Bitcoin Hardware Wallets Full Guide
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With the puff for cryptocurrency increasing day in day out, everyone is determined to have a bite of the crypto cake. But then, as more and more people join this space, new frauds pop up, exposing the crypto world to risks and instability. Whether it is an attempt to steal private keys, fake digital currency schemes, or even counterfeit wallets to rip off users, there is always something to be on the lookout for. Staying safe, therefore, when holding, buying, or trading cryptocurrencies is now of paramount importance than ever before.
One of the most effective ways to protect your coins is to store them in a Bitcoin hardware wallet. This must be something that is not connected to the internet, like a USB flash drive. The main objective here is to store your currency and private keys locally to minimize chances of infiltration from hackers.
What are Bitcoin hardware wallets?
Bitcoin hardware wallets are physical electronic devices developed specifically for securing Bitcoins and preventing hackers from getting a hold of them.
These wallets provide a secure, reliable, and convenient Bitcoin storage by keeping all your private keys in an invulnerable offline environment. This ensures that your coins are fully protected even when the device is connected to an infected computer, tablet, or phone.
Bitcoin hardware wallets are different from their counterpart software wallets in that the latter run only on devices that have an internet connection. And since the private keys are generated and stored online, software wallets are considered less secure.
Why are Bitcoin wallets the best storage option?
- They keep your coins offline: All cryptocurrencies are digital, which means they could be an easy target for cybercriminals. And Bitcoin being one of these currencies doesn’t make it less prone to such attacks. Hackers could possibly plan a hit on your software wallet by accessing your online private keys and steal your coins. But having this information generated and stored offline adds more security to your coins as there is no way hackers can get hold of your wallet.
- Bitcoin hardware wallets use a two-factor authentication (2FA): Most BTC hardware wallets come with a physical button that users need to push to confirm transactions. For instance, let’s say you want to send some Bitcoins. First, you need to connect the hardware device to a computer. Once plugged in, open the company specific app and key in the number of coins you wish to send. Now, when you click the send button on the app, a copy of that transaction is sent to the hardware device, prompting you to push the button on your device to confirm the transaction. 2FA adds more security to your Bitcoin as no one can hack into your system and send payments without your confirmation.
- You are the only person who can access the Bitcoin hardware wallet: No one can reach your Bitcoin wallet unless they physically steal the hardware device. And even then, there is nothing much they can do with the device as it is usually protected with a strong pin code, which only you, (the owner) can produce.
Best bitcoin hardware wallets
Hardware wallets are the most viable option for storing your Bitcoin as far as safety is concerned. Yes, they cost money but then the security these devices provide to your coins surpasses that of software wallets by far.
Here is a breakdown of the most widely used Bitcoin hardware wallets to help you find the best storage for your Bitcoins.
Ledger Nano S is one of the most reputed hardware wallet designed for users looking for the cheapest and most secure way to store cryptocurrencies. Ledger, the French company behind this product, launched it in 2016 to give investors a reliable option for storing their digital currencies safely offline. Other than Bitcoin, the hardware wallet supports a wide variety of altcoins, which makes it the best cold storage option for people who invest in multiple currencies.
Ledger Nano S is designed just like the normal flash drive. You need to connect it to a computer to manage transactions. The device comes with two physical buttons for security purposes. Users are required to push these buttons simultaneously to confirm transactions. Additionally, Ledger Nano S provides you with a 24-word phrase that lets you create backups and recover your wallet in the event your device is broken, lost, or stolen. Currently, the Nano S costs €79, (that’s about $94), which makes it the best Bitcoin hardware wallet for people on a budget.
This bitcoin hardware wallet is yet another popular cold storage that has pioneered the Bitcoin wallets market. Created by SatoshiLabs, Trezor began its operations in 2014 with the sole purpose of signing crypto transactions offline and storing private keys safely. It was the very first Bitcoin hardware wallet to incorporate secure offline storage with the convenience of software wallets. This wallet can be used with several Android apps such as Trezor Wallet, Multibit HD, and Mycelium, and provides support for several other currencies apart from Bitcoin.
Trezor resembles a small, key-sized calculator. It comes with a USB cable through which users connect the device to the computer. Just like the Nano S, Trezor provides a 24-word recovery seed to recreate your wallet in case you damage or lose your device. The hardware wallet also has two buttons that users need to press physically to confirm or decline a transaction. The price of Trezor is currently at € 89, (about $106).
