Hardware Wallet Explained (How they work, Why we need HW)

Hardware Wallet Explained (How they work, Why we need HW) - CoinGyan

Cryptocurrency has emerged as a lucrative investment and many investors are raking in huge profits from HODLing and trading it. However, this digital asset is prone to many online security threats that need to be taken care of on a serious note. Just imagine that you are Dollar Cost Averaging for five years and your total crypto portfolio stands at $100,000. One day you woke up, checked your exchange, and your balance stands NIL. Nobody would ever like to crash in this kind of situation. You need a trustworthy medium to stash your crypto holdings far from the dark shadow of online attacks.

One such secure and trusted medium is a hardware wallet. So, what is a hardware wallet, how it works, and why do we need it? We have uncovered all these one by one in this guide.

Let’s Begin.

What is a Hardware Wallet

To put it in layman’s terms, a hardware wallet is a physical device that looks like a flash drive and is used in safekeeping the private keys of your crypto holdings. Not to forget that a crypto wallet does not store your cryptos but only keys needed to access them because coins never exit the blockchain. They just travel from one address to another.

You should know that the cryptos secured in a hardware wallet are kept offline which automatically eliminates all the possibilities that can lead to online attacks. Also, it is quite easy to move your cryptos in and out of a hardware wallet. Some wallets need a USB cable to connect and complete the transfer whereas some wallets feature a built-in camera that can directly scan the QR code to observe the transfer in a matter of seconds.

So, if we have to summarize the role of a hardware wallet, then it serves the primary objective of defending users and their crypto funds against malware attacks, forced attempts, computer viruses, and many other remote attacks.

Why Ledger Nano X is Best Hardware Wallet

You can find many hardware wallets in the market, but Ledger Nano X is the one that you can trust. It has emerged as the best hardware wallet in the market because of the following top-notch characteristics:

  • Ledger has incorporated itself as a trusted brand in the international markets.
  • It comes with a built-in robust battery of 100 mAH that can last for hours.
  • You can store more than 1000 cryptocurrencies in your Ledger Nano X.
  • It supports diverse languages to help users from different parts of the globe in easy access.
  • It features an extensive memory of 2048 kb which is competitive enough to accommodate all the needs.
  • It works with all the mainstream operating systems like Windows, Linux, and Mac.
  • Ledger also features a wide range of easy-to-understand support documentation.

Feel free to shop Ledger Nano X and many other hardware wallets from the Ledger store.

How Hardware Wallets Work

As already explained in the sections above, the hardware wallet technically stores the private keys of your cryptocurrencies. The coins rest on the blockchain and the help of your private key in authenticating your identity on the blockchain to access your holdings. Also, the private keys are stored far from the reach of an internet connection which builds a shield against hackers and protects your investments. Since a hardware wallet has no strings with the internet, people also call it a cold storage wallet.

The hardware wallets allow you to sign and confirm the transactions on a blockchain network. Also, The private key is nothing but a digital signature that signs off the transaction from the blockchain. You would be glad to know that it is impossible to forge private keys because it is made of a random combination of characters and digits.

In addition to the above, the private keys held on the hardware wallet are protected via PIN along with an optional passphrase. So even if you happen to misplace your hardware wallet, nobody would be able to access and liquidate your investments. You can simply utilize the seed phrase for generating the private key. With the help of the seed phrase, you can migrate your private key to another hardware wallet. All you need to do is ensure that when your seed is generated for the first time, you write it down on a piece of paper, and securely stash it under a safe carpet.

Using a hardware wallet is also quite easy as you have to simply connect it with your system and unlock it via PIN. You can then initiate a transaction and validate it using your keys on the wallet.

Ledger Nano X - CoinGyan

Why we Need Hardware Wallets

The prime reason why you need a hardware wallet is that it keeps your cryptocurrency safe and secure.

Easy to Use

It is quite easy to use a hardware wallet as you don’t need to gain any specific technical know-how. You can plug in your hardware wallet to your system and access your funds easily from anywhere. Hardware wallets also enable users to sign in to various dApps without the need for creating an account every time on every dApp. Some hardware wallets also allow you to sign in to Google or Facebook.

Safe & Secure

Cryptocurrency investors and traders find hardware wallets secure as they come up with a lot of features that ensure utmost security. Your crypto holding shall stay safe even if the system to which you connect it is infected with malware or virus. The best thing about a hardware wallet is that it does not need the support of the internet to function.

Multiple Cryptocurrencies

You can store a diverse range of cryptocurrencies in a single hardware wallet. For example, Ledger Nano X alone can store more than 1000 different kinds of cryptos. Also, you don’t need to have a recovery phrase for every crypto you own. A single passphrase can provide security backup to your entire portfolio.

Cryptocurrency Trading

It is quite easy to use hardware wallets for cryptocurrency trading in top dex around the world without KYC and risk of hacking. You can directly connect your hardware wallet in a matter of seconds to a trading platform and start trading. One of the best things you can expect while using a hardware wallet is high-grade security allowing you to trade seamlessly without any fear.

Immunity Against Computer Viruses

A computer virus can corrupt your software which means that if you are using a hot wallet to store your crypto, then your funds could be trapped into a risk if a virus rests on your system. However, hardware wallets build a shield against computer viruses. As they don’t need to interact with any online activity.

Wrapping it Up

Hardware wallets have been successful in gaining influential popularity among crypto traders and investors. You might not believe but Ledger has secured approximately 15% of all crypto assets on a global scale. The robust security alone is the most important factor that contributes to this popularity. If you still have any doubts or queries using a hardware wallet, then feel free to drop them in the comments below.

Related Posts
Scroll to Top