In this article, we will tell everything about cryptocurrency wallet options and ensure that your digital funds are secured with the most applicable and matching solution.
In recent years, the cryptocurrency market became bigger and more influential. The variety of digital coins and tokens has been continually growing as well as a number of investors, miners and traders. At the same time, global cryptocurrency acceptance also gave rise to scams, thefts and hacking incidents. Since the majority of countries haven’t come up yet with an effective regulatory framework, crypto owners often have nowhere to turn in case something goes wrong.
Given that a cryptocurrency is governed by the blockchain technology rather than a particular body and is generated through a process called mining, every individual user is in charge of their own digital assets except for the cases when they pass through a crypto exchange or any other centralised entity.
What is a Bitcoin wallet?
Before trying to understand the notion of a hardware wallet, let us explore what Bitcoin wallet essentially is. At first glance, a cryptocurrency wallet is might look comparable to real-world wallets used in everyday life. At the same time, Bitcoin wallet is not necessarily a physical item. It is rather a digital tool that stores cryptographic keys, which consist of complex coded characters that are mandatory to successfully perform Bitcoin transaction. Public keys help traders to identify your wallet if they want to transact funds to a correct address. Private key is a unique access cipher that acts as a security instrument to confirm that other users cannot access cryptocurrency kept in the wallet. Thus, while public keys can be compared to user names, private keys are special passwords that must be kept in secret. When taking into account various options to safeguard virtual tokens, remember the golden investment rule: “Decentralisation puts the responsibility of hiding the key primarily on investor’s shoulders”.
Crypto wallets can be secured in various ways, some of which are:
- wallet backup;
- encryption with a intricate and difficult password;
- establishing a cold storage;
- multisig, which involves initiating a complex transaction mechanism under which 2 or 3 users are asked to approve the transaction.
Types of cold storages
As one of the forms of a cold storage mechanism, hardware wallets entail storing your cryptocurrency offline with a goal to give 100% protection and security. Below we will describe four different forms of cold storages and their fundamental components.
Paper wallets efficiently safeguards your digital tokens against attacks or computer malwares by printing the keys on a sheet of paper. Moreover, modern paper wallets also provide a Quick Response code that could be scanned and inserted into a software wallet to carry out fast transactions. Considering that the printed paper sheet keeps all necessary information required to make a transaction, its security is crucial. It is generally advisable to encrypt your device with a strong code and make a duplicate of the sheet to guarantee the maximum protection.
Sound wallets are not as spread as other popular forms of wallets, but they are also recognized as an alternative option to safeguard your cryptocurrency. The sound wallet mechanism implies placing the encrypted keys into enciphered sound devices such as vinyls, cassettes or Compact Discs. These audio items contain an encrypted code that can be revealed with the help of special devices such as optical machines or cutting-edge 3-D readers.
Deep Cold Storage
Along with the aforementioned cold storage types, the notion of deep storage also became very popular in recent years. It was developed by a UK-based startup which was originally specialising on bank security solutions and tools. Later on, this startup came up with the idea of a deep cold storage for Bitcoin wallets. Deep storages are effectively secured by an underwriter against external hacker attacks or theft. In order to ensure 100% security, this service requires a preliminary verification with ID documents, residence proof and phone numbers. Thus, it is not supported by those users who prioritize their privacy and anonymity.
Hardware wallet basics
While wallets play an important role in securing cryptocurrency, if the key you that are storing gets lost, the chances of getting your coins back are very slim. One possible solution to this serious dilemma is considering a hardware wallet. Due to its numerous security characteristics and tools, hardware wallets are often considered more protected than a software wallet. Hardware wallet is a type of a cold storage that keeps cryptocurrency offline and does not interact with computer or Internet if you do not need to use it. Keeping your digital funds offline considerably reduces the possibility of external threats and viruses. Hackers can not steal digital funds from your cryptocurrency hardware wallet if it is mainly offline. While software wallets can be vulnerable to malware or attacks, hardware wallets can go online when users want to trade or perform any other operation and then be turned offline to ensure portability and great security.
Choosing a credible hardware wallet that has a great value is a huge responsibility which often requires a lot of reading and experimentation. When considering different options, think about the following factors that good hardware walles must have:
- security features
- user-friendly design
- supported cryptocurrency
- guidelines on how to approach your digital funds
- price and money that you are ready to spend
Hardware wallet types
Hardware wallets are material USB devices that are developed with a goal to safely store your encrypted keys. These items can be located in a special storage repository or deposit container to make sure that criminals and scammers can not approach and manage your private keys. These USB-shaped gadgets are becoming a popular alternative to secure your cryptocurrency in an disconnected regime. Hardware wallets are normally sealed and impermeable and allow multisig transactions. They have a user-friendly design and are perfect for storing Bitcoins as well as alternative altcoins from your investment portfolio. Hardware wallets also provide an innovative backup function, micro storage and a QR code. The most popular and trustworthy hardware wallets are listed below.
It might be harder to enable backup or encryption for your hardware wallet because it can be more problematic for traders to access their funds. Thus, a lot of crypto investors use both cold and hot storages, because the latter is more appropriate for regular spending. Utilizing a hardware wallet for long-term investments and a hot wallet for frequent operations is a smart strategy which eliminates the need to extract tokens from the hardware device every time you need to make a transaction or open a position. Thus, it is important to pick the wallet that suits your investment goals and risk attitude. Think about what kind of strategy (long-term, HODL, Buy the Dip) you are following, because it will ultimately determine the kind of wallet or device advisable for you. “Splitting strategy” is usually recommended by exchanges, such as Godex.io, that encourage frequent cryptocurrency trading, because they process a huge number of transactions and are often most exposed to hacking attacks. To secure cryptocurrency investments in case the security is under threat, such platforms often encourage their customers to keep their virtual coins in a cold storage.
Ledger Nano is a USB-designed gadget that can store more than 700 digital coins, from the top-rated ones like Bitcoin and Ethereum to the less recognized assets. This wallet USB has great security characteristics that safeguards your cryptocurrency from different external risks.
KeepKey is a USB-shaped hardware device that provides excellent security tools and components. The wallet works with all prestigious cryptocurrencies in addition to 50 ERC-20 standard coins. KeepKey also provides a straightforward backup tools, which produce a recovery phrase that can be used to regain your private keys in case something happens to your KeepKey.
Trezor Nano X
Trezor Nano X is a special device that works with more than a 900 tokens and crypto such as Bitcoin Cash, Litecoin, Ethereum and many others. With an understandable design and various useful components, the wallet also provides a supplementary security level that protects your keys from third parties and only allows access to authorised users. Thus, Trezor guarantees maximum crypto security and effectively preserves your digital tokens.
Trezor Model T
Trezor Model T has entered the market in 2019 and works with a great variety of virtual currencies plus all ERC20 standard tokens. Model T offers a user-friendly touchscreen, advanced transaction authentication tools, Personal Identification Number, PIN blockage and other features that focus on security and excellent functionality.
BitBox is an innovative form of a cold storage designed as a USB gadget that gives its customers the maximum control over their virtual coins. It supports numerous coins, such as Bitcoin, Litecoin, and many others. This USB device provides cutting-edge security components against theft and malware threats. In addition, BitBox has invisible microscopic sensors which enable users to perform a transaction or enter password with 3 easy gestures – hold, tap or slide.
To sum up
With hundreds of different crypto hardware wallets that can be found on the modern market, embracing the most trustworthy hardware wallet is not an easy task. Investors are liable for securing their cryptocurrencies and picking the most trustworthy wallet to keep them. Make sure that you consider all available options and make a conscious choice based on your profile, goals, strategies and preferences.