Hardware Wallets- are they safe?
Cryptocurrencies are described as secure. They are developed using a cryptographic language, and users get to trade without revealing their names. Yet more than a billion dollars’ worth of cryptocurrencies has been lost, hacked or destroyed unintentionally. In protecting themselves against hackers, cryptocurrency owners are advised to hold their coins in one type of wallets: hard wallets. But how safe are they?
Types of Hard Wallets
When referring to hard wallets, most people refer to the USB flash drive-like devices. However, hard wallets also include paper wallets. Some people are also known to tattoo their private keys and QR codes on their bodies. Provided the wallet stores digital assets in a device not connected to the Internet, it can be categorized as a hard wallet.
Hard wallet devices like the Ledger Nano S, Trezor or Keepkey share the following safety features:
- They store private keys in a highly secure area within the wallet. Your private key cannot be transferred out of the wallet by any means
- Provide immunity from computer viruses and malware
- Allows you to send and receive cryptocurrencies with minimal effort
- Have open software which can be checked for robustness.
Unfortunately, hard wallets can’t protect you in the following scenarios:
- The wallet was swapped for a fake one during shipping- if for any reason you received an identical but fake hard wallet; the chances of losing cryptocurrencies while using it are high.
- The wallet was compromised during production- if the wallet was produced by a sub-standard company that unintentionally built a weak security system, you might lose your coins
- Sending coins to the wrong address- while malware may not compromise the wallet, they can lurk within your computer and change the address of the recipient as you copy and paste method to enter the address.
While it is possible that a hard wallet could be compromised for some reasons, most hard wallets have maintained a good track record so far. There is yet to be a reported case of a hardware wallet being hacked or compromised in a serious way. Thanks to their track record, even a less known hard wallet like https://www.abitgreedy.com/bitlox/ is sold for more than $100.
A far cheaper alternative to holding cryptocurrencies in a physical device is using a paper wallet. Since securing cryptocurrencies is all about securing your private keys, you can print them on a piece of paper. If you print several copies and store each of them securely, you never have to worry about security threats.
However, a paper wallet isn’t totally secure. A paper wallet is only as secure as the environment around you. When generating the private key, malware on your windows computer could compromise the process. Once you’ve printed the wallet and QR code, someone could steal it. Worse, they could take a picture of the private keys and withdraw your coins. Using a pay wallet to send or withdraw your coins securely is hard work as well. You could be compromised at any stage of the process.
Popular Hard Wallets
Ledger Nano S
The Nano S emerged the best hard wallet in 2017 on several wallet review sites. The parent company claims the product sells out on a weekly basis, and it’s not difficult to discover why. Not only is this wallet affordable ($100), it possesses robust security features. In addition to a built-in PIN lock, the wallet lets you generate a backup seed and backup your wallet so that you can recover your Bitcoins should anything happen to the wallet.
The Nano S looks like a typical USB flash drive. It has an OLED screen and two buttons. The display shows your transaction details. The two buttons are what you press to complete a transaction.
KeepKey is one of the top 5 hard wallets today. It’s shaped like a USB flash drive and connects to your personal computer with a micro-USB. The small device also comes with an OLED display that ensures transactions are reviewed and confirmed before they can be processed. KeepKey’s security system is safe enough to help you make any kind of Bitcoin transactions. With a pin lock and a recovery seed to help recover lost coins, cryptocurrencies are safe in this wallet.
Trezor is arguably the second most popular hard wallet after the Nano S. It works as a transaction signing platform and a place to store a variety of cryptocurrencies. As part of the wallet’s security detail, it uses a deterministic structure. It also allows users to encrypt their wallet with a passphrase to keep away keyloggers from reading user’s PIN-codes.
While Trezor is slightly more expensive than the Ledger Nano S, it has a huge fan base that praises its user-friendliness and secure system.
How to Secure your Coins with a Hard Wallet
Hard wallets are the safest places to store cryptocurrencies at the moment. However, sometimes you will want to trade coins. You will need some liquidity to access your coins. To ensure you can access and trade your coins without compromising on security, follow these tips:
- Store a small amount of digital assets in an offline or online app- for a cryptocurrency day trader, you may want to store a small amount of coins in a mobile wallet or web wallet. Only store an amount of coins you would be willing to lose
- Review and confirm transaction details at all times- if you tend to copy and paste addresses, confirm the details before making a transaction.
- Backup your wallet address- hard wallets allow you to back up your private keys with a recover seed. Back up the addresses accordingly.
With the right hard wallet and a backup plan in place, you can store any amount of supported cryptocurrencies in there. Some alternative wallets that do not store your assets online can also provide better security compared to online wallets. The least secure wallets are exchange-based wallets. Your private keys are held by the exchange, meaning you have very minimal control over them. Keep your hard earned cryptocurrencies safe by investing in the right wallet.