Five Reasons You Need a Hardware Wallet

What is a Cryptocurrency Hardware Wallet?

A hardware wallet is a device which stores access to your cryptocurrencies. The device is separate from your computer or phone which makes it an independent piece of hardware. It stands as an upgrade to software wallets, which can be downloaded on an existing device, like your computer or your phone.

More specifically, a hardware wallet stores your private keys on a dedicated device with software designed specifically to protect private keys. This comes with a number of advantages, which will be explained below.

1. Private Keys Are Stored Offline

Software wallets come with the risk of being connected to the internet. If you use a device connected to the internet, you are at some risk of having information harvested from your device. Most hardware wallets offer a service called cold storage.

If your software wallet becomes compromised, there is no insurance to back up those lost assets. Meaning storing your critical information like private keys is a critical component to keeping your assets secure. Cold storage is an ideal solution for this as your keys are stored on a device disconnected from the internet.

2. Lower Risk of Viruses

Being disconnected from the internet and using firmware that isn’t Apple or Windows based, the risk of viruses and malware being threats to your private keys are near zero when you use a hardware wallet.

A feature that some hardware wallets come standard with is called “air gapped transactions”. This simply means that the device itself is never actually connected to the internet, or your computer, and is thus much less vulnerable (if not impervious) to being infected with a virus.

In addition most viruses are designed to attack platforms like Windows or Apple, which offer more traditional traditional attack vectors.

3. Usability

A hardware wallet can bring a certain degree of peace of mind. They’re simple to use, highly secure, and can be purchased at reasonable price points. It handles the software and security side to a storage of cryptocurrency, leaving you free of concerns like micromanaging your internet security and navigating a bunch of different cryptocurrency related programs that may not necessarily be in your wheelhouse.

Hardware wallets streamline the security of your crypto assets, leaving you free of worry.

4. Reduced Risk while Traveling

A hardware wallet is more secure if you’re a frequent flyer. Public internet connections and networks without guaranteed trust can be a common security hazard. Laptops connect to the internet presenting a security risk, but are also a higher risk attack surfaces. Malicious actors can access USB ports on a laptop, even when it’s locked, presenting a security risk. Hardware wallets are PIN protected and have additional protections depending on which one you buy.

As well, should you lose your hardware wallet by some unfortunate fate, then you can use a seed recovery phrase you receive with the hardware wallet to recover the private keys and save your crypto. This phrase should be written down on paper and stored somewhere physically secure and is sometimes called a paper wallet. Remember not to keep the paper wallet and the hardware wallet in the same place.

5. Verification on the Hardware Device

With a hardware wallet, all of your transactions have to be verified with user inputs before they transfer. Without access to the hardware wallet, it is impossible to send any crypto from the wallet.

In this sense, the hardware wallet can be rightfully interpreted as the “signing device”. As in, it is the device that signs transactions and makes them valid to be broadcasted to its respective blockchain. Without a signature, a transaction is not valid. Without a hardware wallet, a transaction cannot be signed.

Conclusion: Hard to Ignore Benefits of Hardware Wallets

So why own a hardware wallet? For the risks it mitigates by providing users with an affordable solution to the problem of hot storage. Hot storage is any wallet that is connected to the internet, such as in the case of software wallets used on a computer or a mobile device. Being disconnected from the internet keeps your private keys untouchable by unforeseen actors which can gain access to your device through an internet connection.

Hardware wallets have a failsafe if you lose physical access to them by unfortunate circumstance. This failsafe is a paper wallet with a passphrase giving you emergency access to your private keys, so you can save your lost crypto until you can replace it. All of these factors combined offer peace of mind when navigating the uncertain world of cybersecurity.

There are, of course, some downsides to hardware wallets. Perhaps the biggest obstacle for hardware wallets is the price. They tend to range from $70-$300. It probably won’t make a lot of sense to buy a hardware wallet if you only own $10 worth of crypto. The other is the complication. While hardware wallets have become much easier to use, there is still a bit of learning curve.

If you’re unsure of where to start, we have you covered. Read our review of The Best Bitcoin and Crypto Wallets in 2023 to get a comprehensive list of the highlights, cost, and cryptocurrencies supported by each hardware wallet.