What is a Hardware Wallet and How Does it Work?

Jump to page contents

What is a Hardware Wallet and How Does it Work?

Ready to join our tribe?

We respect your email privacy

Subscribe now to recieve exclusive updates and offers!

A hardware wallet is deemed as the safest category of wallets as it stores your cryptocurrency offline, in a physical device you can carry around with you. In an industry which is increasingly plagued by malicious attacks and cyber hacks, this cold storage device can help you protect your Bitcoin and other currencies.

The Main Advantages of a Hardware Wallet

Hardware wallets store users’ private keys securely, by being offline. Keys are stored within the microcontroller of the device, and cannot be exported in plaintext. Such wallets have the distinct advantage of being rather immune to potential viruses or hacks which software or exchange wallets are considerably vulnerable to.

When you do need to connect your wallet online, in order to transfer or trade crypto, you can connect through a secure system which allows you to validate entire operations of the device. Communication is also secure and encrypted, so your private keys never come in direct contact with potentially unsafe software.

How do Hardware Wallets Work?

The different cold storage wallets on the market today operate in different ways, so the best way to explain how they work is with specific examples.

KeepKey

KeepKey is a USB-enabled device capable of storing Bitcoin, Ethereum, and over 50 other cryptocurrencies. Every transaction which goes through this hardware wallet is reviewed and accepted through a convenient display and confirmation option.

KeepKey is able to restore your private keys, using a BIP 0039 recovery seed. As a result, you don’t even need to store your private keys on the device.

Ledger Nano S

As a manufacturer specialising in crypto wallets, Ledger offers several hardware wallets. The Ledger Nano S is the precursor of the company’s latest release, the Nano X, but the Nano S is so well-designed that it remains just as popular today.

The Ledger Nano S shares a lot of features with KeepKey, although it is built upon the secure element (ST31 family) and BOLOS platform. This allows it to execute several applications independently and in isolation of each other. A secure chip protects cryptographic information, and the device comes with a 4 digit PIN lock.

The Risks of Hardware Wallets

While it is true that hardware wallets are indeed extremely safe, they still have some risks which you should know about, in order to keep your funds safe. Some of the less reputable wallets may come with certain design flaws or software bugs which make them vulnerable to unauthorised access. This is why you should always seek to purchase only the best hardware wallets.

It is also possible that hardware is switched en route to you. Secure wallets may be replaced by others without you knowing, or a back door is inserted into your actual device. If you receive a package which seems tampered with in any way you should immediately contact the product manufacturer for advice.

Recently Similar Guides

Latest Guides

Bitcoin,Casino,Cryptocurrency

What are the Traits of a Bitcoin Casino?

The massive surge in popularity of cryptocurrencies such as Bitcoin has led to the flourishing of a new wave of online casinos. Bitcoin transactions are becoming more common so it was inevitable that the gaming industry would catch on to this trend soon enough. What Differs a Crypto Casino and a Regular Casino? Up until […]

2 October, 2020
Bitcoin,Blockchain,Cryptocurrency,Decentralised

What Is A Bitcoin Fork?

Bitcoin forks are an important aspect of open sourced and decentralized technology. Bitcoin forks allow users to create new blockchain platforms based off of Bitcoin’s open sourced code, but what is the point? In this guide we explain everything about Bitcoin forks, what they are used for, and why they are important for the cryptocurrency […]

28 September, 2020
Blockchain,Cryptocurrency,Ethereum

What is VeChain?

So, What Exactly is VeChain? VeChain is a platform created using Blockchain technology and designed to improve existing supply chain management and oversight. The platform takes advantage of several elements of Distributed Ledger Technology (DLT) to facilitate the process of origin confirmation and quality mark of a particular product. VeChain is made up of two […]

26 August, 2020
Bitcoin,Crypto Mining,Cryptocurrency,Mining

Hash Rate Vs. Hash Power

Hash rate and hash power are two very important aspects of securing and verifying the transactions on a blockchain. What is the difference between the two? Why are they necessary for proof-of-work verified blockchains? We discuss this and more below. So, What is Hash Rate? Hash rate and hash power both relate to how a […]

20 August, 2020
Bitcoin,Casino,Gambling

Betting in Bitcoin

Since their inception at the turn of the millennium, online casinos have been at the forefront of technology adoption. From mobile gaming to automated verification and the use of virtual reality, the industry is constantly evolving. This is normally great news for players, as most innovation is a step towards a better, safer, fairer, and […]

20 August, 2020
Bitcoin,Casino,Cryptocurrency,Gambling

The Next Big Cryptocurrency

Will There Ever Be A New Bitcoin? Bitcoin is the first iteration of blockchain technology and cryptocurrency to ever be created, and it is also the largest cryptocurrency by market capitalization, worth over 170 billion dollars. After more than 10 years from Bitcoin’s date of inception, there is now well over 5500 unique cryptocurrencies, hundreds […]

10 August, 2020
Cryptocurrency,Trading

What is Futures Trading?

If you ever hear about fictional characters wheel and deal over futures, you must be familiar with the phrases “invest in pork bellies” or “corner the market”. The movie “Trading Places” by Eddy Murphy/Dan Akroyd climaxed over the price of a product most people forgot: frozen orange juice. How can anyone become wealthy on pre-bacon […]

5 August, 2020
Gambling,Gaming,Regulation

The Importance of Responsible Gaming

What is Responsible Gambling? Responsible gambling is one of the most important aspects of playing online as it significantly affects the way players gamble. We’ll elaborate further on this, but first things first, let’s go through what responsible gaming actually is. Not to sound too obvious, but responsible gaming is the act of gaming responsibly. […]

27 July, 2020