Hardware Wallets Explained: Should you use a Hardware Wallet or not?

When it comes to cryptocurrencies, secure storage is essential. Malicious actors are prevalent in the crypto world, and they have a variety of tactics for stealing consumers’ assets. The most important thing you can do is devise a strategy for safeguarding your digital assets

You can choose from a variety of storage choices, each with its own set of security and usability trade-offs. Newcomers are most likely to stick to trades on centralized exchanges. Many people get their first taste of cryptocurrencies on these platforms which allow them to save their assets in an online wallet. However, the user does not have complete control over their assets on these platforms. They may not be able to reclaim their funds if the exchange is hacked or goes offline.

Users may not realize the benefit of removing their cryptocurrency from an exchange. They may lack the knowledge or they believe that custodial solutions are more secure. After all, if the user makes a mistake, self-custody can result in a loss of funds.

Taking charge of your cryptocurrencies like your Empire Tokens on your own can be intimidating. Hardware wallets, on the other hand, are unrivaled in terms of security.

Today, we are going to discuss hard wallets and answer these questions⁠ — What is a hardware wallet? What is the difference between software and hardware wallets?⁠ — that will help you decide the best place to store your digital assets in.

What is a crypto wallet?

A crypto wallet is a software program or physical device that stores your cryptocurrency and allows you to send and receive transactions in it. Private keys and public keys are the two key pairs that make up a crypto wallet. The address used to send crypto to the wallet is determined by the public key, which is obtained from the private key.

Private Key

Your private key is your ticket into the crypto world. It’s similar to a physical key wherein you can use this information to unlock your funds and spend them. Someone else could steal your cryptocurrency like your Empire Tokens if they get their hands on it. In a decentralized system, there is no forget password button, so if you lose the key, you lose access to your assets. You also won’t be able to call a bank to reverse a fraudulent transaction.

To summarize, private keys must be kept hidden and secure. For cryptocurrency holders, they’re quite valuable. Hackers and scammers are continually attempting to steal them, employing phishing techniques or malware to defraud consumers of their funds.

It’s simple to keep track of your keys because they’re just sequences of numbers and letters. They can be scribbled on paper and kept in a secure location. However, in order to use the keys to move money, they must be stored on a device that generates confirmation that you can spend your coins.

Hardware Wallets

The blockchain ecosystem relies heavily on hardware wallets. When working with blockchains, they give security and utility. If you don’t already have one, here are several reasons why you should.

A hardware wallet is a type of cold wallet that saves your private keys on a safe physical device. Because the private keys are kept offline at all times, they are unaffected by malicious software, unless the device is malfunctioning. Hardware wallets are more secure than hot wallets because they can sign transactions without the private keys ever leaving the device. Users’ funds are vulnerable to a wide range of assaults when they store private keys on internet-connected PCs or cellphones. Malware on these devices can identify crypto-related behavior and drain the users’ cash.

An impregnable vault with a little slot is what a hardware wallet is like. When a user wishes to produce a network-acceptable transaction, they push it through the slot. Imagine an elf doing cryptographic wizardry on the other side of the slot to sign the transaction. The elf will never exit the vault because it can’t fit through the slot and there isn’t a door. It can only receive transactions and push them out again.

Even if your hardware wallet is lost or stolen, you’ll have additional security in the form of a PIN (personal identification number). If the wrong combination is entered a specific number of times, the device will usually reset. Cold storage should be utilized for funds that aren’t being actively used, such as those that aren’t being spent, staked, lent, or traded. Even individuals with less technical understanding will find a hardware wallet to be a convenient way to accomplish this.

In the event of loss, theft, or destruction, hardware wallets must be backed up. When setting up a new device, the user is frequently asked to record their seed phrase, which is a series of phrases that can be used to retrieve cash on a different device. This allows anyone to spend their coins. Hence, one should treat it as valuable and keep it safe at all times. Users should write these down on paper (or carve them into metal) and save them somewhere secret and secure.

What sets it apart from a software wallet?

Software wallets are similar to smartphone apps that store private keys digitally. Hence, the information is stored on the internet. Most software wallets do not charge customers to keep their private keys, but they may charge a fee if they trade using the app. These wallets may be infected with malware.

Cold storage for confidential keys is provided via hardware wallets and physical devices. Since the passwords are protected by a PIN and the information is not available on the internet, they are less vulnerable to hackers.

Hardware wallets have some drawbacks

Hardware wallets, like other forms of storage, have their own set of advantages and disadvantages. While they are one of the safest ways to store cryptocurrency, they do have certain drawbacks. They provide a good mix of security and usability. Smartphone/software wallets are more convenient than hardware wallets, which can be difficult to use given that two devices must be used to actually send funds.

Even still, hardware wallets aren’t completely secure. A physical threat to a user may persuade them to open a wallet for the attacker, but there are alternative possibilities. If skilled malevolent actors acquire physical access to the device, they may be able to exploit it.

However, in a real-world scenario, no successful hack has been able to recover the private keys from a hardware device. When flaws are discovered, manufacturers usually respond quickly to patch them. That isn’t to suggest they can’t happen; researchers have proven attacks on even the most widely used wallets.

Attacks on the supply chain can also compromise the security of a hardware wallet device. When a malicious actor obtains a wallet before it is handed to the user, this happens. After the user has deposited coins, they can tamper with it to decrease security and steal cash.

Another drawback is that hardware wallets require you to take custody of your money. Many people see this as a benefit because your finances are not managed by a third party. However, this also means that there is no remedy if something goes wrong.

Conclusion

Hardware wallets’ drawbacks do not outweigh their benefits. Hardware wallets have a high level of security that is impossible to match by other storage techniques. There is simply no substitute for cold storage, which removes a significant amount of risk from fund self-custody.

When looking for a hardware wallet, users should familiarize themselves with the many solutions accessible. On the market, there are a variety of devices, each with its own set of features, supported cryptocurrencies, and learning curve.