After crypto exchange FTX’s sudden collapse in November 2022, sales for a particular piece of hardware blew up: hardware wallets that let owners hold and move crypto without being constantly connected to the internet. Here's what you need to know:
wallet costs about $79, while Trezor's Model One is about $50. The differences between the models sold by hardware companies cover the number of cryptocurrencies they support, the security architecture itself, and the screens, buttons or battery life of the device.
When you plug your device into your computer, you connect to the hardware wallet’s proprietary desktop application. Ledger’s is called Ledger Live and Trezor’s is called Trezor Suite. From there you can interact with a handful of decentralized finance protocols or send crypto. These applications do not work without the hardware wallet. When you need to interact with the blockchain, you’ll have to confirm the transaction directly from the wallet.
Hardware wallets can be a bit of a pain to use. The most popular model from Ledger, for instance, only has one button, and you’ll have to press it multiple times when entering the four-digit numeric passcode that protects the wallet. But these wallets’ safety make them popular with HODLers who’d rather not keep the bulk of their crypto on an exchange or in a hot wallet.These wallets are only as safe as the user. Consider them the crypto equivalent of stuffing cash under the mattress.
The companies that create hardware wallets cannot reverse blockchain transactions, so there’s no margin for error. Considerof one Redditor, a “very technical person,” who kept their wallet in a fireproof case, then woke up one day having lost their life savings. Their mistake? “I have just realized that I did take the screenshot of 24 seeds and stored on google drive. The seeds were kind of encrypted and Words were swapped but it seems hacker managed to figure it out.
Still, lots of traders consider it better to take the risk with a hardware wallet than to hold funds on a centralized crypto exchange or hot wallet. There’s no way of knowing, definitively, how a crypto exchange invests your funds, and it’s harder to prevent a hot wallet from being hacked. If you want to keep your funds in a hardware wallet, make sure not to let anyone know the seed phrases, and certainly don’t make digital copies; that’s a recipe for disaster.
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