What is a bitcoin hardware wallet?
A bitcoin hardware wallet, also known as a ‘hard wallet’, is a physical electronic device that stores your bitcoins. Hardware wallets are the most secure type of Bitcoin wallets and act like cryptocurrency safes, important for after having paid for your bitcoin.
I. How do bitcoin hardware wallets work?
Exactly how your hardware wallet will function depends on which model you buy – some will have display screens, some will have different security features such as PINs and backup recovery phrases, and some can be as simple as a USB. What they all do, however, is give you a wallet address that stores your bitcoins completely offline to keep them out of reach for hackers. Think of hard wallets as miniature computers that can handle bitcoin transactions without having to be connected to the internet.
II. What other types of wallets are there?
When it comes to bitcoin wallets there are a number of options from which to choose:
- Online wallets. Wallets that are hosted online. Also known as web wallets, these require you to sign up to an online service and access your wallet with an account name and password.
- Mobile wallets. These are wallets stored on your mobile phone in the form of an app. They make it easy to spend and transfer your bitcoin on the move.
- Desktop wallets. Desktop wallets work through software that you download onto your computer. Once you have installed a wallet client you can use its interface to store and transfer coins, as well as check your balance.
- Paper wallets. Like hardware wallets, paper wallets allow you to store your coins offline. These DIY wallets are literally printed on paper after you have generated a wallet address and private key through an online service.
III. What’s the difference between hardware wallets and other wallets?
Hardware wallets are more secure, and the only type of wallet that comes in the form of a physical device rather than something you download (or make in the case of a paper wallet). Hard wallets are ‘cold wallets’ meaning that they keep all bitcoins offline. This makes hard wallets safer than mobile or desktop wallets, which are stored on devices connected to the internet, or online wallets, which are hosted directly.
IV. The most important factors when choosing a hardware wallet
There are a variety of hardware wallets, with each coming with unique security features and extras. Here are factors you need to keep in mind when choosing one:
The main purpose of hardware wallets is to secure your bitcoins. Hard wallets typically require you to set up a PIN code that you will have to use to access the wallet, so in case you lose your device nobody else can access your coins. Another feature you should look out for is the recovery seed. This feature allows you to add a custom phrase, with which you can restore your hardware wallet if it gets lost or damaged (this is very important as you could lose access to your coins forever otherwise).
Some hardware wallets such as Trezor and KeepKey have display screens that allow you to view details of your transactions without having to connect the devices to a computer. Others, such as Ledger HW.1 wallet don’t have this display screen, meaning that you will need to connect them to a computer when you need to use them.
Ease of use
There are very intuitive hardware wallets out there, and ones that are more complex. There are those, such as Trezor, which don’t require you to have a very technical understanding of cryptocurrencies: all you need to do is turn them on and start using the device. And there are those, such as Ledger Nano S, that need to be connected to a computer and configured first. As a whole, hard wallets do not require much technical knowledge and are generally very easy to get to grips with.
Generally, all hardware wallets are small (easily fitting in your hand), but some, such as the Ledger HW.1, are tiny. Some are also shaped like cards (such as Bitlox, and BitBox) whereas others are shaped like the normal flash drives (Ledger Nano S and Opendime). Depending on how/where you want to store your wallet, size and shape could be a factor you want to consider.
V. Are transactions made using hardware wallets anonymous?
Yes. Like with any other wallet, transactions between bitcoin hardware wallets are completely anonymous. Only wallet IDs display on the blockchain and there’s no way of tracing them back to your identity.
VI. Do I need to download any software?
Sometimes you may need to download the software and configure your hardware, but it all depends on the hardware wallet you’re using. Most popular hardware wallets such as Trezor and KeepKey will only require you to download a plugin/extension from Google Chrome and configure your device, which includes setting up a PIN. If you are using Ledger Nano S, you will just need to connect it to your computer’s USB port and follow the instructions.
