Seed phrase or recovery phrase is a list of words that acts as the key to your wallet. In case of a break of your computer, your wallet’s seed phrase is the only way to restore it. With that in mind, you should keep your seed phrase guarded and out of danger; that’s where hardware wallets come to play.
Software wallets, also known as hot wallets, store your seed phrase online or on your device, which is always connected to the internet. Yes, that’s not safe. That’s why in this article, we’re introducing all the best available cold wallets for using.
Best Hardware Wallets Available.
What Are Hardware Wallets?
Consider wherever your keys are stored, whether on servers, your computer, laptop, or mobile phone. When using a hot wallet; it’s almost the same. Cold wallets store your keys, so you are the one responsible for the safety of your keys. However, cold wallets come with many security features like anti-tamper attacks, open-source software, water resistance, and more.
How Do Hardware Wallets Work?
Cold wallets vary in the way they operate, some use Bluetooth or USB port, and others use QR codes.
In contrast, some might think that Bluetooth connections or USB may not be safe, but that type of connection is limited, and your private keys never leave your cold wallet.
However, if you’re not the Bluetooth or USB type, you can still go for an air-gapped cold wallet. That type of wallets is designed to keep the device in absolute isolation from the world. But, an air-gapped cold wallet uses QR codes to sign transactions.
The first question that comes to mind, how do I make transactions? Many cold wallets have their own integrations that are compatible with either computers or mobile phones or both of them.
For example, to send a transaction using a hardware wallet with a USB connection. Firstly, connect the device to your computer, enter the recipient’s address and the amount you are willing to transact in an integration that works with your device. Now comes the good part; you need to confirm the transaction on the device. What happens under the hood is that your private key is in the device and never leaves it, but the USB connection is only used to transfer the signature confirmation
But… What about using an air-gapped cold wallet? The same concept, use integration on your mobile or computer to enter the recipient’s address and instead of connecting via USB, ask the device to confirm a transaction. It’ll display a QR code, scan it and you good to go. Of course, that comes after confirming your device’s ownership, like entering a PIN code or something like that.
What Happens If I Lose My Device?
Don’t worry; your assets will remain safe. All hardware wallets devices are either PIN protected, or passphrase protected so that no one can access your holdings.
And to recover your wallet, you can recover it into any other cold or hot wallet that’s compatible with your lost one using the seed phrase generated during the wallet’s setup. That’s why we always recommend backing up your seed phrase somewhere safe; without your seed phrase, you can never recover your wallet.
Differences Between Cold and Hot Wallets.
In simple words, hot wallets connect to the internet. Hot wallets have the advantage of compatibility with many coins, also it’s more likely to get updates faster. However, your private keys are stored encrypted on servers or on your computer. Meaning, if a hacker managed to access them, they’ll have control over your private keys. That makes hot wallets a hazardous place to keep your holdings.
Unlike hot wallets, your cold wallet device itself is your own server, as your private key never leaves the device on any occasion. The fallback might be that it’s less upgradable and costs more than hot wallets, but it’s definitely worth it. Also, many hardware wallets offer great price points; make sure to check our review for the hardware wallets mentioned above, where we spoke in detail about features and price.
Pros and Cons of Hardware Wallets.
There’s nothing perfect, so are hardware wallets. Here are the pros and cons of having a hardware wallet.
- Your private keys are kept safe, and they never leave your wallet.
- Your wallet is protected with a PIN code.
- It has mobility, and you can carry your wallet with you anywhere.
- Major security features like anti-tamper and water resistance.
- Limited connection to your phone or computer, making it immune to viruses.
- You need to have your wallet with you to access your holdings.
- Works with fewer coins than hot wallets.
- It might be compromised during shipment.
- It needs integration to work.
That was almost all you need to know about hardware wallets; now, check our review for each of the wallets mentioned above to have a full picture.
Also, we’d love to hear from you; tell us in the comments section below, which do you prefer, hot or cold? And why?