In light of the recent Parity bug, now seems as good a time as any to reiterate the importance of a hardware wallet. You never want to be dependent on a third-party to take control of your digital assets.
Wallets manage public/private key pairs that control access to your digital assets. In short, they allow you to check on, hold, and/or spend your crypto in a generally user-friendly manner.
So, what is a “paper” wallet?
A paper wallet is public private/key pair written down – on a piece of… paper. Once written down, it can be physically secured and stored until access to its crypto is required. Remember this when it comes to paper wallets: 1) the private key is in plain sight if someone ever gains access to your paper and 2) you have to be certain the private/public key pair is generated in a secure manner – ideally on a machine not connected to the internet. [Read More]
Ok, what is a “hardware” wallet?
A hardware wallet is a physical device that you control which protects your private keys from ever being exposed to third parties. Hardware wallets should have a screen of their own, for security reasons. (To prevent man in the middle attacks.)
Then, what is a “software” wallet?
A software wallet exists on your cellphone or personal computer. If those “host” devices become compromised, then your wallet (and everything in it) is also at risk. If your device is connected directly to the internet, then your device can theoretically be compromised at any time.
And, what is a “web” wallet?
A very bad idea. A web wallet is a service by a third-party where they involve themselves in controlling your digital assets. If the service operator vanishes, so too could your funds. If the service encounters problems – so will you. Avoid these kinds of wallets if you can, unless you can personally evaluate the security and structure of the wallet service. [Remember: No Keys, No Coins]
Hardware Wallets ftw
Hardware wallets are trivially easy to set up and operate – buying your crypto was probably more involved. The top wallets can readily work in tandem with your cellphone or your personal computer.
Hardware wallets are probably the most secure way for the average person to manage their crypto – they can conveniently keep people from accidentally losing access to their funds or control over their assets.
If you normally need instant access to a portion of your funds, then you can always treat the hardware wallet as a “bank account” of sorts. You can keep a separate software wallet on your phone or computer for your “spending money”. This amounts to a trade-off between security and access while minimizing the amount of crypto at risk.
If you are a “trader” – then your hardware wallet may slow down your reaction time when responding to market events. This is because you will first need to send your crypto from your hardware wallet to an exchange.
If you are a hodler – then instant access is probably a non-issue.
When you set up your hardware wallet, you will be given recovery words that can be used to recreate your wallet. This need to be safeguarded, because your hardware wallet is not physically unbreakable. Physical things can break, and you’ll need your recovery words to get your digital assets back.
If someone gains access you your wallet, they do not immediately have access to your funds. They need your pin/password to operate the hardware wallet – this information should exist (ideally) only in your head.
Currently, I recommend the Ledger Nano S because it is small, secure, and relatively inexpensive – and I’m personally familiar with it. If you want to see how simple it is to setup and use, then follow this link:
In the meantime, if you follow this link: https://www.ledgerwallet.com/r/73d9
… You can grab a Ledger Nano S directly from the manufacturer and support this site at the same time. (It has been my experience that most people prefer ordering hardware wallets directly from the manufacturers.)
If you follow this link: http://amzn.to/2hqpSYB
… You can buy the Ledger Nano S from a 3rd party on Amazon and see a few of the other top hardware wallets – also while supporting this site.
Any reputable hardware wallet is better than no hardware wallet!