In the world of cryptocurrency, people mostly suffered from a lot of hacking attacks that try to steal their cryptocurrencies.
So the hardware wallets are the best practices cold storage hacked proof wallets that keep your bitcoins and other cryptocurrencies safe and secure from all types of hacking attempts.
In this article, we will cover the following topics:
- What is Hardware Wallet?
- Properties of Hardware Wallet
- Why do you need a Hardware wallet?
- Risk of using Hardware Wallet
- Some Important security precautions for Hardware Wallet users
1 What is Hardware Wallet?
Hardware Wallet is a physical cold storage electronic device that stores the private keys of a user in a secure hardware wallet device in such a way that these keys can never export from the device in any situation.
Hardware wallet keeps your private key secure into the device and it signs the transaction offline.
You have to use the device every-time whenever you wanted to do any bitcoin transaction from the hardware wallet so no one can steal your funds without having the device itself.
2 Properties of Hardware Wallet
- All the operations of the transaction occurred securely on the device. The Hardware wallet device only broadcasts the signed transaction hash publicly.
- It generates the private key secretly on the device and never disclosed. It provides the 12 words passphrase for backup to restore the wallet in the future.
- The hardware wallet has a screen to display information to the user.
- It contains one or more physical buttons to perform the operations manually on the device.
- it displays receiving address and transaction information on the device screen to avoid hacking attempts on the user.
- The user has to confirm the transaction manually by pressing the button on the hardware wallet device which makes it impossible to steal funds from it by hackers without the physical access of it.
- It works perfectly on the popular operating systems Windows, Linux, macOS.
- It does not allow to install any software on the device and no one can compromise it, if anyone tries to do it forcefully then the device self damaged itself.
- Hardware wallet required one or more PIN code set up to access the device and for doing different operations on it.
- Normally hardware wallet supports only the top 5 to 10 cryptocurrencies.
3 Why do you need a Hardware Wallet?
- Hardware wallet store your private keys securely in the device that is impossible to expose by any hacker.
- Hardware wallets are immune to computer viruses means you do not need to worry about the infected computer you are using with your hardware wallet.
- You can store multiple cryptocurrencies in a hardware wallet.
- Physically access the hardware wallet device required by the user for confirmation before sending the funds from the device.
- Hardware wallets cannot be compromised.
- The hardware wallet is protected by the PIN code encryption.
4 Risks of using Hardware Wallet
- Bugs: Hackers can get access to the internal structure of the hardware wallet from the firmware bugs created into it.
- Replacing the receiver’s address: Hardware wallet does not provide any security regarding receiving address replacement which is somewhere replaced by viruses into your computer because the receiving address is the user performed task and the hardware wallet can’t control it.
- Compromised Manufacturing process: There may be some third-party companies or sellers that can create similar looking compromised hardware wallet devices. You must buy the hardware wallet from the well-reputed company and from there original sellers.
- A bad random number generator Hardware wallet created the private keys using a random number generator so the values created by a bad random number generator can be predicted by the hackers.
5 Some Important Security Precautions For Hardware Wallet Users
Hardware wallets itself provide powerful security where there will be no chance for a hacker to steal your bitcoins but most of the users sometimes did mistakes from their side that results in losing their bitcoins due to their fault and lack of knowledge of security.
So here are some security precautions for the hardware wallet users given below:
- Always Keep Backup Seed Offline: First and most important safety rule is that you must keep your hardware wallet backup seed offline always in any situation. Take backup offline on paper and store at some secure location where there is no online access. If your backup seed goes online or stored on a device that can connect to the internet (IoT) then no one can help you not even god.
- Keep Multiple Offline Seed Backup: In the past, many users complained that they lost their funds by losing their seed backup where they were unable to restore funds as they had only one backup that got lost. So please keep multiple offline seed backups if you don’t want to lose your bitcoins.
- Take Seed Backup on Paper Only (Offline): Taking a backup of your hardware wallet seed is a very important step of security. Don’t try to be clever, don’t go fancy and try to be old fashioned, write all your seed words on the paper and store them at secure locations where there is no internet connection and you can access that place easily but not others. You can also store backup seed on fire-proof Cryptosteel.
- Don’t Disclose Your HW Information on Social Media: If you are too much using social media services then you need to be aware while using it especially if you are a cryptocurrency hodler. Please don’t talk to your friends and relatives about your bitcoins and hardware wallets. Don’t share any information on social media regarding your cryptocurrency investments and its storage locations. Do not wear a hardware wallet around your neck and also do not take photos of your hardware wallet backup seed, you must avoid these stupid things.
- Use official Software of Hardware Wallet: If you think that you are very smart and start using s third party software in order to access your funds from hardware wallets then my dear I guaranteed you that you will surely lose your funds in the future. Don’t be over-smart and only use the provided official software of the hardware wallet if you want your bitcoins secure. Let me give you one more important advice as whenever you will update your software then don’t use it for 3-4 days because new update may have some bugs by which you can lose your bitcoins where you don’t have any faults but you lose due to company faults and no one can help you in this situation, so better to keep yourself aware and secure.
- Triple Confirm Address on Hardware Wallet Device: When you are using a hardware wallet like Ledger and Trezor then they will show you the bitcoin address on the hardware wallet device screen when you are receiving or sending your bitcoins. So you must confirm the address at least three times before doing any transaction. If you are a lazy guy and don’t do this then you must keep in mind many users already lost their funds by not doing this and you may be the next one of them. Bitcoinik strongly advises you to check the address on the hardware wallet device while doing transactions.
- Check the Surroundings while Taking Seed Backup and Using Hardware Wallet: You must check your surrounding area when you are doing seed backup of your hardware wallet as there may be some cameras placed there that can capture your backup seed information and you may get informed about it after when your funds got stolen. You must be sure that there are no cameras and you are in a secure empty room while doing the backup of your hardware wallet and doing transactions from your hardware wallet.
- Do Not Share Hardware Wallet Seed Backup and PIN: It is your responsibility that you must keep your hardware wallet seed backup and PIN securely. Do not share seed and PIN to somewhere even official software of the hardware wallet wants it. Please keep in mind that only you know your backup seed, and all others even official company of your hardware wallet who wants to know your seed is totally a scam and a big scam. Please keep your hardware wallet backup seed to yourself only. Also, you must use a hardware wallet PIN that you can remember easily and others can’t guess it easily.
You must take care of your security as most of the hacking attempts are only possible from user faults.
The Hardware wallet has a good reputation as there was no record and no way of hacking their internal technology by hackers until today.