Invigorating your interest in finance, technology, and design in the new, global economy.

Why You Need a Hardware Wallet

Ok, so you have some Bitcoin. Your buddy finally convinced you to sign up for Coinbase and take the plunge. Your past few days have been consumed with reading about the incredible new world of finance cryptocurrency will lead to, spending hours on /r/bitcoin, and telling everyone you know why they need to get in now. What about the security of your coins though? What if yet another hard-fork happens and Coinbase or your exchange of choice decides they’re not about it? You need to control your private keys and a hardware wallet is the best way to do it.

First, what even is a hardware wallet? According to Bitcoin Wiki:

hardware wallet is a special type of bitcoin wallet which stores the user’s private keys in a secure hardware device.

You might have thought that keeping your coins on Coinbase was the safest bet. They have 2FA after all, and you read somewhere that their coins are FDIC insured. That’s great, but the beauty of Bitcoin and crypto in general is that you can eliminate the need for a bank or bank-like institution entirely. You can do this in multiple ways, whether it be printing out a paper wallet on Bitaddress and keeping a copy in your sock drawer. But what if a fire happens or a snooping little sister decides your QR code would make a good base for her newest drawing? You could even take things to the next step and get something more secure like Cryptosteel. Their products are great for things like cold storage and offer an unprecedented level of physical security. There are, however, more convenient options for cold storage and for those of you who have taken the voyage into the world of altcoins. These options interact with software wallets but don’t require that you store your keys on a vulnerable computer.

By keeping your keys stored on the secure element inside a hardware wallet, you have the freedom to connect to a computer without worrying about whether you can trust it. The computer can be infested with malware, but it won’t be able to access your private keys. Plus, if the computer you regularly use to send cryptocurrency dies, your keys are still safely stored on your hardware wallet and can be brought onto a new device.

There are, of course, some caveats to using a hardware wallet that make it slightly less convenient than just storing coins on your phone. You’ll still need to have a backup of your recovery phrase, preferably in multiple locations, in case your wallet is stolen or breaks. However, a stolen wallet will be locked with a password and will be useless to any potential thief. You’ll be able to recover your coins on any device or import them into a new hardware wallet. Another caveat is that you’ll need to plug in your wallet any time you want to access the crypto stored on it. The best way to alleviate this is to keep a small amount of spending money in a hot wallet/software wallet on your phone or other device and keep your savings on the hardware wallet. Finally, hardware wallets cost money, so you’ll have to fork out anywhere from around $25-150 to get one. This is a small price to pay for the security you gain though.

Below I’ve provided details regarding some of the best starter wallets for you to play with. There are more advanced options like the Ledger Blue for users who require more features, but all of these offer about the same level of security.

Ledger is my personal favorite when it comes to hardware wallets. I have the limited edition Electrum HW.1 pictured at the top of this article, and despite taking a beating it still works great. My next purchase will be the Ledger Nano S.

 

The Nano S is great because it offers multi-currency support, meaning not only can you store your bitcoins, but you can also store: Ark, Bitcoin Cash, Dash, Dogecoin, Ethereum, Ethereum Classic, Komodo, Litecoin, PoSW, Ripple, Stratis, ZCash, and ERC20 tokens like Augur through the MyEtherWallet app. As the software is being continually updated, more coins will be supported in the future. You can see the Ledger team’s development road map here. It also boasts a small screen, a tiny form factor, physical buttons for confirming transactions, and support for other apps like FIDO authentication and GPG. The Nano S goes for around $95.

Trezor, arguably the biggest name in hardware wallets, created the first dedicated hardware wallet for Bitcoin after the idea manifested with people using a modified Raspberry Pi to store their crypto offline. Right now, you can only buy the original model, but a new Model T is coming out in January 2018 and is available for pre-order.

Like Ledger, you can store multiple cryptocurrencies on the Trezor including: Bitcoin, Dash, Dogecoin, Ethereum, any ERC20 token like Augur or BAT, Ethereum Classic, Litecoin, Namecoin, and ZCash. This wallet also offers the app support and various integrations including FIDO, GPG, a password manager, and password-less login. It also boasts a larger screen than the Ledger Nano S and physical buttons for authentication. The form factor is a little bit larger on this device, but what it lacks in compactness it makes up for with a huge developer community. A Trezor will run you about $87 depending on the color you choose.

KeepKey has made one of the sleekest looking hardware wallets currently available. They’re a newer player to the hardware wallet space and don’t have quite as many integrations as Ledger or Trezor. However, what they lack in functionality, they make up for with simplicity of use.

The KeepKey can secure multiple currencies including: Bitcoin, Dash, Dogecoin, Ethereum, Litecoin, and Namecoin. It also offers the unique functionality of allowing you to Shapeshift your assets on-device. As the developers continue to work on the wallet, they will likely add more integrations for advanced users. If you want to purchase a KeepKey today, you’ll be spending $129.

With cryptocurrency being such a new space, we’ll likely be seeing a whole slew of new hardware wallets coming out in the next few years. Already, some interesting contenders are set to release their products in the coming months like CoolWallet with their credit card sized device. Still, if you already own cryptocurrency, it’s better to purchase a wallet with an established reputation for great security today than to wait for the next best thing and risk having your assets stolen. The beauty of firmware updates means that all three of the wallets detailed in this article will be gaining functionality as time goes on. While the debate over whether it’s morally right to have a “Swiss Bank account in your pocket” could go on for ages, the fact remains that it’s possible today. With the uncertainty surrounding the future of finance and governmental structure, why not take control and safeguard at least some of your assets today?

 

Written by Alex Duplessie


*This article contains affiliate links to purchase the wallets mentioned on Amazon. By clicking them, you’re helping with the continued operation of this website. If you’d like to purchase the hardware wallets directly from their sellers, you’re free to visit Ledger and Trezor’s websites and to search for KeepKey on Amazon without using our affiliate link.

Next Post

Join the conversation.

© 2017 Millennial Investor

Theme by Anders Norén