KeepKey, Trezor, Leger Hardware wallets

THE BASICS of HARDWARE wallets

Hardware wallets are in the physical form of a very special USB device.  To spend money from this wallet it must be inserted into a USB port of a computer, laptop, or tablet.  You may also be able to plug your Hardware wallet into some “USB OTG” compatible phones. At any time you can receive funds even when the wallet is not plugged in.

A Hardware wallet has a small display and a few buttons. You use these to confirm that your spending transactions are exactly as you want them.

Since this wallet has a very limited user interface, you need to use it together with a complementary software program.  You can’t spend your currency without this extra (free) software. The hardware wallet provider will include this extra software program, typically as a browser extension. You can also use wallets from some other software wallet providers for the same purpose.  Some Desktop/Mobile wallets and/or Web wallets are compatible with Hardware wallets.

In the following text, when we say “all Hardware wallets”, we are referring to the three most well known reputable Hardware wallet manufacturers: Trezor, Ledger, and KeepKey.

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SECURITY of HARDWARE wallets

A Hardware wallet keeps your private keys extra safe by storing them inside its dedicated internal memory. They are never transmitted to the connected computer – and so they are never exposed to the internet, nor to viruses that might be lurking on your computer.

If a thief were to steal this wallet, even if they could open it without destroying it, they would still only have access to a memory chip with encrypted keys – so they will still be safe.

The display and buttons are used for three security purposes: 1) to set your personal login 4-6 digit security PIN, 2) to view your Seed phrase, 3) Confirm transactions.

If you mistype your PIN too many times when trying to log in then the wallet may intentionally delete your keys as a security precaution against thieves.  But don’t worry, you can recover those keys with your Seed phrase (which you did back up, right?).

If proper security precautions are taken then this type of wallet is generally considered more secure than an all other wallets, except perhaps a Paper wallet.  This wallet is also generally considered to provide the best reasonable combination of usability and security.

DON’T LOSE YOUR SEED PHRASE AND DON’T LET OTHERS SEE THEM OR THERE IS A VERY GOOD CHANCE YOUR CURRENCY WILL BE STOLEN.

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BACK UP / RECOVERY of HARDWARE wallets

All Hardware wallets implement the HD feature that we have described earlier.  This feature ensures that a receive address is never used more than once and that a Seed phrase is generated to help you recover your keys in the future.  When you set the wallet up for the first time you will see your Seed phrase on the wallet’s display. You will need to back up that phrase. Most Hardware wallets will include a paper form for this purpose.

All Hardware wallet keys can be easily recovered and imported into many other HD wallet types.  This includes wallets that are not Hardware wallets. You may want to do so if your wallet gets broken/lost/stolen, or if you simply choose to leave your original Hardware wallet.  This way you are not “locked” into sticking with one Hardware wallet.

Not ALL HD wallets can import the same Seed phase from all other wallets, but many wallets with HD are compatible with many others.  Also, not all HD wallet types use the same Seed length, so a good Hardware wallet will not be limited to a fixed Seed length. This way you can use it to recover Seeds from any other compatible HD wallet.

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COST of HARDWARE wallets

A hardware wallet is generally not free.  Most cost at least $75, and up to $250. Since they can very safely protect 10’s of 1000’s of dollars worth of currency (and maybe millions) then they are sure to be well worth the cost.  Many people chose this wallet for larger coin holdings for this reason.

As a side note: You can actually recreate some of these hardware wallet features on a standard USB memory device for free.  But it does take some tech skills and it won’t have a display nor buttons to safely confirm transactions.

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FEATURE SUMMARY of HARDWARE wallets

Here is a list of features that this type of wallet can and should provide. Unlike other wallet types, all Hardware wallets provide almost all of the same features as each other. The following are features of the hardware device itself.  Additional features will be provided by the associated software wallet.

  • HD: “Hierarchical Deterministic” – Always creates new receive addresses and is easy to back up / recover keys via the Seed phrase.
  • DISPLAY AND BUTTONS: For setup and transaction confirmation.
  • HIDDEN WALLET: A method to create two wallets on one device.  One “dummy” wallet with a few bitcoins and one “hidden wallet” which contains your fortune (This is a Trezor option in case you are kidnapped and forced to reveal your PIN)
  • OPEN SOURCE: SOME wallets are Open Source.  This means there is a reduced chance of software hacking.
  • WALLET COMPATIBILITY: The Hardware wallet can be used together with other software wallets.
  • PIN: Code needed to log into the wallet with an optional private key deletion in case of multiple wrong PIN attempts (by someone who may have stolen your phone.)
  • SEED +: One or more extra Seed words that YOU choose which will be added to the wallet’s chosen 12-24 Seed phrase. (for extra security)
  • TAMPER RESISTANT FIRMWARE: If the wallet detects it is not running original factory firmware it will indicate this to the user.
  • TAMPER RESISTANT PACKAGING: To ensures that the device you receive has not already been hacked.  This may be alternatively done in software.
  • VARIABLE SEED LENGTH: Compatible with other wallet types which may use shorter seed phrase lengths.

These features are explained in more details here. [Summary of Important Wallet Features]

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PROS / CONS of HARDWARE wallets

The following pros and cons are generalizations of what makes this wallet type uniquely different from most other wallet types.  

Pros:

  • COLD STORAGE: Can be easily kept in offline cold storage
  • SECURITY: Keeps private keys internal to the wallet, so it is safe to use even on infected computers and phones. Considered the most secure (which can be debatable in relation to a Paper wallet)
  • VERIFICATION: Unlike other wallet types, the Hardware wallets screen and buttons ensure that your transactions can’t be tampered with by malware.

Cons:

  • COST: Not free
  • INCONVENIENT: Slightly less convenient to spend your currency. Also more difficult and inconvenient to set the PIN and to confirm the Seed phrase.
  • LOST: More Easily lost, broken, or stolen than most other wallets (but it will still be protected by a PIN and can recover with your Seed phrase)

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EXAMPLES of HARDWARE wallets

The highest rated and most common Hardware wallets today are (in alphabetical order)

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GET STARTED of HARDWARE wallets

To get started with this type of wallet you will have to purchase it.  It is safest to purchase directly from the wallet provider or from one of their authorized retail outlets.  Don’t try to save a few bucks by buying it from some unknown seller. Amazon is usually safe but eBay can be risky.  When it arrives inspect it to see if it seems factory sealed. If it looks OK then plug it into your computer with the included USB cable, set your PIN, and backup your Seed phrase. Start the wallet browser software on your computer, find your first receive address, and transfer currency to this address. This currency can come from your Exchange wallet, from some other wallet you own, or someone can send currency to you. Then you are ready to start spending.  

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