Cryptocurrencies such as Bitcoin and others gained popularity across the world. Nevertheless, there are certain risk factors when it comes to cryptocurrencies. People should keep in mind that the crypto world is dangerous and it is important to protect their crypto assets. Importantly, it makes sense to learn more about risk factors. One of the best solutions is to use a hardware wallet.
Let’s start from the beginning as there are several options. There is a high chance that newcomers will stick to exchanges. Interestingly, these platforms provide many with their first exposure to cryptocurrency and allow users to store their funds in an online wallet. However, the user is not technically in control of their coins. For example, if the exchange is hacked or taken offline, they may not be able to recover their funds.
Let’s have a look at a hardware wallet why it makes sense to use such a wallet.
It is worth noting that a private key is a passport of the user to a cryptocurrency’s ecosystem. Importantly, in many ways, it is just like a real-life key. Interestingly, with this information, users can unlock their funds to spend them. However, if someone gains access to this information, they can steal crypto assets.
This is not the end of the story, as if you lose the key, you lose access to your coins. Unfortunately, there is no forgot password button in a decentralized environment. Furthermore, it is not possible to call a bank to reverse fraudulent transactions. People should keep in mind that the bottom line is that private keys must be kept secret and secure. Importantly, they are incredibly valuable to cryptocurrency users.
Hardware wallets and interesting details
It is worth noting that storing private keys is straightforward as they are just strings of numbers as well as letters. Interestingly, an alternative way would be writing them down on paper and storing them in a safe. Importantly, to use the keys to move funds, nevertheless, they need to be on a device that creates proof that a person can spend his or her coins.
As a reminder, hardware wallets are devices specifically designed to securely store private keys. They are considered safer than desktop or smartphone wallets, mainly because they do not connect to the Internet at any point. Moreover, these properties significantly reduce the attack vectors available to malicious parties, as it means that they can’t tamper with the device remotely.
People should keep in mind that a good hardware wallet ensures that private keys never leave the device. Interestingly, they are normally in an incasing within the device that doesn’t allow their removal.
As a reminder, since hardware wallets are offline at all times, they must be used alongside another machine. Interestingly, they can be plugged into infected PCs or smartphones without any risk to private keys. From there, hardware wallets interact with software that allows the user to view their balance or make a transaction.
Hardware wallet and technical aspects
Importantly, once a user creates an intersection, they send it to the hardware wallet. However, the transaction is still incomplete as it needs to be signed by the private key in the device. Users confirm that the amount, as well as address, are correct when prompted on the hardware device. Moreover, at that point, it is signed and sent back to the software, which broadcasts it to the cryptocurrency’s network.
People should take into account that a hardware wallet is like an impenetrable vault with a small slot. Importantly, when users want to create a transaction that the network will accept, they push it through a slot.
Last but not least, hardware wallets, like other forms of storage, come with their own trade-offs. Nevertheless, the limitations of hardware wallets do not outweigh their advantage. Thus, it makes sense to use a hardware wallet.