Welcome to our FAQ guide on crypto hardware wallets! Over time, we've collected a bunch of questions from you, our customers, about everything to do with our products. These questions cover all sorts of real-world concerns you've had about moving your crypto into cold storage with a hardware wallet. We've put together this guide to answer those questions in a clear and straightforward way, using all the knowledge we've built up. Let's get started!
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- What is the point of a crypto hardware wallet?
- Is a hardware wallet a cold wallet?
- Does my crypto still grow in a hardware wallet?
- How do I use a hardware wallet for crypto?
- How does a hardware wallet actually work?
- How does a private key work?
- What does a private key look like?
- What is the difference between a digital wallet and a hardware wallet?
- Do you need a computer to use a hardware wallet?
- Does it cost to transfer crypto to a hardware wallet?
- What are the downsides of hardware wallets?
- Which hardware wallet is the easiest to use?
- How do I choose a hardware wallet?
- What are the three types of crypto wallets?
- Do you lose your crypto if you lose your hardware wallet?
- What happens if you lose your crypto hardware wallet?
- Can you move crypto from a hot wallet to a hardware wallet?
- Can hardware wallets fail?
- Is a hardware wallet worth it?
- How long can a hardware wallet last?
- What is the safest crypto hardware wallet?
- Can you sell directly from a hardware wallet?
- Are hardware wallets anonymous?
- Why have two hardware wallets?
- Do I need two hardware wallets?
What is the point of a crypto hardware wallet?
A hardware crypto wallet, often resembling a USB drive, is designed for the secure storage of cryptocurrency. Its primary purpose is to keep your private keys (which allow access to your crypto assets) completely offline, thus safe from online hacking, malware, and other digital threats. This form of "cold storage" is considered the safest method for holding cryptocurrencies, especially for long-term investments, as it minimises the risk of digital theft which is a common concern with internet-connected ("hot") wallets.
Is a hardware wallet a cold wallet?
Yes, a hardware wallet is a type of cold wallet. The term "cold wallet" refers to any cryptocurrency wallet that is not connected to the internet. Since a hardware wallet stores your crypto offline, it falls into the category of cold wallets. This makes it less susceptible to online hacking and is considered one of the safest ways to store your crypto.
Does my crypto still grow in a hardware wallet?
Yes, the growth or decline in the value of your cryptocurrency is independent of where it's stored. A hardware wallet's role is purely to safeguard your private keys. The actual value of your cryptocurrency is determined by market movements and is reflected in your wallet balance, regardless of it being in a hardware wallet or an online platform.
How do I use a hardware wallet for crypto?
To use a hardware wallet, start by initialising it. This usually involves setting up a PIN code and writing down a recovery phrase, which is essential for accessing your funds if the hardware wallet is lost or damaged. Connect the hardware wallet to a computer or a smartphone, usually via a USB cable, Bluetooth or QR code scanner. Then, using the associated application, you can transfer your cryptocurrency to the wallet by sending it to the address provided by the wallet. Your private keys, which authorise transactions, remain stored on the hardware wallet and are never exposed to the internet, protecting them from online threats.
How does a hardware wallet actually work?
A crypto hardware wallet stores your private keys, the crucial codes you need to access your cryptocurrency, in a secure physical device. When you want to make a transaction, you connect the hardware wallet to your computer or smartphone. The transaction is signed inside the wallet using your private keys, but these keys never leave the device. This way, your crypto remains secure, as the private keys are never exposed to the internet or potentially vulnerable software.
How does a private key work?
A private key is a unique string of characters that acts as a digital signature for your cryptocurrency transactions. It proves your ownership of the cryptocurrency and is used to authorise transactions. The private key must be kept secure, as anyone with access to it can control your cryptocurrency.
What does a private key look like?
