Hardware Wallets
Hardware wallets are one of the most convenient and safest options out there for storing your cryptocurrency.
A hardware Wallets is a type of cryptocurrency wallet where you can store your private keys in a secure physical device. The cryptocurrencies stored in the wallet are kept offline, meaning that they can’t be hacked. However, when needed, the coins stored are readily available. If you are not that well-versed in coding and technical details, the hardware wallet is a great way to store the majority of your cryptos.
Before we go any further let’s take a more in-depth look into the different types of cryptocurrency wallets.
What are cryptocurrency wallets?
When we hear the word “wallet,” we often think of a pouch wherein we can store physical money. Cryptocurrencies don’t have a digital form and the way we control the flow of these coins is via our private keys and public addresses.
In a standard wallet, we can perform two functions:
- Put the money inside the wallet to store it.
- Take the money out of it to give it to someone else.
In cryptocurrencies:
- Your public address is where people can send you your crypto.
- You can unlock your crypto and use it any way you want with your private key.
A cryptocurrency wallet is a program or a device that stores your public address and private key. It can also be used to receive and spend your crypto. The wallets can be broadly divided into the following categories:
- Hot wallets.
- Cold wallets.
Hot Wallets
These are crypto wallets that are actively connected to the internet. While it is easy to transact using these wallets, they are vulnerable to hacks. Exchange wallets, mobile wallets, and desktop wallets are examples of hot wallets.
Cold Wallets
Cold wallets are crypto wallets that are not connected to the internet and hence safe from hack attempts. Paper wallets are an example of cold wallets. The idea is that if you want to store away and hold on to your cryptocurrencies safely, then you can use a cold wallet to keep them safe.
Hardware wallets combine the safety of cold wallets, along with the ease of transactions of hot wallets.
Bitcoin hardware wallet details
Hardware wallets are physical devices, which act as a flash drive and store your private keys. The device is secure enough that you can even use them with a device you don’t trust. The best things about using hardware wallets are:
- You will keep the wallet disconnected in your pocket or bag at all times. This makes sure that the wallet is off the net and cold.
- Whenever you need to send your crypto, you simply connect the wallet to a computer or a device, enter your PIN-code and send the funds. The moment the transaction is completed, you disconnect it and keep it in a safe place.
How hardware wallets secure your private keys?
The most important thing that you must remember is that the private key never leaves the hardware wallet. The entire transaction validation process is done within the hardware wallet itself and not on the computer. Traditional offline wallet clients only use the private keys from your regular hard drive or device storage. Unfortunately, what this means is that they are easily available and vulnerable to attacks. You can always store the private keys in an encrypted hard drive, but to use that you will need to decrypt it, which will instantly make your keys vulnerable.
Hardware wallets, on the other hand, don’t expose the private keys even during transactions. Here’s a brief description of how it works:
- The hardware wallet will ask the wallet software running on your computer or smartphone to provide the payment details like the requested amount and target address.
- The moment the hardware wallet receives those details, they will await user confirmation, sign the transaction, and then eventually send back a digital signature to the software. This will complete the transaction.
Exodus
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- Purchase Cost: Free
- Cloud Storage: Yes
- Cold Storage: No
We picked Exodus as best for beginners because it is free and comes with good customer support and optional support for cold storage.
Pros
- Huge variety of cryptocurrencies
- Built-in exchange
- Good customer support
Cons
- Closed source software
Exodus is a desktop and mobile wallet with a very simple user interface and an exchange built-in. One of Exodus’s most popular features is the ability to swap between a growing number of cryptocurrencies. Exodus currently allows for swaps between over 100 different cryptocurrencies.
With its simplicity, this wallet is great for beginners just getting into the crypto space. It also has great support, which is an essential feature for beginners getting into what many would consider a confusing market.
While it is great for beginners, more advanced users may find it lacking in some features. First, Exodus is a closed source wallet. This goes against the ethos of the idea of Bitcoin and blockchain and can create some security concerns as its code is not open for everyone to see. Instead, users rely on the Exodus team to ensure there are no holes in the security of its wallet.
Exodus has an option to set custom fees to keep costs down in addition to the option of automatically setting a fee that ensures the transaction completes quickly.
Best For Advanced Bitcoin Users Electrum
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- Purchase Cost: Free
- Cloud Storage: Yes
- Cold Storage: Yes
We chose Electrum because is it secure, open-source, and offers advanced features and options.
Pros
- Customizable transaction fees
- Greater level of security than most hot wallets
Cons
- Bare-bones user interface
- Only works for Bitcoin
- No customer support
Electrum is one of the original Bitcoin wallets. It has been around since 2011, two years after Bitcoin’s creation, and has changed little since. While this wallet is bare-bones in terms of its user interface and its commitment to only Bitcoin, it excels at this primary function. Electrum is also more suited for advanced users due to its complex options.
Electrum is open source, allows its users to set custom transaction fees, and has the option to choose between legacy Bitcoin and Segwit. It also offers users the ability to determine the level of security they wish to use. For example, you can create a standard wallet, one with 2-factor authentication, or a multi-signature wallet. You can also elongate your seed phrase with custom words.
Electrum is perfect for the more advanced Bitcoin holder who wants great security features and customizability all in a simple layout.
Best for Mobile Users Mycelium
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- Purchase Cost: Free
- Cloud Storage: Yes
- Cold Storage: Yes
We chose Mycelium for mobile users because it gives you more control over transaction fees and integrates with a hardware wallet.