VII. How do I set up a hardware wallet?
Each different hardware wallet will have its own steps to set up, but don’t worry because they are usually very simple and involve plugging in the device via USB and going to the company’s website. However, there are hardware wallets such as Trezor and KeepKey that will require you to download an extension on your Chrome in order to configure the wallet. As you set up the hardware, remember it’s imperative that you record the recovery seed. This is a string of words (usually 24) to help you restore your wallet in the future should the device get stolen. You can read more about recovery seeds in our FAQ section.
VIII. How do I transfer bitcoins from/to a hardware wallet?
It’s simple. Here’s how to go about it:
To a hardware wallet
Set up your device and access your wallet (whether that’s through the in-built screen, website, or specific software will depend on the device). Generate the bitcoin address (public key) by clicking ‘Receive’ and copy it. Go to the platform/wallet you wish to transfer your bitcoins from, choose the send option, and paste/enter the wallet address (public key) you had earlier generated. Hit ‘send’ and the bitcoins will transfer to your hard wallet – usually instantly.
From a hardware wallet
Plug in your device to a computer and launch your wallet’s official app or a compatible desktop app to unlock the wallet. Go through the security steps (password/pin number etc.) to open it. Go to the ‘Send’ option and enter the wallet address to which you would like to send bitcoin.
IX. What if I lose or damage a bitcoin hardware wallet?
If you haven’t recorded your recovery seed, it can be a real problem because there’s no way you will be able to access your bitcoins and it’s more than likely you’ve lost those coins forever. Fortunately, if you have taken the necessary backup steps then there are steps you can take to restore your hardware wallet. Exactly where you have to go to enter your recovery phrase will depend on the wallet, but once you have done so you will regain access to your coins.
X. What are the main bitcoin hardware wallet manufacturers?
While there are many companies producing bitcoin hardware wallets, there’s only a few of them that are well known to dominate this industry with quality hardware. The most popular brands include:
Ledger is run by security experts in cryptocurrencies and blockchain applications and is one of the most trusted providers around. Some of Ledger’s products include Ledger Nano S (most recent bitcoin hardware), Ledger Nano USB hardware wallet, and Ledger HW.1 USB Smartcard hardware wallet.
TREZOR’s hardware wallets have a reputation of being both very secure and easy to use. Aesthetically designed and with an inbuilt screen, their signature product the TREZOR One is a very popular option for storing bitcoin and other cryptos.
The KeepKey hard wallet is compatible with a number of digital assets, including Ethereum, Bitcoin, Bitcoin Cash, Litecoin, Dash, Dogecoin, and Namecoin. It also has an LED display and great security features.
CoolWallet S is the main hardware wallet developed by CoolBitX, a Taiwanese company founded in 2014. It aims to build a bridge that connects blockchain and widespread public use. Its hardware wallet is sleek, slim and light (like a credit card) and can secure several cryptocurrencies (Bitcoin, Ripple, Ethereum, Litecoin and Bitcoin Cash).
BitLox is another brand that’s known for developing hardware wallet with ample features and compatibility. One of its hardware wallets – the BitLox Advanced can store up to 100 different wallet addresses and is slim enough to fit in your regular wallet. Other products it offers are BitLox Ultimate and BitLox Extreme Privacy Set.
This Company believes in a future where entrepreneurs and individuals will enjoy independence in their digital world, without worrying about cyber theft. Their flagship product is the BitBox, a very compact USB bitcoin hardware wallet.
XI. Should I use a hardware wallet?
Well, it depends on how you want to use your bitcoins. If you’re looking to trade regularly then they can be inconvenient because you will need to keep transferring your coins from your hard wallet to an exchange. If your goal is to hold your bitcoins for long-term, they are by far the most secure option.
XII. How can I find the best bitcoin hardware wallet?
That’s the easy part. Browse through our reviews and find the right hardware wallet for your needs. We have reviewed the quality and most reputable hardware to ensure you get a perfect fit.