2021’s Best Cryptocurrency Wallet
As a cryptocurrency user, you will probably know you need a hardware wallet to store your digital coins and tokens securely. However, if you are new to crypto, this is an important lesson. You should store your digital currency in a hardware wallet if you intend to hold it long-term.
What is a crypto wallet?
Crypto wallets are used for storing, sending, and receiving cryptocurrency. In essence, it is a digital bank account for your cryptocurrency.
More specifically, crypto wallets store public and private keys that allow you to manage your digital currency holdings and interact with blockchain networks.
There are two kinds of wallets: hot wallets and cold wallets: Hot wallets are connected to the internet, while cold wallets aren’t.
These are the easiest and most widespread types of crypto wallets since they are easy to set up and use. Whenever you create an account on an exchange, download a mobile wallet, or install a desktop wallet on your laptop, you are creating a hot wallet.
Even though hot wallets are easy to use, they have one obvious drawback: security.
It is not advisable to store large amounts of digital assets in a hot wallet, such as a web wallet or a mobile wallet, as this leaves your funds vulnerable to potential security threats, such as cyber theft.
Therefore, you should only hold only a small amount of crypto in a hot wallet and your long-term investment in a cold wallet.
In terms of cryptocurrency storage, cold wallets are more secure since they aren’t connected to the internet. You connect your cold wallet to the internet only when you want to make a transaction. Both hardware wallets and paper wallets are cold wallet options.
A hardware wallet stores the private keys of your cryptocurrency within a physical vault. They connect to your computer or smartphone via USB and, as you keep them offline, they provide cold storage for your coins and tokens.
To protect your digital currency keys, hardware wallets include a variety of security features.
Typically, they’re protected by a PIN and include other security measures, such as a screen for viewing transaction details and buttons for manually verifying transactions.
There are basically two parts to a hardware wallet. The first part is a desktop, mobile, or web client, which is connected to the Internet and performs many of the basic functions of a hot wallet. Although this software wallet can create transactions, it cannot sign them — this is where the second part, the hardware wallet in which your private keys are stored, comes in. You must send the transaction to your offline hardware wallet, confirm that it is you, and sign it with your device before it can be completed.
What is a private key?
A private key is a very long string of numbers and letters that acts as the password to your cryptocurrency. With this secret combination, your wallet can let the blockchain network know you’d like to send your coins to another person. The most important thing to remember is that whoever knows your private key controls your coins.
Why Hardware Wallets are Superior to Hot Ones?
Most digital wallets store your security codes and keys on their online servers, which are extremely vulnerable to hacker attacks, scamming attempts, and other ill-intentioned activities. While most of the major hot wallet websites and companies have put in place major security measures, it only takes the smallest security flaw to make your savings disappear forever.
As opposed to web wallets and desktop software wallets, which are susceptible to attack by hackers, malware, and phishing scams, hardware wallets store data offline. You can trust hardware wallets to keep your coins safe even if your computer is hacked — it’s safe, keys are stored in your hardware wallet, not on your PC, and lost wallets are protected with a PIN.
Your recovery seed will also let you restore your coins in the event that you lose your wallet. You can write down this unique passphrase and store it somewhere safe. By using this recovery seed, you can get your funds back if something goes wrong.
How Do Hardware Wallets Work?
Imagine you want to send a Bitcoin transaction using a hardware wallet. Since a hardware wallet is so simple, it can only sign transactions, so it must utilize a more sophisticated computer to perform all other functions, such as preparing the transaction and broadcasting it to the network.
Therefore, you need to download a program that can communicate with the hardware wallet in order to use it. This program is called a bridge, and it allows you to prepare your transaction for signing. Cryptocurrency transactions are the only data that hardware wallets allow to pass through to them.
As soon as a hardware wallet receives a transaction from the bridge program, it signs it on the hardware wallet itself and sends it back to the bridge program. Your private key never leaves the hardware wallet. You only transfer signed and unsigned transactions between your computer and hardware wallet. Since a hardware wallet’s design is minimalist and simple, you can use it with any computer without fear of infected or hacked data.
How to choose a hardware wallet?
If you decide offline storage in a hardware wallet is the best option, choosing a wallet is the next step. There are several reputable options available, so when choosing one, consider the following factors:
- Security features: What features does the wallet offer and how secure is it? Is it protected by a PIN? Is it equipped with its own screen? Is it possible to verify transactions manually by pressing buttons? Has the wallet ever been the subject of a security breach?
- Ease of use: Take a look at how simple it is to set up and use.
- Supported currencies: Ensure that the wallet you are considering supports all the coins and tokens you want to store.
- Supported operating systems: Can you operate the device on your smartphone or computer using the operating system you have?
- Crypto Access: Hardware wallets usually come with their own hot wallet, which is usually an extension for a browser or a web wallet. In the case of storing Ether (ETH) on a Ledger Nano S, you would manage your tokens using either the Ledger Wallet Ethereum app or the third-party wallet MyEtherWallet.
- Back up and restore: Find out how to back up your wallet and restore your coins if something goes wrong. How easy is it to do and will it increase the security of your funds?
- Price: If you’re buying from an overseas provider, compare the exchange rates and shipping costs of competing wallets to determine which one offers the best value.
- Portability: If you plan to take your wallet with you on a daily basis, consider how easy it would be to carry it around.
Best Hardware Wallet of 2021?
There are currently more than a dozen vendors on the market who offer hardware wallets. Three of the market leaders are Ledger, TREZOR and KeepKey. I will cover the best.
1. Ledger Nano X
The Ledger Nano X is Ledger’s flagship when it comes to hardware wallets. The device is capable of managing 100 crypto assets simultaneously.
2. Ledger Nano S
Nano S and Nano X, both support the same coins. Nano S only works with desktop computers and Android devices, while Nano X can connect to iOS devices. Additionally, the Nano X has a larger screen with a higher resolution.
3. Trezore Model T
TREZOR was the first company to introduce the idea of a hardware wallet. The reputation of TREZOR gives it an edge over its competitors. Marek “Slush” Palatinus is one of the company’s founding members, who launched the first mining pool for Bitcoin (founded in 2010).
Check for Resellers in your country at https://trezor.io/resellers/
Keepkey is similar to the TREZOR one and the Ledger Nano S, however, its wallet is too big to carry conveniently in your pocket. Keepkey’s wallet is almost twice the size of TREZOR one or Ledger Nano S.
5. SafePal S1
These wallets are incorporated into the SafePal App, a one-stop solution, allowing users to store, manage, and easily trade their crypto assets. Best For Newbie crypto traders and investors
What happens if the wallet manufacturer ceases to exist?
In today’s hardware wallets, seed phrase technology is used to generate a unique code. This technology isn’t specific to any one company. As a result, if a particular company goes out of business, you can recover your coins by using your seed phrase at another company wallet. In many cases, your seed phrase can be used to extract your coins, for example if your hardware wallet gets damaged or breaks.
Do I need to use a Hardware Wallet?
Hardware wallets have a price, and no one is interested in paying for a product they can get for free (hot wallets are free). But the security you get by using a hardware wallet is much more valuable than the $50-$100 you’ll have to pay for buying the device.
My personal preference is for the Ledger Nano S, which is the greatest value for money among the top 6. Also, make sure to only buy the wallet from an authorized reseller or from the company directly.