What are crypto hardware wallets?

Cryptocurrency is becoming more mainstream as time passes. You can now not only use it for saving or investing. We’ve come such a long way that you can now purchase goods as well.

So, you have your Cryptos, and as obvious as it seems you need somewhere to store them.

In this article we will go through all the concepts that surround cryptocurrency hardware wallets, going through how their security works and some tips and recommendations when using this type of cryptocurrency wallet to store your favourite crypto.

What is a cryptocurrency hardware wallet

A cryptocurrency wallet is made up, in its most basic expression, of a key or public key and a private key.

The public key, from which the public address is derived, is used to receive cryptocurrency. If the wallet is deterministic, multiple addresses of the same key are generated. 

Regarding the private key, it is used to confirm the outgoing transactions and to be able to mobilize the funds. This means that the private keys require special care or protection, since whoever has access to them can transfer the cryptocurrencies.

How to use a hardware wallet

We already told you that a cryptocurrency hardware wallet stores the private keys, which are used to sign an outgoing transaction. Since it is a separate device, it is usually connected to the computer via USB, or in more current wallets, via Bluetooth.

The way to use it is very easy actually because if you have already used a cryptocurrency wallet before, you will not find many differences. First of all, this is because the device only stores the private keys, and serves, in part, as a 2-factor authentication device. It is only based on connecting the device, entering the corresponding app and being able to manage your cryptocurrencies.

Regarding this last point, to manage cryptocurrencies (send and receive) each cryptocurrency hardware wallet usually offers its own interface.

But it is worth noting that wallets of this type do not depend only on the interface that the manufacturer provides. Most of these are compatible with third-party wallets, such as MyEtherWallet, MetaMask , Exodus , among others. These allow wallets to be generated, but storing the corresponding private keys within the compatible hardware wallet.

This will allow you to do transactions, exchange your cryptos and even spend that well invested money on goods. Considering how crypto has expanded its horizon and the things you can do now with it you can’t miss the hype train around it.

More platforms are accepting cryptos as payment methods. From Subway to Starbucks. Although ETH casinos aren’t as widespread as gambling sites with other payment methods, such as Skrill casinos, there are some Ethereum casinos you can visit and have a blast. With the Ethereum method payment, you are not needed to provide any personal detail or credit cards. It’s easy to start with: open your wallet, search for Ethereum and select the amount and choose the casino you want between the different options.

On the other hand, once you have played and you want to withdrawal your money, you have to check if it’s possible to do it in your own casino account balance. Maybe you have to meet the wagering requirement of the bonus or provide additional information to the casino. Then, choose Ethereum as your withdrawal option and wait for the funds to be transferred to your wallet.

How is the security in a hardware wallet

The main security of each hardware wallet consists of isolating the private keys on a device that is not permanently connected to the internet. In basic terms, a USB memory would fulfil the same function, but without protecting the data that you store there. So a cryptocurrency hardware wallet is much more than a storage device.

Every record within the memory of a hardware wallet is encrypted. This means that not everyone can connect a wallet of this type and read the information stored there.

Storage and encryption processes vary by manufacturer. Wallets like Ledger or Coolcard use a system called secure element . This consists of a separate microcontroller from the main controller, which is responsible for all security-related operations, including information storage. This type of secure element system prevents information from being exposed if the main controller is compromised.

However, there are also cryptocurrency hardware wallets that use a single controller, such as Trezor or KeepKey. These manage and store information through the same microcontroller.

Another security aspect used by Bitcoin hardware wallets is through 2-factor authentication. This happens in cases like this example: when using a Trezor One it is necessary to enter a security code to unlock the wallet. The code is entered from the app with which you manage your wallet, although the number panel with the corresponding location will be displayed within the device.

Pros and Cons of hardware wallets

Here’s a table outlining the pros and cons of hardware wallets:

Pros	Cons
Enhanced Security: Offline storage greatly reduces vulnerability to hacking	Cost: Hardware wallets can incur a purchase cost
User Control: Full ownership and control over your cryptocurrency	Potential for Loss: Risk of losing your coins if you misplace the device or forget your seed phrase
Peace of Mind: Protection against online threats like malware or phishing	Less Convenient for Frequent Trading: Requires extra steps to access your crypto
Long-Term Storage: Perfect for securely holding crypto for extended periods	Learning Curve: May be slightly more complex to set up for beginners

When to Consider a Hardware Wallet

So, should you ditch your software wallet and grab a hardware wallet? It depends on how much cryptocurrency you’re holding and how seriously you take security. If you’re just dabbling in crypto with small amounts, a reputable software wallet might be fine. However, if you have a significant investment in cryptocurrency, or you plan to hold it for the long term, a hardware wallet starts to look like a very smart decision.

Think of it like this: if you have a modest amount of cash in your pocket, a regular wallet does the job. But if you’re carrying a large sum, you’d likely move it to a more secure location, like a safe. Hardware wallets are essentially the “safes” of the cryptocurrency world, giving you much greater peace of mind about the security of your assets.

Conclusion

Crypto is in everyone’s mouth these days. The community is more involved than ever. Fortunately, as with every growing community, there are companies interested in investing, technology and developing solid platforms to secure our beloved savings and investments.

Devices like crypto wallets are extremely important, given the digital nature of the currencies. Now that you are fully aware of their existence and with the basic knowledge, we shared with you of how they work, it is up to you to discover the device that suits best your investment strategy and your lifestyle.