What are Hardware Wallets?
A cryptocurrency Hardware wallet is defined as being a ‘Cold storage device’ which stores your private keys and cryptocurrency offline. Hardware wallets are especially a good option if you want to truly own your own cryptocurrency without entertaining or having to deal with any counterparty risk (which would be there if you hold your cryptocurrency portfolio on an exchange, in this instance the exchange would be the custodian of your cryptocurrency funds and not you). So yes… you read that right, you can actually store most of your cryptocurrency offline this is something that many people new to cryptocurrency don’t know.
How do they work?
Hardware wallets usually contain two parts to their main functions and these are acting as a ‘connected device’ and a ‘disconnected device’. The connected part of the device contains your public keys and performs generally all of the requirements that a standard wallet would do in a transaction between you and another person, the only thing that the connected part of the device cannot undertake is signing of the transaction as the disconnected (offline) part of the device holds your private keys and is responsible for this function.
To use the device you simply connect it to your computer using a standard USB cable or QR code matching. Then using the Hardware devices software (dependant on which manufacturer you buy your device from), you can then perform regular transactions.
Are they secure?
Although commonly deemed to be the best form of securitising your digital assets the main risk is that like your traditional pocket wallet the device is a physical device which could be prone to theft or loss. In instances like these hardware wallet manufacture offer varying levels of additional security such as; PIN access (which is similar to a PIN you would use on your credit card), Seed key access which is a randomly generated seed key that you should write down or store in a place only you know about so if your device is lost you can simply buy another device, reboot it with your seedkey and access your funds again.
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