What Is Hardware Wallet ?
A crypto wallet is like a digital bank account. You can send, receive, and manage your crypto assets with a crypto wallet. You can do all this with a hardware wallet, but it is a physical wallet. These wallets come in different shapes and sizes. For instance, some look like a USB stick. Below is the answer to the question how does a hardware wallet work?
Within the crypto wallet, a hardware wallet is considered the safest option to store your crypto assets personally. When you use a crypto wallet, the device encrypts access to the coins. It makes it safer to store crypto than an online wallet.
With an online wallet, access to the wallet is stored online. If the site I hacked, there is a risk of losing coins. This risk is not there with a hardware wallet since the crypto is stored offline.
Hardware wallets are protected from unauthorized use with a PIN. If the hardware wallet was stolen or lost, no one could access the coins if they did not have the PIN. You can regain access to your crypto assets with a backup seed (recovery) phrase.
How to Get a Crypto Wallet
To get a crypto wallet, you have to buy it, usually from a website. Most makers of these wallets will sell them directly on their official sites or via an authorized retailer. Do not attempt to buy from a shady source at discounted prices. Such a wallet could be compromised to steal your digital assets. The top 5 crypto wallet companies are:
How to Secure Your Coins Using a Hardware Wallet
If you opt for a hardware wallet, it is the safest option possible. When you use your hardware wallet, you are storing your private keys. You can prove that you own the coins at a given address with a private key.
If you lose the wallet or it is stolen, you will still get access to your coins using a backup. The backup will consist of 12 or 24 random words generated by the wallet. These words are known as the seed phrase. The blockchain uses the first four letters of the phrase as a backup identity. You will regain access to the coins if you enter the word in the wallet.
It is advisable to write down this phrase and store it safely. The wallet will generate the words offline, which means hackers cannot access them. Ensure that you store the seed phrase offline and do not store it on a device with internet access.
The Benefits of a Hardware Wallet
Now that you understand what is a hardware wallet and how it works, what are its benefits over other types of wallets? Below are the benefits of using a hardware wallet.
When using a hardware wallet, also called a cold wallet, you are in full possession of your private key at all times. You never have to store it online, where hackers could access it. A cold wallet is thus the safest wallet out there.
Multiple Cryptocurrencies, One Wallet
A cold wallet is a convenient method to hold your crypto assets in one space. Most cold wallets have no limit on how many crypto assets you can hold in one wallet. Many of them support thousands of different coins on different chains.
If you are looking for a secure, easy method of storing your crypto assets, a cold wallet is the best option. It allows you to store your crypto without the risk of theft while at the same time being easy to access in a minute or two when you need the crypto.
A major downside of a physical wallet is that since it is physical, it can be destroyed or stolen in case of a fire or natural disaster such as a hurricane. There have been issues with some wallets, which have a backdoor that can be used to steal the crypto.
Another downside is that hardware wallets can be expensive compared to a software wallet, which is free. Some of these cold wallets come with complex features. As a result, these wallets can be tricky for first-time users to understand. Sometimes, I can even cause them to lose access to their assets.