In the past two years alone, investing in Bitcoin and other popular digital assets has become incredibly simple. Thankfully, the same can be said for securely storing them, too.
The ease of storing crypto boils down to one incredible innovation – hardware wallets. Before, buying BTC, ETH, LTC, or other blue-chip assets meant keeping them in sketchy software wallets or online exchanges.
If you’re curious about how that ended up, then look no further than the Mt. Gox Wikipedia page. Over time, cryptocurrency investors realized that the best way to store crypto is offline in physical devices called hardware wallets.
What Is a Hardware Wallet?
Hardware wallets resemble USB devices but are far more powerful in terms of security. We like to think of them as miniature, portable, and highly sophisticated vaults.
Hardware wallets keep your crypto offline by storing your private keys within the confines of a physical device. Whereas software wallets and online exchange wallets are always connected to a network and are therefore easily compromised, hardware wallets aren’t.
The main advantages of hardware wallets (cold) vs. exchange wallets (hot) include:
- Immunity to computer viruses that steal private keys
- Can interact with network-connected interfaces and devices without being compromised themselves
- Private keys are never exposed to live networks
- Some hardware wallets use open-source software, which increases their auditable nature and security
Hardware wallets give you most of the storage benefits you would get with a bank but without the downsides. Banks are centralized operations that take asset ownership out of your hands and into their own. Transferring money, making payments, or other processes related to your money can only be done during business hours, and with the bank’s permission.
A set up such as that begs the question: Is money in the bank truly yours? Hardware wallets flip the paradigm so that your financial activity is always within your control. Because the blockchain never closes, neither does your hardware wallet.
Is It Safe to Store Cryptocurrency on an Exchange?
Cryptocurrency exchanges create liquidity for the digital asset market and give global traders a common ground upon which to do business. As far as infrastructural concerns go, crypto exchanges are indispensable for the digital asset ecosystem and its future.
While that may be so, cryptocurrency exchanges have real pitfalls - most of which are owing to security problems. In the years since Satoshi released the Bitcoin whitepaper back in 2008, countless cryptocurrency exchanges have been targeted by cyberthieves looking to score a big payday.
Unfortunately, many of them have succeeded in doing so. With several billions of dollars worth of crypto lost due to security issues in the past decade alone, the way crypto exchanges store BTC and other digital assets is a real concern.
Buying cryptocurrency on an exchange is secure in and of itself, but problems arise once you leave newly purchased assets on the exchange. Many exchanges store assets in what are called hot wallets. In a nutshell, a hot wallet is connected to a network and can, therefore, be compromised.
A cold wallet (also known as cold storage) works in the opposite manner. Instead of being connected to a network, cold storage means the wallet is not connected to anything at all. This method of storage gives digital cryptocurrency assets a physical nature.
Today, cryptocurrency exchanges are transitioning en masse to cold storage. After years of heavy financial losses, the benefits of storing cryptocurrencies in cold storage are more than obvious.
At this point, you may be wondering how cryptocurrency exchanges employ cold storage across their multi-billion dollar stashes of crypto. The answer?
Choosing the Best Hardware Wallet
Hardware wallets have become essential for cryptocurrency investors. Due to their uncompromising security, they’ve become standard in the crypto world. It’s common to hear investors rhetorically asking, “If you’re willing to spend $10,000 on BTC, then why not spend a fraction of that on security?”
However, because of the explosion of interest in hardware wallets, there are now many to choose from. For investors who are new to buying Bitcoin and other cryptocurrencies, the wide selection may seem daunting at first.
The great news is that even though there are several hardware wallets to choose from, they tend to have excellent build quality and awesome security characteristics.
Let’s take a look at the best hardware wallets money can buy.
Ledger Nano S Cryptocurrency Hardware Wallet
If there is a true cryptocurrency industry favorite, it is the Ledger Nano S. The Ledger Nano S securely stores Bitcoin, Ethereum, Litecoin, Ripple, and many other top altcoins. Built atop leading industry safety features, the Ledger Nano S allows for crypto asset storage and secure digital payments, all with the click of a button.
The Ledger Nano S connects to any computer or tablet via USB and uses a secure on-device OLED display to double-check and confirm each transaction with you via a single tap on its side buttons. Between its smooth interface and industry-leading security features, the Ledger Nano S is a dream to use.
