Hardware wallets

On August 12, 2021, one of the biggest heists struck the cryptocurrency world. Immediately the news headlines hit the internet, people began to ask questions. How much was stolen? Who did it? How were they successful?

Later, we heard that the total amount of coins lost was worth about $610 million. If you read the story, there is a lot you can learn.

Hackers have the tools, the skills, and patience to hack even big crypto organisations and any such organisation that lets their guards down.

But as an individual, you have limited resources and expertise in this kind of thing. What can you do?

Quite frankly, you don’t need more than a few resources to stay safe from your side of things if you know all the tips that can protect you and do it. This guide will explain all you need to protect your hardware wallet and protect your private keys.

Let’s start with definitions: what are the hardware wallet and private keys?

What’s a Hardware wallet?

A hardware wallet is also called cold security. It is a form of safe where crypto investors can store their private keys and protect themselves from hackers.

Probably, you are new to everything, and you want a clearer explanation. So we will start from where you can understand.

The blockchain

The blockchain is a peer-to-peer technology (a set of computers that stores a ledger of all transactions). These computers are all over the world and can be tracked. It is like a replacement for a bank.

The crypto wallet

To enter the crypto world, you need a medium to access and transact with your funds, something like an app. This is the crypto wallet, and will give you something similar to a “bank account number” that is referred to as the “public key”. To gain access and use the funds that are linked to your public key and crypto wallet, you need a kind of “password.” In the crypto world, these are called “private keys”.

Cool, yeah? But why do you need to protect these keys if they are yours?

Hackers are on your case. It sounds scary, but that’s true. To make it worse, if you have the information about your private keys on the internet, they can probably have access to it.

You have to protect your wallet. To do that, you need to protect the only access anyone could use — — your private keys.

You have two options for protecting this key. They are:

• Non-custodial or hot wallet
• Cold or Hardware wallet

A hot wallet stores your private keys online. Unfortunately, they are consistently targeted by hackers, like the story I shared at the beginning of this article.

Hardware wallets store your private keys offline. Therefore, they are more difficult to hack. One common way hackers can hack is if they already get hold of it before you buy it. That’s why it is important to get the device only from trusted dealers.

It is up to you to choose what method you will use to protect your keys, but you can use both and still use a physical backup.

How does the hardware wallet work?

Hardware wallets are designed to use as minimal features as possible. That way, it is difficult to manipulate or get access to it because the more features and internet connectivity a device has, the easier it is to hack.

So when you get a hardware wallet from a trusted seller, you have to connect it with a bridge.

A Bridge

A bridge is like the other half of the wallet. It is like an app. Since the main wallet is too small to allow many operations (it could be as small as a USB device), the bridge is where you operate it.

Once connected, the hardware wallet will generate a set of words, usually between 12 and 24. They are called the seed phrase. With the private keys, they are your access to your crypto wallet. Learn more about wallets & private keys here.

Now, whenever you want to transact, the hardware wallet would generate codes for each transaction. But if you lose the device, your seed phrase or private keys will be the only tools you can use to gain access to your crypto wallet.

These are things you should know about seed phrase:

• If you forget your seed phrase and private keys, no one can help you retrieve access.
• If someone else has your seed phrase or private keys, then they can access your wallet as easily as launching the trusted app and inputting those sets of words.
• It is like a password for anyone to access your crypto wallet anywhere in the world.
• Unlike a normal bank transaction where you can make complaints at the bank, there is nowhere to go if you are hacked. Blockchain technology isn’t controlled by organisations like the government or banks where you can run to.

Do not save it online, too, because the internet is an access that allows skilled hackers to seek vulnerabilities. The best advice is to write it down and keep it somewhere no one can reach it (even having more than 1 copy).

Let’s give some tips to keep you safe at all times.

Tips on how you can protect your private keys

• Don’t take screenshots of your seed phrase or private keys. It means you are saving the images on your phone, connected to the internet. Sadly, it is prone to hacking.
• Don’t recover a crypto wallet from a device you do not trust. Instead, use a smartphone or computer you can trust.
• Sharing your seed phrases or private keys with anyone means you know they can get access to your funds. It is easy once they have them. All they need is an internet connection and an app to put in those words or recovery phrases.
• Write the seed phrase or private key down manually and keep it safe. You can control it in a vault or anywhere as long as you are sure it won’t get out.
• When buying a hardware wallet, buy directly from trusted dealers.
• When you are making transactions online, confirm every detail before proceeding. For example, check the address for little differences like one letter or the encrypted sign, which signals that everything you put on the website is between you and the website.

Conclusion

It is easier to stay safe and protect your crypto wallet with a hardware wallet. We have covered all the things you need to do and what you shouldn’t do. One key point is to keep your private keys and the recovery phrase to yourself. Then, you should be safe.