Losing your life savings to a hacker is a scary reality that’s all too common in the world of cryptocurrency. While the technology is powerful, the risks are great and have thus far cost individuals and corporations millions of dollars.
Keeping your funds online presents constant risks. Hardware wallets, also known as cold storage devices, have emerged as a powerful option helping to shield people from the potential of this unfortunate fate.
Top Hardware Wallets
The hardware wallet market has changed significantly over the past ten years. Leading devices now offer high-level security with easy-to-use features and support for a wide range of digital assets.
Premium Hardware Wallets
Ledger Nano X ($149)
French security firm Ledger released the Nano X in 2019, which quickly became their primary device. The Nano X leads the market with over 6 million sales and is a popular hardware wallet choice for crypto enthusiasts.
The Nano X works with over 5,500 cryptocurrencies through the Ledger Live companion app. The app offers a single screen that allows you to control multiple cryptocurrencies using one interface. You can stake coins, swap tokens, and handle NFT collections through Ledger Live. The platform also connects to major DeFi protocols, allowing you to earn APY on assets.
The device packs a wide range of features into a small profile – no larger than a standard USB drive. Its Bluetooth connectivity lets you trade on mobile devices without risking your portfolio, thanks to the CC EAL5+ chip, which keeps private keys safely stored in the device.
However, Ledger’s closed-source software blocks outside security checks, and while the device adheres to strict security standards, some users prefer open-source options. Ledger also had a database leak in 2020 that exposed customer emails, serving as a stain on its otherwise pristine record.
Trezor Model T ($219)
Czech-based SatoshiLabs changed hardware wallet security forever with the release of its open-source design. The Model T came out in 2018 and supports 1,400+ cryptocurrencies through the native Trezor Suite.
A color touchscreen makes this device unique – it’s easy on the eyes and has zero screen visibility issues. You can enter recovery phrases or confirm trades more easily than with buttons, and the screen lets recovery happen on the device itself to protect seed phrases from potentially compromised computers.
Trezor maintains complete transparency, revealing all its security tests to the public while welcoming outside reviews and tests of its hardware. The device uses Shamir backup to split recovery phrases into pieces for better asset protection.
This device’s high cost is supported by its many features. At $219, it costs more than other options but still lacks Bluetooth, which may be offputting if you’re primarily a mobile user. Some note it lacks a secure chip, but Trezor claims it stops cyber-attacks in other ways, and thus far, these claims have proven valid.
Mid-range solutions
Ledger Nano S Plus ($79)
Ledger’s basic device improves the features of the Nano S at a more affordable price. The Plus holds more crypto apps simultaneously and has the same secure chip as the Nano X.
A bigger screen offers an overall better display and a USB-C integration to work with newer computers. Desktop users who don’t need mobile access tend to prefer this device. DeFi support stays complete, but no Bluetooth means minimal, if not nonexistent, mobile trading opportunities.
BitBox02 ($149)
Swiss maker Shift Crypto combines open-source software with a secure chip. This mix gives the best of both worlds and satisfies anyone looking for an open-source option offering hardware protection for private keys.
The device brings new ideas, offering a microSD slot to back up device data. Touch sensors simplify navigation, while the OLED screen clearly shows trade details. Overall, the BitBox02 is a newer market option that’s starting to prove itself as more devices ship.
Budget-Friendly Options
SafePal S1 ($49)
A product backed by Binance Labs, SafePal provides security at a starter price. The S1 works through QR code transactions without USB connections, removing the risk of physical attack vectors.
The device connects to over 20 blockchain networks and works with Binance DEX. A mobile-centered design suits active traders, but the required app makes some users cautious about privacy, given the requirement to download and use the app to access your funds.
KeepKey ($49)
The ShapeShift KeepKey offers excellent construction and a big-screen display at an affordable price. The metal case and bright OLED screen pack a punch you’d expect to see in devices far exceeding the $49 price point.
However, while the device has flair, it lacks technical prowess. Updates slowed after ShapeShift bought it in 2017, and the now-limited coin support and lack of updates make KeepKey a better choice for storing major assets like Bitcoin and Ethereum.
Bitcoin Hardware Wallets
Coldcard Mk4 ($148)
The Coinkite Coldcard Mk4 is a top choice for securing your Bitcoin. Released in 2023, this device cuts out risks through a simple design.
A setup without a computer connection lets you move signed transactions through microSD cards or QR codes, completely blocking malware. Features like PSBT or native CoinJoin match satisfy privacy-focused users, further boosting the Coldcard’s focus on security.
The secure element rates above standard CC EAL5+, and the firmware design blocks supply attacks that might manipulate the end user instead of the hardware.
However, newcomers face challenges with the text display and comparatively complex features geared towards Bitcoin-natives.
What is a Hardware Wallet?
A hardware wallet is a physical device that looks similar to a USB drive. It’s a purpose-built tool for keeping your digital assets completely offline and away from potential online threats.
