The protection of cryptocurrencies is an important issue; due to this, different types of Wallets have been created; one of these alternatives is Hardware Wallets, physical devices specially designed to store and protect cryptocurrencies and offer the greatest possible security of those funds. These small devices allow the safeguarding and protection of private keys.

How do Hardware Wallets operate?

These physical devices operate as a wallet without the need for an Internet connection, keeping the private keys safe. This alternative is also part of the Cold Wallets due to their condition of storing “cold” as they are not connected to the blockchain or the Internet. They are small units called HSM or security hardware modules, with military-type security, allowing the generation of private keys to never leave the device.

If this device is attempted to physically manipulate to access the private keys, it will automatically destroy or erase itself, completely removing the keys. This alternative represents a more secure and convenient option in the market, especially when storing large amounts of cryptocurrencies “cold.” Each record within the memory of a Hardware Wallet is encrypted, meaning that anyone cannot connect a wallet to this type of device and read the stored information.

Hardware Wallet Features

A Hardware Wallet has two main functions: the generation of private keys and “signing” with those keys a content that is sent to them. Thus, the private key never leaves the device. A Hardware Wallet has a screen that verifies what is being signed to avoid hacks due to the transaction information’s interception. These devices are compact and portable; they can be taken anywhere or kept in a safe place. To manage cryptocurrencies, you only need to connect to a computer or smart mobile phone through a USB port, enter your password, and make the shipment. This device requires software to do the management; after disconnecting the Wallet, it turns off automatically. The security level of the Hardware Wallet is quite high and reliable since the validation process of the operations is carried out within the same device, and not on the computer or mobile device to which it is connected so that any operation can be signed no need for private keys to leave the device.

Some features of Hardware Wallets

Private keys are generated randomly and without any pattern through a random number generator or RNG; They are immune to virus and malware attacks that could infect them and steal the private keys, allowing the storage of large amounts of cryptocurrencies efficiently and safely; they are compatible with most of the available operating systems; They allow you to add extra security layers, and thus prevent third parties from using the device and wanting to steal the key; they have a seed that allows the restoration of keys and recover funds; among other additional features.

Vulnerabilities that this Wallet could present

The main vulnerability occurs physically since it depends on the attacker having access to the device; another vulnerability may be the supply chain, a type of attack in which the intruder has access to the device in the distribution path, thus making it vulnerable to being maliciously modified. There are also counterfeits; there are devices that aesthetically preserve the original appearance but that do not offer the same security and could be destined for the theft of cryptocurrencies.

Tips when using a Hardware Wallet

When using a Hardware Wallet, it is recommended to avoid as much as possible that other people have knowledge that we have one; When a recovery seed is generated, it should be done without an Internet connection and make sure you are alone (or with someone you trust); It is also recommended to always generate recovery seeds with BIP39 passphrase (12 or 24-word format plus an additional custom one), and encrypt the rest of the words as a kind of password; Another tip is never to store the seed and the passphrase in the same place.

What do you think about this topic? Do you think that Hardware Wallets are safer than other types of Wallets?

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Image from WorldSpectrum via Pixabay.com under Creative Commons license.


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