A private key in cryptocurrency typically looks like a long string of random letters and numbers. It's usually made up of 64 alphanumeric characters, which can include both uppercase and lowercase letters as well as numbers. This string is unique and acts as a secure digital signature for accessing and managing cryptocurrency assets. For example (this is a randomly generated example!): eF3C9a7E9F254b342Fc93bAe1234aBcD123e4567EF89012abC345d67890123Ef.
What is the difference between a digital wallet and a hardware wallet?
A digital wallet, or a software wallet, stores your cryptocurrency's private keys on an internet-connected device like a computer or a smartphone. While they offer convenience for frequent transactions, they are more susceptible to online threats such as hacking and malware. A hardware wallet, in contrast, stores your private keys on a physical device that remains offline, greatly reducing the risk of online theft. The trade-off is in convenience; accessing funds stored on a hardware wallet is a bit more involved than with a digital wallet.
Do you need a computer to use a hardware wallet?
Yes, a computer or a smartphone is typically required to interact with a hardware wallet. These devices are needed to manage transactions, such as sending or receiving cryptocurrencies. However, the critical operation of signing transactions with your private keys happens within the hardware wallet itself, which keeps the keys completely offline and secure.
Does it cost to transfer crypto to a hardware wallet?
Usually yes, transferring cryptocurrency to a hardware wallet incurs a network fee. This will vary based on the specific blockchain of the cryptocurrency and the current network congestion. This fee goes to the miners or validators of the blockchain network, not to the hardware wallet. The amount of the fee can fluctuate, so it’s wise to check current network conditions before making a transfer.
What are the downsides of hardware wallets?
The primary downsides of hardware wallets include their cost (they can be more expensive than software wallets), the risk of physical loss or damage, and the potential complexity for users unfamiliar with cryptocurrency technology. Additionally, while they excel in security for long-term storage, they are less convenient for quick, daily transactions compared to online wallets. There's also the need for regular firmware updates to ensure the device remains secure against emerging digital threats.
Which hardware wallet is the easiest to use?
The Ledger Nano X and Trezor Model T are popular, and the most common choices for beginners for their user-friendly design. The Ledger Nano X offers Bluetooth connectivity for mobile use, and Trezor Model T features a touchscreen interface. Both provide straightforward setup processes and intuitive apps, making them accessible for beginners while still maintaining robust security features for experienced users.
How do I choose a hardware wallet?
To choose a hardware wallet, evaluate what you need based on security features (like secure chip technology and backup options), supported cryptocurrencies (ensure it supports the currencies you hold), user interface (consider how easy it is to set up and use), price, and customer reviews for reliability. It’s also prudent to consider the wallet’s track record in terms of security breaches or vulnerabilities and the responsiveness of its customer support. Compare security features across the industry's best hardware wallets.
What are the three types of crypto wallets?
The three main types are hardware wallets, software wallets, and paper wallets. Hardware wallets store private keys on a physical device offline. Software wallets are digital apps or programs storing your keys on an internet-connected device, offering more convenience but less security. Paper wallets involve printing your public and private keys on paper, serving as an entirely offline form of storage, but they are less convenient for regular transactions and vulnerable to physical damage or loss.
Do you lose your crypto if you lose your hardware wallet?
Not necessarily, losing your hardware wallet doesn't mean you lose your crypto as long as you have the recovery seed. This seed, typically a series of 12 to 24 words, is created when you first set up your wallet. It allows you to regain access to your cryptocurrencies by entering these words into a new hardware wallet. It’s crucial to keep this recovery seed in a safe and secure location, separate from where you store your hardware wallet.
What happens if you lose your crypto hardware wallet?
If you lose your hardware wallet, the security of your cryptocurrency still remains intact as long as no one has access to your PIN or recovery phrase. To regain access to your funds, you need to purchase a new hardware wallet and enter the recovery phrase that was provided during the initial setup of the lost wallet. This phrase, which should be kept secure and private, restores your private keys and consequently, your access to the cryptocurrencies. It’s crucial to note that the physical loss of the wallet does not compromise the security of the funds, provided the recovery phrase is not also compromised.