While your crypto still lives on the blockchain, a hardware wallet keeps it safe from online threats. Unlike software wallets or exchange accounts, which remain perpetually online, hardware wallets keep your private keys (which are like the master password for your wallet) secure and offline.
Even when the device is plugged into your computer, the private keys are stored in a secure chip that never connects directly to the internet. Thanks to this configuration, you’re in complete control of your funds when you use a hardware wallet, as its by-design security makes it nearly impossible for hackers to access your crypto remotely.
What is “Cold Storage”?
“Cold storage” refers to using a hardware wallet to store your crypto assets securely. The terminology and concept gained traction after high-profile exchange hacks in the early days of crypto, most notably Mt Gox.
This exploitation by malicious actors lent significant credence to keeping investors’ assets securely offline, and the practice quickly gained traction.
These hacks were possible because exchange funds were kept in “hot wallets” – online storage solutions that, while convenient for trading, remain vulnerable to malicious exploitation.
Exchanges have lost billions of dollars to these hacks, and best practices now dictate keeping the vast majority of exchange assets stored in offline hardware wallets.
The growing adoption of hardware wallets reflects an evolution in people’s attitudes toward digital asset security. As digital assets move from the fringes to mainstream investment portfolios, more investors recognize that keeping significant holdings on exchanges or in software wallets presents considerable risk, analogous to storing cash underneath your mattress.
Today, most “cold storage” (hardware wallet) solutions support thousands of cryptocurrencies and even have built-in exchanges. From swapping access to accessing opportunities in decentralized finance (DeFi), hardware wallets have emerged as the de facto solution for on-chain security.
How Do Hardware Wallets Work?
Hardware wallets create new wallets for you, generating and storing private keys in a secure chip on the device itself. When you want to send a transaction, it is signed inside the wallet to ensure your private keys never touch your computer or phone.
This process happens in four steps:
- You initiate a transaction on your computer
- The transaction details get sent to your hardware wallet
- You physically confirm the transaction on the device
- The signed transaction returns to your computer and broadcasts to the network
The beauty of this system lies in its simplicity. Even if your computer is compromised with malware, your crypto remains safe because the critical signing process happens offline.
Cold Storage vs Hot Wallets
Exchanges and mobile apps offering crypto often use “hot wallets” that stay connected to the internet for quick access and trading. That’s a convenient approach for traders, but these wallets are ultimately vulnerable to hacking. Criminals have stolen billions of dollars through various exploits and attacks targeting hot wallets.
A properly configured cold storage device removes these risks almost entirely. Hardware wallets permanently keep private keys offline, creating a physical security barrier between your funds and online exploits. This security model has proven so effective that exchanges now store up to 95% of customer funds in cold storage. They keep only the minimum required balances in hot wallets for daily trading. Exchanges that practice this security measure include:
Security Features and Benefits
Leading hardware wallets incorporate multiple layers of protection:
- Mandatory PIN codes block unauthorized physical access
- Military-grade secure elements prevent hardware tampering
- Recovery seed phrases safeguard funds if your device is lost or damaged
- Advanced passphrases create hidden wallets for extra security
The modest investment in a hardware wallet ($50-200) provides enterprise-grade security for your cryptocurrency portfolio. Compared to the potential loss of funds from exchange hacks or online wallet compromises, cold storage offers unmatched protection for serious crypto investors.
Recent events reinforce this reality. While major exchanges continue to face sophisticated attacks, not a single properly used hardware wallet has been compromised through remote exploitation. This track record explains why hardware wallets remain the gold standard for cryptocurrency security.
What To Consider When Buying A Hardware Wallet
Key Features to Consider
Not all hardware wallets offer the same features; what you get often depends on your price point. Leading devices support different numbers of cryptocurrencies, with more affordable devices supporting 3-5 and higher-end devices supporting up to thousands of coins and tokens simultaneously.
The user interface is also essential. Some wallets offer built-in screens for transaction verification, while others rely on companion mobile apps.
It’s important to note that premium devices often include touchscreens that simplify entering recovery phrases and confirming transactions. While not essential, these features can significantly improve the quality of life during device usage.
Coin Support and Compatibility
Entry-level hardware wallets generally support Bitcoin and major cryptocurrencies only. By contrast, more advanced devices support thousands of coins, making them suitable for diverse crypto portfolios.
Those new to crypto or who just want to stack back major tokens like Bitcoin and Ethereum will generally be well-suited to start with a more basic wallet. However, higher-end devices also naturally support these options as well.
Compatibility with third-party wallets adds flexibility. Leading hardware wallets integrate with popular software like MetaMask and Electrum, expanding their utility for DeFi and advanced trading.
Security Implementation
Hardware wallets use different approaches to security. Some rely on specialized secure chips similar to those in credit cards. Others focus on open-source software and routine security audits.
Both approaches work effectively, but they present different tradeoffs. Secure chips offer strong tamper resistance, while open-source implementations allow independent security verification.
Hardware Wallet Use Cases and Applications
DeFi integration
Hardware wallets now largely support decentralized finance platforms directly, without the need to move your assets off the device. The leading devices connect to DeFi protocols through MetaMask or WalletConnect, enabling yield farming, liquidity provision, and token swaps, all enjoyed with the benefit of cold storage protection.
In particular, the Ledger Nano series stands out with its native support for Aave Compound and Curve via the Ledger Live app. Similarly, Trezor users can enjoy similar features through Suite’s exchange integrations.
NFT storage
Valuable non-fungible tokens need protection just as much as cryptocurrency tokens and coins. The top hardware wallets let users view or transfer NFTs directly through their interfaces. The Ledger Nano X shows NFT details and images in Ledger Live, while the Trezor Suite offers similar options through connections to partner software.
Multi-currency management
Modern hardware wallets eliminate the need for multiple devices, with single hardware wallets now secure dozens of chains simultaneously, including:
- Bitcoin and major cryptocurrencies
- ERC-20 tokens on Ethereum
- BEP-20 tokens on BNB Chain
- Programs on Solana
- NFTs across multiple networks
- Emerging Layer-2 solutions
Setting Up Your Hardware Wallet
Initial Hardware Wallet Setup
You’ll want to pay careful attention to detail when setting up your hardware wallet. Ensuring you undertake all of these steps will maximize the protection your device offers, protect your assets, and ensure your device is secure before use.
First, you should always order directly from manufacturers or authorized resellers. Never order from a random website – these devices could be tampered with and unsafe for use. Upon receiving your order, always verify the package and ensure there’s no evidence of any tampering.
When you unpack the device and plug it in, update it to the latest firmware immediately. Then, generate a new seed phrase for that wallet. Never, under any circumstance, use the pre-configured devices’ seed phrase, as it may be compromised.
You should also always test small transactions before sending larger transfers to ensure you have the correct address and that the device works correctly.
Backup and Recovery
Your recovery phrase gives you complete control over your funds, allowing you to restore the wallet should you ever lose it. Proper backup requires writing seed phrases on paper or metal – never store them digitally, as the compromised device could, in turn, allow hackers to access your wallet.
Make sure to store these backups in multiple secure locations, such as a personal safe. Also, ensure that you test the recovery process before storing any significant value on the device to ensure the device is recoverable.
Finally, consider multi-signature setups for more significant amounts to maximize your security.
Best Security Practices
To maximize the security of your hardware wallet, regularly update the firmware and ensure you use front PINs. Avoid using personal dates like birthdays or simple sequences like “1234,” as these are easily guessable. Enabling passphrase protection is a good way to add a layer of security on top of a strong PIN.
Never share your seed phrases of private keys with anyone, as this can quickly compromise your wallet. Maintaining separate devices for different risk profiles is also advisable, such as having a dedicated laptop for wallets that hold over a certain amount of digital asset value.
Ensuring that your transactions are signed offline whenever possible while verifying any addresses to which you are sending funds multiple times before confirmation are two more practices that can help maximize the security of your assets.
Hardware Wallet FAQ
What are the best hardware wallets?
Top hardware wallets in include Ledger Nano X ($149) or Trezor Model T ($219) for premium users, Ledger Nano S Plus ($79) next to BitBox02 ($149) for mid-range budgets along with SafePal S1 ($49) for cost-focused buyers. Bitcoin users often select Coldcard Mk4 ($148).
Why do I need a hardware wallet for cryptocurrency?
Hardware wallets offer superior security for storing digital assets by keeping private keys offline rather than on the Internet. Hardware wallets stop remote attacks and protect you from exchange breaches that have, in the past, resulted in major financial losses.
What’s the difference between hot and cold wallets?
Hot wallets like exchange accounts or mobile apps connect to the internet for easy trading. Cold wallets, or hardware wallets, store private keys offline, creating a physical barrier that prevents remote theft.
Can hardware wallets be hacked?
Properly used hardware wallets have never faced a hack via remote attacks. The offline key storage makes remote hacking almost impossible. PIN codes, along with passphrases, add protection against physical theft.
Which hardware wallet supports the most cryptocurrencies?
The Ledger Nano X handles over 5,500 cryptocurrencies through Ledger Live, making it the option that can support the greatest number of digital assets. The Trezor Model T follows with support for over 1,400 cryptocurrencies.
Can I store NFTs on a hardware wallet?
Yes, new hardware wallets handle NFT storage. The Ledger Nano X or Trezor Model T lets you view and transfer NFTs with the same protection as fungible tokens.
Are hardware wallets worth the investment?
Hardware wallets cost $49-$219, making them a small investment compared to the assets they protect. Since exchange hacks led to billion-dollar losses, these devices offer protection for serious investors.
What happens if I lose my hardware wallet?
Your funds stay safe if you lose the device. Use the backup recovery phrase (12-24 words) you recorded during setup to restore access to your wallet on a new device.
