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What are the best hardware wallets?

What are the best hardware wallets?

05 Nov, 2020

Anyone who deals with cryptocurrencies is often confronted with the question of how to store them safely. Many types of cryptocurrency wallets differ in security and ease-of-use. One of the safest methods of storing Bitcoin and other cryptos is hardware wallets.

What is a cryptocurrency wallet?

The term "cryptocurrency wallet" refers to a programme, online service or device that makes it possible to receive, store and send cryptocurrency. At its very core, a cryptocurrency wallet is a combination of so-called public and private keys. Unlike traditional wallets, cryptocurrency wallets don't store any currency in them. Since cryptocurrencies only exist in digital form, they're stored as records on the blockchain, while the wallet programme contains a private key that allows users to control the cryptocurrency belonging to a specific public address.

Public and private keys

Public and private keys are extremely important concepts in the world of cryptocurrencies. A public key is a non-secret code string paired with a corresponding secret private key to send transactions. The public key is calculated as the value of some function of the private key. However, knowing a public key doesn't make it possible to calculate the private key. On the Bitcoin network, the public key is a Bitcoin address.

A private key is a secret code string used to access a cryptocurrency wallet. It's a kind of password for the wallet. With a known private key, the public key can be easily computed.

By way of analogy, the blockchain is a bank, a public key is a bank account number, and a private key is the password to it.

A Bitcoin address in an Exodus software wallet
A Bitcoin address in an Exodus software wallet

Types of crypto wallets

Among the variety of cryptocurrency wallets, there's something for everyone. There's no "one size fits all" wallet because they differ in many ways. The primary way is security and ease-of-use. Generally speaking, the more convenient a wallet is, the less secure it is, and vice versa. These types of crypto wallets are listed in ascending order of security:

  • Account wallets
  • Online wallets
  • Software wallets
  • Hardware wallets
  • Paper wallets

Cold wallets

Cold wallets are crypto wallets that are not connected to the Internet for most of the time. An Internet connection is only necessary to make a transaction. Hacking these wallets is much more difficult, which makes them more secure than hot wallets. Cold wallets include hardware, paper wallets, and software wallets installed on computers that are not connected to the Internet.

Hot wallets

Hot wallets are crypto wallets that are mostly online. They're less secure and much easier to hack than cold ones, but also more convenient to use. Hot wallets include online, account and software versions.

What is a crypto hardware wallet?

A hardware wallet is a physical, electronic device that stores your private key. It often looks like a USB flash drive and is connected to a PC via a USB port. It's a small, straightforward computer whose sole purpose is to store private keys and sign transactions. The simplicity of its design is its additional layer of protection: even when it's connected to a PC infected with a virus or other malware, it's not susceptible to viruses.

Advantages and disadvantages of hardware wallets

Advantages

Disadvantages

One of the most secure ways to store cryptocurrencies

They cost money

The ability to store many different cryptocurrencies on one device

They're less convenient to use than hot wallets

 

Risk of loss, theft or destruction of the device

How does a hardware wallet work?

  1. To make a transaction using a hardware wallet, you first need to connect it to a PC with Internet access.
  2. Download and install a special programme that will act as an intermediary between the blockchain and the wallet.
  3. You create a transaction, and the intermediary programme sends it to the wallet for signature.
  4. You confirm the transaction using the device.
  5. The signed transaction is sent back to the intermediary programme and then transferred to the blockchain.
  6. You can disconnect your wallet until next time.

Cold storage vs hardware wallet

Many people are confused by the difference between hardware wallets and cold storage. Cold storage is any storage of a private key on an offline medium, be it a device or paper. As such, hardware wallets are a type of cold storage.

Among cold storage methods, hardware wallets are an excellent option because they combine high security with relative ease-of-use.

Can a hardware wallet be hacked?

Hardware wallets are specifically designed to keep private keys as secure as possible. They provide excellent protection to their owners' funds from viruses, malware, hacks and other digital threats.

However, even hardware wallets aren't entirely secure. One of the most likely threats is the insertion of malware into the wallet's design. The essential security rule when purchasing a wallet is to buy a wallet made only by a trusted manufacturer and never buy it on eBay or from third parties.

Another possible threat is that criminals can steal your hardware wallet and force you to tell them the PIN code.

The best hardware wallet

There are about 20 different models of crypto hardware wallets on the market. Let's take a look at the best ones.

Ledger Nano X

The Ledger Nano X hardware wallet is the latest product from Ledger, a French company, one of the most reputable manufacturers of hardware wallets. For now, it's one of the best hardware wallets for Ethereum, Bitcoin and many other cryptocurrencies. It supports over 1,500 coins and allows you to install up to 100 cryptocurrency apps simultaneously. It's also integrated into other services, such as Bitstamp, MyEtherWallet and Mycelium.

Another innovation in this hardware wallet is the addition of Bluetooth, which allows you to connect to the network via your smartphone. Perhaps the only downside of this wallet is its $119 price tag.

Ledger Nano X

Ledger Nano S

This hardware wallet model is the predecessor of the Ledger Nano X. The first independently certified hardware wallet, it supports over 1,100 cryptocurrencies. For now, it's probably the most popular crypto hardware wallet. Its ease-of-use and affordable price ($59) make it one of the best cheap hardware wallets.

Ledger Nano S

Trezor T

The Trezor Model T is a second-generation cryptocurrency hardware wallet made by SatoshiLabs, the company that created the first legitimate Bitcoin hardware wallet. The new model comes with a large colour touchscreen and is easy to set up and operate. It supports more than 1,000 cryptocurrencies and many services, including Mycelium, MyEtherWallet, Bitstamp and Electrum. However, its $170 price tag makes it one of the most expensive hardware wallets around.

Trezor T

BitBox 02

The BitBox 02 hardware wallet is manufactured by the Swiss company Shift Crypto. It has two editions: one edition supports Bitcoin, Litecoin Ethereum and all ERC-20 tokens. The other is supports Bitcoin for added security. It's probably one of the best Bitcoin-only hardware wallets. The device has its own display controlled via invisible touch sensors for verifying transactions and entering passwords. The wallet costs $110.

BitBox 02

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