How To Use Hardware Wallets To Store Cryptocurrency Safely?

While hot wallets offer excellent trading-related flexibility, their security system isn’t that good. And as they’re always connected to the internet, almost any hacker can use brute force to access it. If you don’t have a 2FA in place.  

A hardware wallet for cryptocurrency, on the other hand, is much more secure. As it stores your private keys and funds offline. However, if you’re into frequent trading, they may not be the best option for you, as it takes quite some time to take coins out of a cold storage solution.  

How Does The Best Hardware Wallet For Crypto Work? 

Trezor: An Example of a Hardware Wallet (Source) 

A hardware wallet for cryptocurrency is basically a physical device, which is designed to store your keys securely and protect your funds from cyber threat. Unlike software-based wallets, these work as a cold storage solution and helps minimize exposure to malware and hacks. 

Also, when you are making a crypto transaction, the hardware wallet will sign it internally so that your private keys never leave the device. This way, even if someone hacks your system, they’ll never be able to break into your wallet and steal private information. 

Most hardware wallets also use an encrypted cryptocurrency storage system. So, even if someone steals it, they won’t get access to your funds as long as they don’t know about the recovery phase or PIN code. However, as these devices are quite small, like USBs, it’s important to store them in a secure place instead of carrying everywhere. 

How Do Hardware Wallets Work?

At its core, these secure crypto storage options rely upon a process called private key management. It stores all your private keys offline to make sure that no one can access them through online means.  

The private key encryption feature, on the other hand, kicks in when you are making a transaction and locks your private keys through advanced cryptographic methods. So, if you don’t put the right PIN into the physical device, it’d be impossible to steal the keys.

Besides, as a type of cold storage solution, a hardware wallet also uses encrypted cryptocurrency storage to resist tampering and keeps your funds safe through 2FA and passphrase support. 

However, they are not the best option if you want to trade frequently, as they need to be connected to a device while making a transaction.  

This slows down the trading process to some extent, but if security is your primary concern, hardware wallets should be a no-brainer for you. 

So, How Do You Set It Up?

Setting up a hardware wallet will take some time, as it’s quite a lengthy process. So, it’s important to be patient and follow the steps we’ve mentioned below – 

1. Firstly, you have to take the wallet and connect it to your phone or computer by using the provided cable. There should be a companion app available too, which guides users on how to perform this stage of the setup procedure. 

2. Once it’s connected, you’ll be requested to create a PIN code. It’s important to use a strong code, such as a combination of numbers, uppercase & lowercase letters, and special characters, to make sure that no one else can crack. Oh, and write it in your diary so that you don’t forget or lose it. This would make it impossible to access your funds. 

3. Now, your hard wallet will generate a ‘secure wallet recovery phrase’ (usually within 12-24 words), which will help you get your coins back if you ever damage or lose the device.  

4. Most wallets also come with features called private key management, which is used to protect your keys, and cryptocurrency wallet security features like two-factor authentication and passphrase protection. So, you have set them up as a part of the procedure. 

5. Finally, after everything is done, you can try transferring a small amount of cryptocurrency first to check if it’s working as intended or not. If you are comfortable with the entire process, move in your funds and keep them protected. 

How Should You Make Safe Transactions With Hardware Wallets?

While hard wallets are extremely safe, their overall ability also depends on how carefully you are using them. For example – 

1. Before you sign a secure crypto transaction, always double-check the recipient address on the screen of your device. If there’s malware in your device, it can change addresses without you even noticing – so it’s best to be careful. 

2. The secure wallet recovery you have is the last line of defence. So, store it offline, if possible, in more than one location, and especially on a metal backup plate. It’s better not to keep them on cloud storage or your phone though, as they can get hacked. 

3. A physical crypto wallet won’t be much of your use if it gets stolen, damaged, or lost. Therefore, you have to keep it in a safe location as well, especially away from moisture, extreme heat, and places your dog might knock it over. 

4. Manufacturers of these devices will keep on sharing new updates to patch security issues and fix bugs every year. However, if these updates are ignored, you might end up losing all your data and private keys, even if you have multi-factor authentication on it. 

5. Some cyber-attacks focus on tricking users into signing a malicious transaction by copying the data of the person you’re trading with. So, before you make the transaction, be sure to talk to the person again and confirm their data legitimacy first. 

Summing It Up 

Trading cryptocurrency is all about maintaining control and managing your data efficiently. If you are making the mistakes we’ve mentioned before, it’s inevitable that someone will get your credentials and try to steal your money.  

So, be safe, be secure, and keep on adding layers of security to your account. If the hackers are evolving, why shouldn’t your defence do the same as well?