Pros
- Customizable transaction fees
- Ability to use hardware wallets
- Open-source software
Cons
- Mobile only
- Confusing for a first-time user
Mycelium is an open-source and mobile-only Bitcoin wallet. Mycelium currently only supports Bitcoin, ETH, and ERC-20 tokens. In some ways, Mycelium is quite similar to the Electrum wallet with some of the differences being that it is mobile only, has a more refreshed user interface than Electrum, and also has a built-in exchange.
Mycelium, like Electrum, is one of the earlier wallets in the space. Also like Electrum, you can set custom transaction fees so you can choose how long you’re willing to wait for a transaction to be completed.
Mycelium also has a few more interesting features such as hardware wallet support, which allows users to hold their Bitcoin in an offline storage device while still using Mycelium’s user interface to see their holdings.
Best Hardware Wallet Ledger Nano X
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- Purchase Cost: $119
- Cloud Storage: No
- Cold Storage: Yes
We picked the Ledger Nano X because it offers secure cold storage and connects to devices with Bluetooth or USB through the Ledger desktop or mobile app.
Pros
- Ledger Live has an intuitive and convenient user interface
- Stores up to 100 different apps
- Open-source software with added benefit of customer and community support
- Convenience of Bluetooth connectivity
Cons
- Bluetooth integration a potential vector of cyber attack (USB is still an option)
- Bluetooth feature not perfected
- Limited wallet storage
In July 2020, Ledger experienced serious hacks that revealed detailed customer information including names, phone numbers, email addresses, and even home addresses in some cases. Though this does not affect people’s private keys, it has led many to question the integrity of Ledger’s internal security measures.
The Ledger Nano X is the second generation hardware wallet from Ledger, a French company launched in 2014. Ledger’s first cryptocurrency product, the Ledger Nano S, was one of the first hardware wallets on the market and dominated the space for a number of years.
The Nano X resembles a USB drive and connects to your device via USB or Bluetooth. This means that you can connect the wallet to your iOS or Android device and do not need a computer. It supports over 1,800 cryptocurrencies. This list continues to grow each year as the Bitcoin community asks for support for their favorite cryptos.
While the device itself is a cold storage hardware wallet, the Ledger team has created the Ledger Live software that provides a user interface for all your holdings. This gives users the ability to add new wallets for different cryptocurrencies to their devices and manage their portfolios. Ledger hardware wallets have been, and currently are, the most popular in the industry. The Ledger also comes with a 1 USB-C to USB-A cable so that it can be connected to either a desktop computer or a smartphone if preferred over Bluetooth.
Best For Security Trezor Model T
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- Purchase Cost: $190
- Cloud Storage: No
- Cold Storage: Yes
We chose Trezor as best for security because it comes with the strongest security features and track record of any reviewed hardware wallet.
Pros
- Web-based user interface with exchanges built-in
- Massive list of supported cryptocurrencies
- Open-source software with added benefit of customer and community support
Cons
- Higher price point than others
- Small touchscreen for typing
- Confusing for a first-time user
Trezor, like Ledger, is a name synonymous with crypto cold wallet storage. Its Model T is the second generation of hardware wallets they have created. The Trezor Model T is very much like the Ledger, but it gives the user the ability to access third-party exchanges, like Changelly and CoinSwitch, directly in its website interface. While this is quite convenient, it hardly justifies its more expensive price tag of $190.
The Model T utilizes a touch screen, which can be easier to use for beginners than the buttons their previous model used. The Trezor also has a MicroSD card slot, allowing you to use MicroSD cards to encrypt the PIN and further protect your device from attacks.
Like the Ledger Nano X, the Trezor Model T also comes with a USB Type-C cable so that you can connect to either your smartphone or desktop computer. Currently, the Trezor Model T supports more than 1,600 different cryptocurrencies. Some consider the Model T to be a bit more secure than the Ledger Nano X due to the X’s Bluetooth connectivity (although Ledger’s Bluetooth is optional).
Best Bang For Your Buck Ledger Nano S
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- Purchase Cost: $59
- Cloud Storage: No
- Cold Storage: Yes
We picked the Ledger Nano S because it offers an affordable entry point into cold storage hardware wallets.
Pros
- Access to Ledger Live
- Secure storage for a low price
- Open-source software with added benefit of customer and community support
Cons
- Max storage of three apps
- No wireless Bluetooth feature
The Ledger Nano S is the first generation hardware wallet introduced by Ledger, one of the first hardware wallets ever made. Like the Nano S is compatible with 1500+ cryptocurrencies. The Nano S does not come with a USB type-C cable, so users with more modern smartphones may have trouble connecting to their devices.
The Nano S is essentially the same as its successor, the Nano X, minus a couple of features. Both support the same list of cryptos and have access to the Ledger Live software. Unlike the Nano X, Nano S lacks Bluetooth connectivity, and it only stores up to three apps versus the 100 that can be simultaneously stored with Nano X.
The Nano S only has enough storage to make wallets for a limited number of cryptocurrencies at a time. If you were to delete an app in order to add another type of cryptocurrency, their online guide says it will not affect your assets.
The deleted wallet, and crypto within it, can still be seen in Ledger Live, but the wallet will not be seen on the Ledger device itself. This means that if you would like to send or receive to the wallet you have deleted, you may have to delete another wallet to make more room.
That said, at just $59, the Ledger Nano S is a fantastic wallet for those looking to store their cryptocurrency safely for a fair price. It is also quite easy to use with Ledger Live, making it an ideal product for a beginner looking for safe and simple storage for a handful of cryptocurrencies.
