A Bitcoin hardware wallet is a small electronic device around the size of a USB stick or credit card that stores the private keys for a Bitcoin wallet.
- People very familiar with Bitcoin
- People that already own and have completed Bitcoin transactions
- People looking for higher levels of security and storing bitcoins offline
- Experienced people looking for more anonymity or security than other options
- Security – Hardware wallets have a range of features that provide a large amount of security compared to other wallet options
- Private keys are not connected to computers or the internet
- The signing of transactions is performed within the device which protects the private key
- If the hardware wallet is lost or stolen, the digital wallet can be restored if using private keys or recovery phrase
- Some hardware wallets allow multiple private keys and phrases to hide large bitcoin balances if someone forces you to give them access to the bitcoins on the device
- A great option for storing bitcoins for long periods of time
- When not connected to a computer, bitcoins are in cold storage, disconnected from the internet or network
- Protected from many computer viruses that software and web wallets may be exposed to
- Easy to lose or steal, hardware wallets are about the same size as a USB stick or credit card so they can easily be misplaced or stolen
- If it is lost or stolen and you don’t have a backup of your recovery phrases then you also lose access to your bitcoins
- Easy for governments to confiscate if you are transporting bitcoins to another country
- Some functions may be hard coded in and you are unable to change them without connecting to other software, such as setting the fee for a transaction
- Expensive to purchase relative to other options
- Risk of fake hardware wallets with malware if you don’t buy from a reputable company
- Requires the device to be plugged into a computer to transfer bitcoins
- Good for storing bitcoins but may not be the best option for regular Bitcoin transactions
Hardware Wallets Summary:
Hardware wallets are one of the most secure ways to store a large number of bitcoins. Private keys are protected, your bitcoins are held in cold storage when not connected to a computer and they are not at risk of computer viruses that other wallets may be exposed to.
Hardware wallets only carry the private keys, so as long as you have a backup or private keys and recovery phrase, you can still access your bitcoins even if it is lost, damaged or stolen
Some hardware wallets allow multiple private keys and phrases which allows you to provide someone the private keys and phrase to a smaller bitcoin address on the wallet while still protecting your larger bitcoin balances on the device.
Hardware wallets are a very secure way to store bitcoins for long periods of time however they are not as convenient for frequent bitcoin transactions, especially while traveling or if you may not always have access to a computer. They also may not be the best option for transporting bitcoins internationally. There have been cases of airport security confiscating hardware wallets, as they are either unsure what the device is, or it is against the law to take bitcoins across borders.
Hardware wallets are generally for more experience Bitcoin users, so if you are new to Bitcoin, it may be best to consider one of the other options in this chapter before buying a hardware wallet.
Best Hardware wallet to buy: