As soon as Bitcoin gained some actual market value, reports of cryptocurrency thefts started appearing. The digital world is not foolproof when it comes to protecting your data and chances are that it never will be.
So, it is understandable that you’re worried about the safety of your hard-earned Bitcoin fortune, especially now that the coin is trading around the five-figure range.
While these concerns are well-founded there is also a very simple solution that actually offers all the protection you could want, at least so far. You may be embracing the cryptocurrency trend because you’re excited about fewer regulations or more online interaction and anonymity, but the security still lies in hardware solutions.
Introducing the best hardware wallets for Bitcoin and other cryptocurrencies. This article will explain the benefits and the very few drawbacks of owning and operating a hardware wallet.
It will tell you how they work, what makes them best, and why some of them are simply so popular that over the past few years no other products seem able to slip through the cracks onto anyone’s list of the best hardware wallets.
How Hardware Wallets Work
Until a couple of years ago, most people held their Bitcoins in online wallets. As the cryptocurrency trend became more popular, more and more digital wallets were developed and hardware wallets also came into existence.
Perhaps it was the need for even more security, or for some it was the need to have something tangible that related to Bitcoins.
A hardware wallet generally consists of two keys, one private and one public. The device will also use an algorithm to manage the keys and to allow you to take part in transactions within the Bitcoin network.
Although Bitcoin is the mother of all cryptocurrencies, most of the best hardware wallets today also support other cryptocurrencies.
Why is it important to store other cryptocurrencies?
Well, despite the fact that Bitcoin has the biggest market share and the highest value, there are other currencies such as Ethereum, Litecoin, Bitcoin Cash etc. which have significant values. All the more so, there are more and more cryptocurrency miners steering towards mining alternative currencies due to how competitive and expensive Bitcoin mining has become.
Have you ever heard of hacked hardware cryptocurrency wallets? If you’re not mistaking them for regular USBs used for storing data, then probably not.
While in the real world it is safer to keep your money on your credit card as you won’t lose it in a robbery, with cryptocurrencies the situation is entirely different.
No matter how secure your digital wallet of choice is, there is always the possibility of the service getting hacked or your transaction being rerouted by a third party. In case you didn’t know, cryptocurrencies don’t come with insurance.
While your local bank may eventually refund the money you lost, if you become a victim of cryptocurrency fraud, no one is getting your money back.
Did you know paper is also considered a hardware wallet? – Storing your private key on paper is hackproof even if it is not feasible in the long run.
It can tear, get wet, and to make matters worse you’ll eventually have to type your key into another wallet to make transactions. That being said, it is an offline storage option.
This is where the best hardware wallets come into play and deserve the investment. With offline storing, your data cannot be accessed at any time and without your approval.
You are the only one who can decide when to do a transaction, how much you want to send, or how much you want to ask for.
The USB type connectivity used by most of the best hardware wallets prevents hacking by third parties via internet, Bluetooth or infrared. Even if someone were to get their hands on your hardware wallet, there are multiple stages of security checks they would have to pass, assuming that you are using more than just a PIN code for confirmation.
Depending on the design, even the best hardware wallets can be very different from one another. However, don’t get too caught up in the visuals.
As long as they have a screen to display the transaction information and have buttons to let you input PIN codes or pass other security checks, they have enough physical features.
What sets the best hardware wallets apart are usually their internal random number generators. Anyone with limited computer programming knowledge knows that producing random values is not an easy task and a bad generator could make your data easy to hack.
The price matters less when it comes to the best hardware wallets, as the absolute best of them are so close in terms of performance and so similarly priced that it really makes no difference which one you get. What you could consider doing is paying extra for one that has specific altcoins that you like to trade in and can’t find support for on other devices.
Best Hardware Wallets for 2018
There are many hardware wallets for cryptocurrencies but only a few of them have stood the test of time. Some were abandoned in their development phases, others underperformed, and some are just too expensive for no real reason.
Here are the three best hardware wallets past and present. Neither of them should lose ground in 2018 to other devices as nothing truly impressive or innovative is awaiting release.
An oldie but goodie, this user-friendly device is still one of the best hardware wallets, and some would argue that it is, in fact, the best of them all. Its price tag is around $110 which is very affordable when you consider its reputation and competitors’ prices.
The way TREZOR works as an offline hardware wallet is very interesting for those unfamiliar with these wallets. It lets you store your coins out of reach of anyone and it only lets you spend them once you are connected to a computer with internet access. It also takes you through a multiple-step process of authentication.
The extra security comes from its limited USB connectivity, as is the case with most offline hardware wallets. Only Bitcoin or other accepted altcoin transactions can be performed between TREZOR and the computer, so nothing else can get through or tag along.
This is what makes it one of the best hardware wallets. You can use it even on unsecure platforms without the risk of losing your data.
Another neat feature is the PIN input. TREZOR displays the numbers on its screen but your keystrokes can’t be monitored effectively by anyone. The reason? TREZOR changes the order of the digits each time you have to input your PIN.
It doesn’t change the code itself, just the order of the digits which means they won’t appear on screen as they would normally on a phone or keypad.
With a team of cryptocurrency security experts behind the design, its simple interface and the ability to hold up to 10 altcoins, TREZOR truly is among the best hardware wallets past, present and future.
Ledger Nano S
This is a strong title contender among the best hardware wallets. Ledger is not a newcomer to the world of cryptocurrency, and with its release of the Ledger Nano S, everyone took notice. Especially considering that at just $99, it is slightly cheaper than the older TREZOR hardware wallet.
When it comes to the design, the Ledger Nano S definitely looks like a newer model. It is slimmer and comes in a metal casing. This puts it ahead of the TREZOR at least in terms of durability.
