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Why You Need a Hardware Wallet

Why You Need a Hardware Wallet

Both newcomers and veteran investors of cryptocurrencies must decide on a wallet to properly secure their precious digital assets. There have been many cases where crypto investors have lost all their coins from a hack. Fortunately, devices known as hardware wallets offer crypto investors a highly secure and convenient way to store and spend cryptocurrencies. The currently most used hardware wallets are USB devices that are manufactured from European companies Trezor and Ledger. These companies’ newest models sell for about $100 or $180 USD. For security reasons, you should only buy from an authorized reseller or directly from the company. To date, there are no known instances of customers having their private key and funds stolen from these hardware wallets.

Other types of wallets such as online web based wallets and software wallets are susceptible to hacks. The value of cryptocurrency is stored in the form of transactions on the block chain, so the private key is what actual gets stored in wallets. With online wallets the private key is stored in the cloud. This method puts your holdings at risk as you rely purely on the hosts security measures to protect you from remote hackers. Software wallets that can be downloaded on your mobile device and pc are preferable to online wallets, but still vulnerable to attacks. If your pc or mobile device has viruses on it, your holdings could be compromised by malicious programs that record your keystrokes or hijack the address you are sending your funds to. Paper wallets are secure, but in order to use your funds you need to import your private keys to a computer. Hardware wallets are completely offline and they maintain their security while also allowing you to easily perform transactions.

Wallets produced by Trezor and Ledger plug into your computer and you can send and receive funds using the companies’ free apps. These hardware wallets provide their high level of security by using a micro processer within the device that is specifically designed to securely hold private keys and sign transactions.  The actual private keys that unlock your funds never touch your computer. Therefore, even if you plug in your device to a computer compromised with viruses, the security of your keys and funds will be maintained. There is a display on the device that visually confirms the address your coins are being sent to and the amount. This protects you from malware attacks that change the destination address.

Hardware wallets also allow you to easily recover your assets in the event that your physical device is lost or stolen. When you first get your wallet, a 12, 18 or 24-word seed will be generated that represents your private key. This list of words should be written down and stored in a safe location. As long as the list of words is backed up on paper, you can enter it into any compatible software or hardware wallet and recover your assets. Even if your device were to fall into the hands of a third party, a PIN number will prevent them from accessing your funds. For an additional layer of security there is an advanced passphrase option. This allows you to have one main account and one or more hidden accounts from the same wallet, with the same word seed. In a scenario where a robber gets hold of your PIN number they would only have access to the account with a small amount of assets and not your hidden accounts were the bulk of your savings are stored.

If you decide that you want to invest in the top-notch security that a hardware wallet offers, you need to first check that your coins are supported by the specific wallet. The Ledger Nano S and the Trezor One and Trezor Model T support the major coins such as Bitcoin, Ethereum, Zcash, Dash all the ERC20 tokens and many more prominent alt-coins. Both Ledger and Trezor are continuously updating their devices to support more coins.

All of the advantages of hardware wallets make owning the device a must for every serious investor of cryptocurrency. The price of $100.00 - $200.00 USD is well worth it to give your cryptocurrency the best security available.

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