The security of our cryptocurrency funds is not something to be taken lightly, and that is why hardware wallets have been created. These are physical devices designed to offer the greatest possible security to our funds at all times.
When considering the security and protection of our cryptocurrencies, one of the most reliable options is Hardware Wallets. These small devices allow us to safeguard and protect our private keys in a physical device specifically designed for this purpose.
Here we will give you a comprehensive explanation of what they are, how they work, which ones exist in the market and what characteristics they have. And as an extra, we will give you some recommendations for use so that you get the most out of this wonderful technological innovation.
Hardware wallets are physical devices that operate as wallets without an Internet connection and keep private keys safely stored within them. This is what is known as Hardware Wallets, which are also part of Cold Wallets due to their cold storage condition, as they do not remain connected to the blockchain or the internet.
They are devices specially designed for this purpose, small HSM units (Security Hardware Modules, in English) with military grade security that allow the generation of private keys and that these never leave the device. Furthermore, if the device tries to be physically manipulated in order to access its private keys, it “commits suicide” by completely removing the keys.
These represent one of the safest and most comfortable options on the market when it comes to cold storing large amounts of cryptocurrencies. This is due to the fact that they protect the security of the private keys within themselves but allow them to be used comfortably, usually via USB. Most of them use a kind of security chip where keys are retained and can never be transferred outside the device.
Hardware wallet functions
Hardware wallets only have two main functions:
- Generate private keys.
- Sign with those keys a content that is sent to you.
In this way the private key never leaves the device even for a second. They usually have a screen that allows verifying what is being authorized to sign to avoid hacks by interception of the transaction.
They are compact and portable, so they can be taken anywhere or kept in a safe place. To manage your cryptocurrencies, you just have to connect them to a computer or smartphone through a USB port, enter your password and make your shipments. In the device that we are using, software is required to manage them. Then, when you disconnect the wallet, it turns off automatically.
The level of security offered by these devices is very high and reliable. The transaction validation process is carried out within the same hardware device and not on the computer or smartphone to which they are connected. So an operation can be signed without the need for the private keys to leave the device.
Hardware wallet features
- They are immune to virus and malware attacks that can infect the device and steal private keys. Therefore, they allow the storage of large amounts of cryptocurrencies safely and efficiently.
- Absolute control over the private keys, and therefore the funds, is owned by the user. Therefore, no trust in third parties is required for the management of the keys and the management of cryptocurrencies; as with online wallets or hot wallets.
- Private keys are generated randomly and without patterns through a Random Number Generator (RNG).
- Hardware wallets usually have limited means of communication, thus seeking to maximize security.
- The hardware wallet software is mostly open source. This allows the user and the community to validate how they operate and verify the security processes they implement.
- Likewise, hardware wallets allow adding extra security layers. For example PIN settings of choice or 2-factor authentication (2FA). These methods prevent a third party from using the device in the event of theft or loss.
- The keys are generated and maintained within the same hardware device. They never go to the computer. So they stay safe and secure.
- They are compatible with most of the available operating systems.
- They have a seed that allows you to restore the keys and recover the funds.
- The acquisition of hardware wallets requires a certain investment. There are devices ranging from € 50 to € 200 or more. However, considering that their acquisition is intended for the protection of large sums of money, it really is a small investment, don’t you think?
Recommendations for use for hardware wallets
- When setting up a hardware wallet for the first time, it is recommended to make a written backup of the seed or keywords. Since several of them show the seed only once.
- The seed backup should be kept in a safe and secure place. since if damage or loss occurs, it will be impossible to restore a wallet and recover its funds.
- Seed backups should never be done inside the computer or other device without first being encrypted and encrypted. Since these devices are prone to hacking and cyber theft.
- If you are going to purchase a hardware wallet, make sure you buy it from their official providers and not from markets or third parties. This because there are many possibilities of hacking, theft and scams if the necessary precautions are not taken.
Examples of hardware wallets
As we already mentioned, they are easy-to-use devices that are in the form of a USB portable hard drive. Currently there are several brands available in the market, but there are 3 important companies in the world of cybersecurity that are at the forefront in the development of these devices. Let’s see which are the most reliable and most widely used.
The first physical wallets were developed by the Trezor company, which has an excellent reputation in the field of security and information technology. Trezor wallets are physical devices that provide secure storage of private keys. It is also a deterministic wallet (HD), so it can generate an unlimited number of addresses starting from the seed.
Its system is compatible with Android, Windows, Linux and OS X, and when it is configured for the first time, it shows on the screen a seed of 24 keywords generated by an RNG without an internet connection. This guarantees that the seed will never be in another device. Thus, this device creates an ideal isolated environment for executing offline transaction signing. So it significantly reduces the chance of your private key being discovered, even if the device you connect it to is infected or compromised.
Among the versions of this company, there are: Trezor One and Trezor T. Both devices with a friendly design and a very easy and simple to use user interface that support a large number of cryptocurrencies, except for Ripple (XRP).
Another company that offers us a variety of options in terms of physical wallets is Ledger. Among his designs we find several devices such as Ledger Nano S, Ledger Nano X. There is another version, although it is no longer manufactured, which is Ledger HW.1.
An operating system called BOLOS is integrated into a security chip at the heart of their designs. This operating system is very powerful and flexible, allowing Ledger to safely run multiple open source applications in complete isolation. Ledger wallets are compatible with Windows, macOS, Linux, iOS and Android operating systems. Access to the wallet is made from the Ledger Live application, which allows control of the devices to send and receive payments whenever you want, in addition to verifying their balances.
They support around 22 cryptocurrencies and more than 1250 ERC20 tokens. For its part, like Trezor, you can configure a PIN or password of your choice, but if 3 unsuccessful attempts are made, all information within the device is erased. The generated seed contains 14 keywords, and the keys are stored in an internal chip resistant to computer attacks. Its value varies depending on the model and ranges from € 50 to approximately € 200.
The Nano S and Nano X versions are compact-sized smart cards very similar to a pendrive, which are connected via USB to the computer to manage assets.
The KeepKey company founded in 2015 created a USB device with similar characteristics to Trezor One and Ledger Nano S to store and manage their cryptocurrencies. It has quite high levels of security, and the generated private keys never leave the device. Like the previous wallets, KeepKey is protected by a PIN configured of your choice, which each time a wrong one is entered, the waiting time increases.
When configured, it emits a seed of 12 keywords, and employs a feature known as recovery encryption that scrambles and shuffles the letters of each keyword, giving you greater security and confidence. KeepKey supports over 40 cryptocurrency trading, and it must be connected with the KeepKey Chrome app to work. Its value is between € 40 and € 80 per unit.