Read on for the top benefits of cryptocurrency hardware wallets.
A hardware wallet is a device that stores private keys for you. This means that you don’t have to worry about losing them or having them stolen. The only way to access your funds is through the device itself.
Hardware wallets are designed to store your private keys offline. They are usually connected to your computer via USB and can be accessed using a PIN code.
In real terms, crypto wallets do not actually store cryptocurrencies. What happens is that they store your digital codes, public and private keys that have links to your cryptocurrencies. These codes and keys are needed to access your cryptocurrencies.
There are different types of crypto wallets available and they can be grouped into three categories which are software, hardware, and paper wallets. Considering the high value of top cryptocurrencies, it is vital to make use of a wallet that assures security; you do not want to lose your money because of wallet breaching.
There are very secure software, hardware, and paper wallets available but in the crypto world, hardware wallets are the most secure and safest. If you want to know why read below to out what benefits you gain from using a hardware wallet.
What Is A Hardware Wallet?
From the word “hardware”, you know we are talking about something physical. A hardware wallet is an electronic device that looks just like a flash drive. They are connected to PCs via USB ports but unlike flash drives, they do not store your documents and files. What they store are private keys.
Private keys are the most important keys for accessing cryptocurrencies and these keys can be stored securely in hardware wallets. They store these keys offline as they are not connected to the internet, they do not need the internet at all. You need a user PIN ( or multiple PINs ) to access these wallets.
On crypto hardware wallets, you would find featured a LED screen and buttons. These features make them easy to use. The buttons are for controls while the LED screen displays the results of transactions and executed operations. You will have to confirm the Crypto transactions manually when you make use of a hardware wallet.
These hardware wallets usually require the installation of wallet software on your PC; this software is provided by the manufacturer. The majority of them are compatible with the major desktop OS; Windows, macOS, and Linux.
There are many crypto hardware wallets available, most used ones include Ledger Nano S, Trezor, and KeepKey.
Read Also; Blockchain 101: Beginner’s Guide to Cryptocurrency
How Does Crypto Wallet Work?
As stated earlier, crypto wallets do not really contain cryptocurrencies. They rather contain the public and private keys needed to access them and for hardware wallets, these keys are what they hold. The primary function of a crypto wallet is to send and receive cryptocurrencies.
As to how hardware wallets work, they work just like any other wallet when it comes to sending and receiving cryptocurrency. However, due to them being hardware devices, their functionality is a bit technical.
These hardware wallets generate a seed number when you turn them on for the first time. Usually, these keys are 128-bit or 256-bit signatures and they are for calculating the entropy of a particular amount of words – usually 24. These will then display on the device’s screen.
These words should be written down by the device owner and stored in a safe place as they are essential for data recovery. After that, the user will be required to create a PIN of 4 to 8 digits. This PIN is very important for the device to work.
For most hardware wallets, if you input the PIN wrongly for 3 consecutive times, they self-destruct and all data they contain are lost.
With that, let’s look at what benefits are there when hardware wallets are used to store cryptocurrencies.
4 Benefits Of Cryptocurrency Hardware Wallets
There are several benefits of using cryptocurrency hardware wallets but right now, the top 4 benefits will be discussed;
Private Keys remain unexposed
Security remains the number one priority when dealing with cryptocurrencies and there is no better way to stay secure than to protect your private keys. If another person knows your private keys, they can access the coins in your wallet.
Cryptocurrency wallet hacks usually occur on the internet. Hackers have been able to hack the wallets of many crypto users because they managed to access their private keys. This is because the private keys are stored on the web (software wallet users).
In this aspect, hardware wallets offer a major benefit to those who make use of them. They ensure that your private keys remain unexposed. Hardware wallets store your private keys offline; off the internet so there is no way a hacker can access them.
If you are going to enter your private key anywhere, it would be just in your hardware device. Not on any computer or website.
PIN Encryption increases security
Still on security; hardware wallets make use of PIN as earlier mentioned which increases wallet security. The only way to access your wallet is if you enter the PIN correctly. Only you – the wallet owner – should be knowledgeable about the PIN digits.
As stated before, most hardware wallets will self-destruct when one enters the PIN wrongly for a 3rd consecutive time. Self-destruction implies that the private keys and public keys will be deleted.
This takes security to a different level as it ensures 100% safety of your funds. If a hacker steals your hardware wallet or it gets lost; you won’t have to worry much as it will self-destruct if the person with it tries to guess your PIN.
Self-destruction does not mean that you have lost access to your wallet and the coins in it. You can easily recover your private keys by getting another hardware wallet – it should be the same wallet provider.
You will have data restoration once you enter the words for data recovery on your new device.
Hold multiple Cryptocurrencies
Due to the increasing number of cryptocurrencies, there is a need for wallets that can hold more than one particular cryptocurrency. Traditionally, crypto wallets hold just a particular cryptocurrency and with different wallet addresses.
For instance, if you want to invest in Bitcoin, Ethereum, and Litecoin, you would need to create 3 different wallets where they can be stored respectively. This can make them very difficult to manage.
With a hardware wallet such as Ledger Nano S, KeepKey, or Trezor, you can store multi-cryptocurrencies without the need of purchasing a new device. This is a very interesting benefit of these hardware wallets; they let you manage your cryptocurrencies with convenience.
Some software wallets like Magnum and Exodus can hold multi-cryptocurrencies but are not as efficient as hardware wallets. When talking about crypto wallets that can hold multiple cryptocurrencies, hardware wallets always come out on top.
Immune to Computer Viruses
Most hardware wallets and malware are virus-proof, they cannot be affected by them. Crypto wallets are vulnerable to malware and virus now and then. Therefore, if you want to be safe from these viruses and malware, you should use a hardware wallet.
Not long ago, the InnfiRAT Trojan virus was discovered. According to reports, this virus is capable of stealing information from browser sessions. They can invade your computer or any device you use to access your software wallet and steal your wallet data.
It is a very dangerous virus and as you would expect it is launched by hackers and other cybercriminals. When the virus steals your wallet data, it sends them to these cybercriminals who can do away with all your coins.
Unlike software wallets, hardware wallets are not online so there is no way they have contamination with InnfiRAT or any other system malware or virus.
If you want top-notch security for your cryptocurrencies; then you should be making use of a hardware wallet. This is one of the many benefits of using cryptocurrency hardware wallets. It also offers several benefits that include security, convenience, and overall functionality.
However, you should note that you can achieve this by using a reliable hardware wallet. Not all wallet providers offer reliable hosting and you might end up losing your coins instead of securing them.
The current top hardware wallets in the crypto industry are Ledger Nano S, Trezor, and Keepkey. They are useful hardware wallets you can use with good reccomdation.