Can you move crypto from a hot wallet to a hardware wallet?
Yes, you can move cryptocurrencies to a hardware wallet from an exchange or another wallet. This is done by generating a receiving address on your hardware wallet and then initiating a transfer from your current wallet or exchange to this address. The process involves the blockchain network of the specific cryptocurrency, and it will require a network transaction fee. Once the transaction is confirmed on the blockchain, your cryptocurrency will be securely stored on the hardware wallet.
Can hardware wallets fail?
Hardware wallets, like any electronic device, can potentially fail due to hardware malfunctions, physical damage, or firmware issues. However, the security and accessibility of your funds are not solely dependent on the physical hardware wallet. As long as you have your recovery phrase, you can restore your funds on a new device. This is why it's critical to keep your recovery phrase written down and stored securely in a separate location from your wallet. Regularly updating the firmware of your wallet can also help in preventing failures and maintaining security.
Is a hardware wallet worth it?
A hardware wallet is generally considered worth the investment for those holding a significant amount of cryptocurrency or for individuals concerned about the highest level of security. It offers enhanced protection against a variety of digital threats, such as hacking and phishing, by keeping your private keys offline. For investors or users who plan to hold cryptocurrencies for the long term, the security benefits of a hardware wallet often outweigh its cost. It's also recommended for those who are not comfortable with the potential vulnerabilities associated with online storage.
How long can a hardware wallet last?
A hardware wallet can last for many years, depending on how well it is maintained. The lifespan of the device is not limited by the technology itself but rather by external factors such as physical damage, technological advancements, and compatibility with new software or cryptocurrencies. Regular firmware updates are essential for maintaining security and functionality. It's also important to consider that as the cryptocurrency landscape evolves, newer models with advanced features may be required to maintain optimal security and compatibility.
What is the safest crypto hardware wallet?
Determining the "safest" hardware wallet involves considering key security features that contribute to its robustness. Look for security features like an EAL5+ secure element, high resistance against tampering, and air-gapped capabilities for reduced online exposure. Open-source hardware wallets add an extra layer of trust through community audits. These features, found in various wallets, enhance security by protecting against physical and digital vulnerabilities. When choosing, balance these security aspects with ease of use and supported currencies.
Can you sell directly from a hardware wallet?
Yes, sometimes. It depends which hardware wallet you have. Some models now offer integrated functions like swaps or direct connections to decentralised finance (DeFi) platforms and exchanges. These advanced features allow users to trade or sell cryptocurrencies directly from the hardware wallet interface, enhancing convenience without compromising security. However, this capability is not universal across all hardware wallets, so it's important to check the specific features and supported functionalities of your wallet. For hardware wallets without these trading features, the traditional method involves transferring your crypto to an exchange or a software wallet that supports selling.
Are hardware wallets anonymous?
No, hardware wallets offer a higher degree of privacy but not complete anonymity. They do not require personal information for setup and do not store your transaction history in a way that is accessible to others. However, transactions made with cryptocurrencies are recorded on the blockchain, which can be publicly accessible depending on the cryptocurrency. Anonymity also depends on how you use the wallet and the cryptocurrency itself, as some blockchains are more private than others.
Why have two hardware wallets?
Having two hardware wallets can be a strategic choice for enhanced security and backup. One wallet can be used for regular transactions, while the other is kept as a backup, storing the bulk of your crypto assets. This approach can protect against risks such as physical damage, loss, or theft of one of the wallets. Additionally, using two wallets can provide a contingency plan, allowing you to access your funds if one of the wallets becomes inaccessible for any reason.
Do I need two hardware wallets?
Whether you need two hardware wallets depends on your specific circumstances. For users with a significant amount of cryptocurrency, having a second hardware wallet as a backup can be a wise security measure. It allows for the diversification of risk and provides an additional layer of security. For average users with smaller amounts of crypto or those using their wallet infrequently, a single hardware wallet, combined with a securely stored recovery phrase, may be sufficient.