How to Install a Ledger Nano S Wallet
Installing a Ledger Nano S is simple and straightforward. After plugging into a USB port, the Ledger walks you through setup with instructions presented on the OLED display. The device will prompt you to create a pin code which you will do well to remember!
Crucially, you must write down your 24-word backup phrase in a secure place. This backup phrase of 24 randomized words restores your device on another Ledger if you lose or damage your original device.
Ledger provides adequate instruction on the other configurations of the device. With the Nano S in hand, you’ll have a mode of financial security that few at this
For the truly tech-savvy, the Ledger Nano X is the latest model to hit the market with additional advantages such as Bluetooth connectivity and extra capacity.
Trezor One Cryptocurrency Hardware Wallet
As in any industry, there are innovators, and then there are followers. The Trezor One hardware wallet falls squarely in the category of the former. Long before other hardware wallets landed on the market, Trezor was already blazing a trail with its revolutionary crypto storage product.
Trezor One cryptocurrency wallets are developed by SatoshiLabs, a company with a long history in the cryptocurrency space. The team at SatoshiLabs keeps Trezor’s firmware up to date with constant additions, meaning the wallet can support the best cryptocurrencies available today.
With a Trezor One hardware wallet, you can safely store Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Dash, Zcash, Stellar, and all ERC20 tokens. This long list brings hundreds of token storage options onto the table, making the Trezor as diverse as it is secure.
How to Install a Trezor One Wallet
Getting your Trezor One installed and ready to use is as simple as setting up a Ledger Nano S. Connect the device to either a computer or tablet via USB, then follow the step by step instructions given by the Trezor software.
You’ll need to choose a pin code carefully. With this pin code, you’ll access the Trezor anytime you need to open it – so don’t lose it!
Next, you’ll create a recovery seed made up of 24 words. Make absolutely sure to write this seed phrase down and store it somewhere safe. In the event that you lose your Trezor One, this seed phrase will help you to recover your stored digital assets.
However, remember that since you can restore your crypto wealth with this recovery phrase, so can anyone else who gets their hands on it. That’s why we must emphasize the importance of keeping it in a safe and secure place.
Similarly, Trezor's latest model the Trezor Model T brings serious competition to Ledger Nano X.
KeepKey Cryptocurrency Hardware Wallet
KeepKey is a relatively new entrant into the cryptocurrency hardware wallet field, but it has quickly achieved a top favorite status amongst Bitcoin investors.
Why? Because KeepKey delivers two things better than anyone else: Great looks and a lower price point. Of course, the main reason you’re buying a hardware wallet is to keep your Bitcoin safe – so, you’ll be happy to know the KeepKey does this just as well as the competition.
KeepKey is an excellent choice for cryptocurrency investors who want a sleek hardware wallet that has increased visual appeal. With this device, you can securely store BTC, BCH, DASH, DOGE, ETH, LTC, and BTCG.
SafePal Cryptocurrency Hardware Wallet
The SafePal hardware wallet is the newest entrant on this list. However, it comes with impeccable backing. SafePal is the first hardware wallet that comes with big financial backing from cryptocurrency giant Binance – considered by many as the world’s #1 Bitcoin exchange.
As far as looks are concerned, the SafePal hardware wallet has the market cornered. It looks somewhat like a smartphone and has an incredibly intuitive user interface with a high-resolution display.
Best of all, the wallet stores nearly every token that can be traded on Binance, including BTC, ETH, BNB, ERC20, BEP2, and NEP5 tokens. Add vast multi-language support to the package, and you have a convincing case for the wallet to watch in 2020.
Should You Buy a Cryptocurrency Hardware Wallet?
Do you need a cryptocurrency hardware wallet? The simple way to answer this question is with another question. Does the value of your investments exceed the cost of a cryptocurrency hardware wallet? If the answer is yes, then you 100% should invest in the security of your crypto investments.
Even if your current investments amount to less than the cost of a hardware wallet, they may one day exceed that cost if the crypto market performs well.
So, no matter how you look at it, owning and using a hardware wallet is the best way to keep Bitcoin and other precious cryptocurrencies safe.
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