So, should you get a CryptoCurrency Hardware Wallet?
If you’re reading this article, the chances are either, you…
- heard of cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH) and ALT coins
- own cryptocurrencies
- may be thinking of where to store them safely
In this article, I cover hardware wallets. I highly recommend them, especially if you’re a serious cryptocurrency investor.
But first things first,…
What on earth is a cryptocurrency wallet?
If you’re new to crypto, you may chance across people talking about different types of wallet and how to store their crypto: exchange wallets, hardware wallets, paper wallets etc
Question is, what are these wallets and what do each of them do?
According to Bitcoin Wiki:
A Bitcoin wallet is a collection of private keys but may also refer to client software used to manage those keys and to make transactions on the Bitcoin network.
Basically, a wallet is sort of like your bank account number. It’s means of storing your access to your cryptocurrency. Like when you have funds in your bank account and you know that the funds belong to you because you most likely created and put the funds in there.
The Two Types of Cryptocurrency Wallets
Your cryptocurrency assets can only be stored in two types of wallets:
- Online or
Online wallets are also often known as “hot wallets” because they’re fast, easy to access and easy to transfer and receive funds.
You can also use desktop wallets which are downloadable, which is sort of a half-online-half-offline kinda thing. Here’s a link to Bitcoin.org where you can find them.
However, I don’t recommend desktop wallets because you got to be a little more tech-savvy if you want to use it. If your PC crashes without backup, your money’s gone.
And even if you backed it up, the desktop wallet is usually in a PC connected to the internet, and hence, not 100% safe. (call me paranoid… but it’s my money!)
From a functional perspective, however, online wallets are good if you regularly use your cryptocurrency to make payments or trade.
Offline wallets, which are sometimes called “cold storage” wallets, are called cold storage because they are truly “offline” – you can access it only as-and-when you plug it into your PC, and synchronize it with certain web wallets.
Offline wallets are inconvenient because they are truly “offline” i.e. you need to plug them into a PC, connect them to their respective wallets and then use passwords to access your crypto assets.
Troublesome? Yes. But it increases security tremendously.
Generally, cold storage hard wallets are best if you want to ‘hide’ your crypto assets, get back to your normal life, and then come back in 1-3 years to cash out your ‘mooned’ cryptos!
For me personally, I keep my cryptos that I want to trade in online wallets, and those I’m holding (or hodling) in a hardware wallet.
Are hardware wallets really THAT important?
Now, you might be thinking… gosh, hardware wallets are so expensive! I might as well get a free online wallet that serves the same purpose.
If you think that…
In nutshell, thieves stole US$500 million because Coincheck used low-security hot wallets to store their users’ crypto assets.
Imagine you holding a big position in NEM when that happened… I don’t think you want to be that guy.
If you’re using an online wallet, hackers can also use phishing or fake websites with typo addresses to cheat you out of your crypto assets.
Check out the latest fake website masquerading as Binance.com.
See the difference?
Some people can’t!
It’s the small little dots below the letter ‘n’!
Hackers are getting smarter and smarter.
And the thing is, blockchain transactions are immutable. It means once they have been set in a block, they can no longer be changed. It is both the beauty and the curse of the blockchain.
If a smart hacker finds a way to access your crypto-assets and withdraws them to the hackers’ wallet. That’s the end for your coins. You can say bye-bye to them.
There is no one to report to. No government authority to save you. No judge to rule in your favour.
More about Hardware Wallets
So, about hardware wallets:
Again, according to Bitcoin Wiki:
A hardware wallet is a special type of wallet which stores the user’s private keys in a secure hardware device.
Accessing the Hardware Wallet
To withdraw cryptos from the Hardware Wallet, you need to access the hardware wallet using a web app. It will then send a copy of the transaction to your Hardware Wallet. You will have a manually click on the button on your Hardware Wallet before it can be approved.
This is a good thing because no matter what, hackers can’t be at your location physically to press the button.
The hardware wallet signs the copy of the transaction using your private keys and sends it back to your computer and web app – ensuring that your private keys cannot be compromised.
Is it worth it to buy a Hardware Wallet?
Yes, they do cost some money (I bought my Trezor for USD 110).
My suggestion, get them if you own crypto assets more than US$3,000.
Anything less than that, you might think it isn’t worth the trouble. But of course, if you’re intending to hold Bitcoin long term, it’s actually a very good investment.
After all, you’ll be sleeping better at night.
Summarized Advantages of a Hardware Wallet
Think about the key advantages of a hardware wallet:
1. They protect your crypto-assets from hackers by keeping them offline; your private keys separate; and requiring manual clicking verification to approve any transfers. It also keeps your crypto-assets safe from yourself, preventing you from over-trading and losing trading fees.
2. Hardware wallets can hold a lot of different cryptocurrencies at the same time, as well as have multiple wallets addresses too. This makes it easy and becomes sort of like a “safe passport to multiple wallets and currencies” – convenient and secure.
3. Software that runs on hardware wallets tends to be open-sourced so there will be much lesser chance and risk of “backdoor programmes” in these wallets as there are communities and groups watching out for software security all the time.
If you currently own crypto-assets and keep them on exchanges, do seriously consider getting a hardware wallet to protect them.
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