It entered the market in 2014 and immediately got popular among cryptocurrency users who looked for a safer way to store their money.

A Trezor wallet will cost you about $100 and for this money you get a device with a small screen and two buttons, the one from the photo above.

The wallet operates through a browser extension and supports all the major cryptocurrencies: from Bitcoin to Dogecoin. Simple design and the fact that it was first to the market made Trezor a trusted choice for thousands of cryptocurrency holders.

Trezor, as well as two other top hardware wallets, are really easy to set up and use to receive funds and confirm operations. All the three devices operate exactly the way I described above.

Ledger Wallet

The most popular hardware wallet in the world is developer by the company Ledger Wallet. Namely, it’s the model Ledger Nano S.

The structure and functionality of the device is pretty much the same as its two main competitors. But it is smaller and costs cheaper (about $80), so I guess these two factors contributed to its wider acceptance.

The wallet also supports Bitcoin, Ethereum, Litecoin, Dogecoin, Dash and ZCash.

KeepKey

KeepKey stands out among the competition because it’s kind of a luxury options for cryptocurrency passionados. The team used high quality materials and put a lot of thought into designing a unique look and feel for their product.

This wallet is significantly bigger than the competitors and costs more (about $120). And if you really want to show people how well off you are, you can get a golden version for about 340.

Due to a bigger screen and and a handy controller, it’s easier to read info of a KeepKey. And even though in terms of functionality, it’s very similar to competitors, its slick design and usability got this wallet a loyal fanbase that won’t switch to other companies.

Should you use a hardware wallet?

Hardware wallets provide cryptocurrency owners with a significantly higher security level. That’s the perfect solution for storing bigger amounts of coins that you don’t use on a day-to-day basis.

The top three hardware wallet market leaders share almost identical functionality, cryptocurrency range and security repercussions. So the choice almost fully depends on your sense of style and budget you allocate for a wallet.

In my opinion, hardware wallet has to be good at two things — storing and securing cryptocurrency. And all the three described wallets, do the job just fine.