Another secure way to store your Bitcoins is through CoolWallet. This one was launched in 2014 as an Indiegogo campaign to provide secure and elegant offline storage for Bitcoins.
Unlike Nano S, Trezor, CoolWallet resembles the basic credit card and connects to a computer through Bluetooth or NFC technology. The “card” comes with a control button that one needs to click to confirm transactions. CoolWallet provides both a number and word seed phrase that allows you to backup and restore your wallet.
The company has not gained enough reputation yet and many investors are not sure if this is the right wallet for their coins. Its price currently stands at $119.
KeepKey is also another Bitcoin hardware wallet renowned for its beautiful interface but somewhat large design. Launched in 2015 in Washington, KeepKey works just like any other hardware wallet. For instance, it has a recovery seed that helps you recover your wallet details and a confirmation button to manually approve transactions.
Transactions are signed in the device and sent to the Bitcoin network through the connected computer. Though the company hasn’t built much reputation within the crypto community KeepKey is still doing great in terms of ensuring a secure crypto storage. The current price of the device is at $129. The high cost could be attributed to its metallic body, digital screen, and top-level security.
What are the risks of keeping Bitcoins online?
When it comes to choosing a wallet for your Bitcoins, the security of your coins is of paramount importance. Your wallet should be able to protect your money from theft or any hacking attempts. Many people opt for online wallets because most of them are free. What they don’t know is that hot storage poses real risks to their money and they could possibly lose all their Bitcoin…All of it!
For instance, let’s say you store your Bitcoins in a mobile wallet. Now, all your private keys information is stored in the app or mobile device you are using. If you happen to lose your device without having set a pin for your wallet, it would be easy for the “thief” to gain access to your private keys and steal all your Bitcoins. Also, with online wallets flooding the market today, there are many counterfeit products and a Bitcoin investor may be lured into choosing buggy software. Such programs can be cracked, exploited, and all private keys extracted. Such hacks have happened to Coinbase before and it is not guaranteed that they wouldn’t happen to other web storages.
Additionally, with online wallets, IP addresses can be traced and data packets analyzed. This leaves enough digital footprints for hackers to target your Bitcoins. To avoid finding yourself in any of these situations, it is important that you get yourself a Bitcoin hardware wallet. The Ledger Nano S, Trezor, and KeepKey could be a great place to get started.
These wallets store your private keys offline and come with USB On-The-Go cables that allow you to connect to your computer safely. Also, the fact that they operate offline makes them less prone to hackers.
But what if my Bitcoin hardware wallet is lost or stolen?
You don’t have to worry if your hardware device gets lost, stolen or damaged. Most Bitcoin hardware wallets provide a secret backup code so that you can always recover your coins. The backup cipher is usually in form of a long word phrase that one needs to write down and store in a safe place. This key phrase is generated automatically when setting up the device.
Most Bitcoin Hardware wallets provide users with a sheet of paper where they should write down their recovery phrase. Most key phrases are usually between 12 to 24 words.
To create a backup of your wallet you need to jot down all the words correctly as this is what you will use to reset your wallet information if your hardware device is lost. A recovery seed is as important as the Bitcoins you store in your wallet. Therefore, you should not share it with anyone. If someone with ill intentions gets hold of this seed, they could sweep your entire wallet clean.
While at it, it is highly advisable to make at least two copies of your key phrase and keep them in different locations. Also, you shouldn’t be tempted to take a picture of your seed phrase with your cell phone just because you feel like writing it down is a daunting task. If your phone is internet connected, it can be hacked and storing your recovery phrase in it puts your entire wallet at risk of being targeted by hackers.
In a nutshell
Using Bitcoin hardware wallets is an effective way to ensure that your coins are secure. With your private keys stored offline, any hacking attempt would bear no fruits.
Even though a bitcoin hardware wallet would cost you money, parting with $100-$150 would be much better than having to deal with the pain of losing lots of Bitcoins to hackers just because you trusted an online wallet. We don’t intend to rule out hot wallets but then, these forms of storage are the easiest targets for spammers, phishers, and all kinds of viruses.
A bitcoin hardware wallet is immune to viruses but that online wallet is not. If your computer happens to download a malware today, your software wallet would be vulnerable to the virus just like any other app on your PC. This would expose your private keys, putting your coins at risk.
Getting a bitcoin hardware wallet ensures that your Bitcoin is always secured, as you will always have your private keys hidden from the world even when you are connected to the internet.
Thank you for reading. We will keep updating you on hardware wallets and other topics regarding cryptocurrencies. Don’t forget to check out our website for related posts.