A hardware wallet is a physical electronic device that is designed to protect an individual’s cryptocurrency funds by securing their private keys. The idea behind hardware wallets is to isolate the private keys from online methods of storage, such as a computer or smart phone, which are more susceptible to being compromised by a hacker. Storing your private keys offline prevents against this, as hackers would have to physically steal your hardware wallet in order to gain access to a user’s private keys. But even then, most hardware wallets require a PIN code for access, providing an added layer of protection.
Despite the strong security protection that accompanies hardware wallets, there are some security risks that exist with hardware wallets. For example, the risks concerning Random Number Generator (RNG) and imperfect implementation.
RNG – Hardware wallets utilise RNG to generate a wallet’s private keys. Whilst this generation of random characters is intended to make it harder to work out what your private key is, the randomness of the RNG itself is difficult to validate. An RNG that is not all that random, and follows a pattern, may result in your private keys being hacked.
Imperfect implementation – Ultimately, a hardware wallet is only as secure as its implementation. Software or hardware bugs contained in a hardware wallet can and will be exploited by hackers in their attempt to access a user’s funds. Verifying that a hardware wallet is as secure as possible is of the utmost importance in ensuring that the private keys are not compromised.
Whilst not a complete security solution, hardware wallets are one of the most secure methods to protect your cryptocurrency funds.
Commercial Hardware Wallets
The more well-known commercial hardware wallets are the: TREZOR wallet, Ledger Nano S wallet, and KeepKey wallet.
TREZOR – TREZOR was the first ever hardware wallet to enter the marketplace in August of 2014, and has developed a good reputation for itself over time. A TREZOR wallet will cost you around $100; TREZOR currently supports the following cryptocurrencies: Bitcoin, Ethereum (+ all ERC 20 tokens), Ethereum Classic, ZCash, Litecoin, Namecoin, Dogecoin, Dash, and Bitcoin Testnet.
Ledger Nano S – The Ledger Nano S was released in August of 2016, and alongside TREZOR, has managed to cement itself as a solid and reliable hardware wallet provider. The Ledger Nano S is the cheapest of the hardware wallets, costing around $80. The Ledger Nano S currently supports: Ark, Bitcoin, Bitcoin Cash, Dash, Dogecoin, Ethereum, Ethereum Classic, Komodo, Litecoin, PoSW, Ripple, Stratis, and Zcash.
KeepKey – Released in September of 2015, KeepKey rounds out the list of the more well-known commercial hardware wallets in the marketplace. The KeepKey wallet is the largest of the three hardware wallets, and offers many of the same security features as TREZOR and Ledger Nano S. With a cost of around $130, KeepKey is the most expensive of the three hardware wallets. Cryptocurrencies currently supported by KeepKey are: Bitcoin, Litecoin, Dogecoin, Namecoin, Testnet, Ethereum, and Dash.
In conclusion, the importance of security in the crypto-space cannot be understated. You wouldn’t have lax security with regard to fiat currency sitting in your bank, so why should that be the case for your cryptocurrency? Whichever way you choose to store your cryptocurrency funds, it is important to make sure that it is well secured. In this regard, hardware wallets provide one of the safest ways possible in storing and protecting your cryptocurrency.