While the cryptocurrency ecosystem keeps expanding, it is time to understand how to safely store your cryptocurrencies if you are a new investor or simply looking for a better way to manage your assets.
As the popularity of cryptocurrencies has increased multifold in the past few years, there are several new ways to manage your digital assets. While every method has its own set of pros and cons, some methods are safer and easier to use than others. However, all the ways to store cryptocurrencies can be summed up under one umbrella – a digital wallet. A digital wallet can be hardware-based or web-based, can reside inside a mobile device or a computer, or can be kept safely on paper as private keys and addresses.
The safety of these wallets depends upon the users and their ability to keep the keys private and secure. This safety is paramount as these keys are the only way to protect your digital assets from others. There are two primary categories of digital wallets – online wallets and cold wallets.
Hardware wallets come under cold wallets and store the keys for the wallets physically rather than online, which online wallets do. As keys are stored online for online wallets, they are more vulnerable. So we believe that hardware wallets are safer and more efficient in protecting and storing your digital assets. Let’s understand how.
Types of crypto wallets
Hardware wallets are one of the safest ways to store cryptocurrencies. As these wallets are not connected to the internet, the chances of your private keys being stolen are minimum. The wallets are often referred to as cold wallets or offline wallets.
In a hardware wallet, the user’s address and private keys are stored in a place that is not connected to the internet. For instance, software can be used that also works in parallel to allow the user to view their portfolio without connecting the keys to the internet. Examples include Blockchain Explorer for checking your BTC balance or Etherscan for checking your altcoins’ balance on the Ethereum network.
Ideally, using hardware wallets is one of the most secure ways to store cryptocurrencies. Another way of storing your crypto is using a paper wallet. A paper wallet is a type of wallet that anyone can generate using certain websites. You can generate private and public keys that you can print on a piece of paper. You can only access the wallet if you have that paper. Moreover, to keep it secure, it is important to laminate that paper and keep it safe without any type of damage.
A hardware wallet can also be used as a USB drive, and it can be safer as it cannot be affected by viruses, and it will never come in contact with the internet. Because of this safety feature, hardware wallets are generally preferred to be used over online wallets.
Let’s see how a hardware wallet works:
- Most hardware wallets have microcontrollers where the Internet-connected chips are separated from private key-storing chips using standard EAL 5+ chip technology.
- These devices cannot be connected to Internet-enabled devices such as mobile phones. Personal computers are fine, though.
- You can sign in and verify physically and manually while remaining offline.
- Touch screens or physical buttons allow the users to enter the PIN.
- Some of these wallets even have additional security methods such as lock pin, 2-factor authentication, biometric security, and other methods.
Let’s take a look at some of the best hardware wallets that you can use.
Ledger Nano S
Ledger Nano S is one of the best options for storing, trading, and transferring huge amounts of cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and others. It was released in 2016 and still is one of the most popular hardware wallets. It is considered to be one of the most secure hardware wallets in the industry, suitable for traders of all experiences.
The device has USB connectivity, an OLED display screen, and two primary navigation buttons. The device provides support for over 1100 cryptocurrencies and digital assets.
Trezor Model One
Trezor is a subsidiary of SatoshiLabs, popular for Model One and Model T devices. Model One was developed early in 2013 and used a Hierarchical Deterministic key and BIP32 transfer protocol to produce and back up these keys. The device has earlier been caught up in security breaches but is now one of the most trusted devices.
It supports over 1000 crypto assets and has a display screen along with two physical buttons, and does not have Bluetooth connectivity.
SafePal S1 is backed by Binance and was developed in-house at Binance Labs. It comes with a PIN and isolated private keys to make it difficult to be hacked. Released last year, SafePal S1 was designed to be more affordable than other competitors and can be synced with the SafePal mobile app.
The users can sign transactions offline using QR code scanning and an inbuilt camera. The device also has a mnemonic chip to store the mnemonic seed codes and private keys. The device is a multi-crypto hardware wallet that supports several ERC-20 compatible coins, Ethereum and Bitcoin, Binance Coin, and BEP2 tokens.
For those more security-oriented individuals, there is also an option to connect your hardware wallet with the web-based one. In this article, we explain how to connect Ledger to Metamask, for an extra layer of protection for your crypto potrfolio.
When choosing which wallet to use, have in mind what are you doing with your cryptocurrencies. If you are a daily trader, using hardware or a paper wallet every day might be time-wasting. On the other hand, if you look at your portfolio as a long-term investment, getting this kind of wallet might be worth it.
In addition, hardware wallets are preferred over online ones because of their security enhancements and the fundamental resistance to hacks and breaches.