The simple Chrome extension you can use for account management is also very aesthetically pleasing, with a no-nonsense approach to displaying your links and connections.
Among the cryptocurrencies accepted on the Ledger Nano S are Bitcoin, Litecoin, Ethereum (and Ethereum Classic), Dogecoin, Zcash, Stratis and Dash. However, it is worth mentioning that out of all of them, it doesn’t support the Zcash z-addresses yet. This will limit your ability to manage this currency.
The Ledger Nano S is certainly a step in the right direction in the development of hardware wallets. It is very user-friendly and unlike its predecessor the Ledger Nano, this one has two display screens. This makes it easier for you to take note of your seed number.
It has all the security features you would expect from the best hardware wallets and it also looks cooler than most designs out there. Perhaps the one true downside is that it resembles a regular USB flash drive so much that you could end up taking the wrong stick with you when you go out.
While it doesn’t have nearly half the reputation of TREZOR or the Ledger Nano S, KeepKey is making the rounds in the cryptocurrency community. It has everything going for it in terms of online and offline transactional and seed security.
You could also argue that KeepKey is just awesome and maybe the best hardware wallet if all you are concerned about is looks. That being said, the clear screen and full black finish might not be enough for most people. As stylish as it looks, KeepKey is a mammoth among hardware wallets at double the size of the TREZOR.
Considering that the price tag is high at $129, how come it still made this list? The answer is quite simple. When it comes to security, it gets it right.
It doesn’t allow external interference and has multiple security layers by default, with options to add more if you want your confirmation process to be even more extensive.
It supports lots of cryptocurrencies besides Bitcoin including Ethereum, Dogecoin, Dash, Namecoin and more. As with most of the best hardware wallets, you will be notified when new currencies are supported.
Is it the best hardware wallet of 2018? It’s definitely up there. To make it simple, if someone got you this as a gift, there’s no real reason to exchange it for another one.
Special Mention: CoolWallet S – Your Credit Card Hardware Wallet
Unlike USB compatible hardware wallets, the CoolWallet S uses Bluetooth technology to handle account management and transactions. Its size is 85.6 x 53.98 mm (LW) and it has a thickness of about 1 mm. It’s a bit larger than a standard credit card but that’s ok considering all the extra features it has.
One advantage the CoolWallet S might have over the previously mentioned best hardware wallets is that the CoolWallet S can connect to any device that supports Bluetooth. This means you can use your smartphone or your tablet instead of a regular computer.
Furthermore, once the initial setup is complete you won’t need secondary devices to start doing transactions.
Aesthetically speaking, the CoolWallet S is really cool as it offers plenty of security and has a visual display on a credit card-like device. The downside? You’ve probably guessed it already. As a device that relies on a non-physical connectivity, it is much more susceptible to hacking.
In addition, the fact that no credit card is as durable as a USB stick, especially one with a metal casing like the Ledger Nano S, you can see why the CoolWallet S doesn’t enjoy a larger market share. It may be one of the best hardware wallets but it doesn’t crack the top 3. Its innovative design however, certainly makes it worth mentioning as an alternative.
What are the Vulnerabilities of Hardware Wallets?
There’s a lot crammed into a tiny device so there’s no surprise that some of them come with bugs or simply lose efficiency after a while. Although there haven’t been any reports of stolen currency or data from hardware wallets, it’s not outlandish to assume that the manufacturing process could be compromised at some point.
What could happen if someone gets hold of your hardware wallet? A fun demonstration was made by the creators of TREZOR a couple of years ago.
They showed that you could set specific passphrases to limit the amount of currency which can be transferred in or out of your account.
This means that while someone could hypothetically force you to give out your password, you could just give one that gives them limited access to your address without them knowing it. This obviously won’t work if the thief is familiar with your holdings but it is still a very neat feature to have.
Words of Caution on USB Flash Drives
While some could argue that the PC was the first hardware wallet, it wasn’t really a portable device. USB flash drives were the first external units to be used as Bitcoin wallets. Some people even use them to this day but they don’t realize the danger in doing so.
Storing anything on a USB flash drive is just as susceptible to malicious interference as storing private information on any desktop or laptop connected to an unsecure network. In fact, you’re better off using a digital wallet than a regular flash drive. These don’t have the security features of a specialized wallet which all of the best hardware wallets have.
To get the most out of your hardware wallet, you will most likely want it to be compatible with alternative cryptocurrencies too. You should also consider only getting one that has support for all popular OS platforms such as Windows, Linux, and Mac OS.
While a hardware wallet like the Ledger Nano S may have a similar appearance to a USB drive, don’t assume that they have similar offline protection. Regular flash drives use a two-way communication line just like hardware wallets, but the latter use a very limited connection.
The best hardware wallets also adhere to special security protocols that are written by experts in cryptography, internet security and cryptocurrency security. These make a world of difference when it comes to managing your coins and keeping outside interference out of transactions.
Hardware wallets are not hard to find as there are plenty to choose from. However, you can count the best hardware wallets on just one hand with fingers to spare.
Based on its continued high performance, steady price, and support for new and exciting cryptocurrencies, TREZOR still sits at the top of the list of best hardware wallets.
The Ledger Nano S might also interest you as it is a bit cheaper and offers some extra physical durability due to its metal casing. It’s not considered a budget option, as $99 is not that far off the price of a TREZOR, but if every dollar counts then it may be the better wallet for you.
Last but not least, the CoolWallet S is fun to look at and maybe even warrant a test run, but the Bluetooth security risk factor is not too encouraging. It is certainly among the best hardware wallets in terms of looks and convenience but if you’re going for safety first, give it a few more years to develop.