A cryptocurrency wallet is a type of electronic wallet that helps store both the public and private keys which are used to buy or receive cryptocurrencies.
Types of Cryptocurrency wallet include:-
Multicurrency wallet:- This type of wallet that can save different types of cryptocurrencies. Since there are over 1000 types of cryptocurrencies worldwide it is only plausible to have a wallet that can store more than one.
Software wallet:- This is a type of wallet that needs to be a connection to the Internet always before a transaction can be made.
Watch-only wallet:- this type of wallet allows the user to monitor all its transactions only. It does not save the keys and as such the user have to keep them somewhere else.
Multi-signature wallet:- This type of wallet requires the signatories of more than one user before a transaction can be made.
Brain wallet:- This type of wallet stores all the necessary information required by the user to recreate a set of keys whether public or private.
Hardware wallet:- This type of wallet uses devices that can be seen to store private keys. Hardware wallet is highly secured since it does not have to be frequently connected to the Internet. Hardware wallet is mainly of two types.T he one which holds the public keys and is connected to the Internet and enable the user to carry out transactions. The one that holds the private keys and is usually offline.
How Does the Hardware Wallet Works?
Hardware wallet helps the user to generate the private key needed to carry out a specific transaction. It keeps track of all the transactions successfully completed on the device.
It does not show the list of records ( blockchains ) instead it displays a code that tells the user what kind of transaction it was and then place that transaction into a suitable group.
Types of Hardware Wallet and How They Work?
This type of hardware wallet looks like a USB drive. To set up the Nano S, a 4 digit pin is required which is only known to the user.
Without this pin, access to the wallet will be denied. Although that doesn’t mean if the user forgets the password all of their cryptocurrencies are lost for good because, during the setup, the Nano S generates a recovery phrase that is kept elsewhere allowing the user to retrieve their wallet.
The Nano S has an added security in form of buttons that have to be pressed at the same time before a transaction can be carried out.
Trezor was the first company to create a wallet for cryptocurrencies and they have made security their main priority giving them an edge as the safest wallet choice there is in the market.
It works in almost the same way as the Nano S does in that it also generates a recovery phrase in case of theft and loss of device and it also has buttons that need to be pressed at the same time before a transaction is completed. The recovery process is of different ways which include web wallet and software wallet.
This type of wallet is like a small computer. The transactions are made offline and then transferred unto a USB device and then completed online thereby ensuring total safety of the private keys.
This type of wallet is used for multiple signatories transactions. It holds the private keys and is capable of carrying out transactions without asking for confirmation from the user. It can be customized to perform a certain task like generating a prepaid card and securing cryptocurrencies transactions.
Ledger unplugged NFC
The ledger unplugged NFC is about the same size as a debit card but uses NFC to buy and receive cryptocurrencies. It has an open Java card inside and it can be used with all Android devices that has a NFC. In case of loss or theft, it can be restored on any other ledger wallet or compatible devices.
This type of hardware wallet is a USB device that keeps and safeguard the user’s cryptocurrencies. Keep key monitors every cryptocurrency transaction and this transaction has to be approved and confirmed before it can be successful. Keep key can be recovered in the advent of loss or theft as the private keys are not necessarily stored on it.
This type of wallet comes in form of a USB stick. It allows the user to spend cryptocurrencies just as they would paper money. All the user have to do is plug it into a computer and follow the instructions contained within the folder displayed on the screen.
The folder contains a web page which the user enters and the open dime will create a unique address through which they can receive cryptocurrencies.
This hardware wallet is Bluetooth device the size of a debit card that can save and safeguard the user’s private keys and cryptocurrencies and it is also wireless.
Every transaction has to be manually approved and confirmed. It only acknowledges the smartphone to which it is paired with, so in case of theft the user’s Bitcoins are still safe and can be recovered.
Thus hardware wallet “ is an open protocol secured hardware wallet ” that is easy to use. Although it is still fairly new in the market, it is actually reliable.
This is a hardware wallet that is encased in aluminum or titanium and works only with their own web wallet using USB and apps using Bluetooth. Bitlox allows the user to have a hidden wallet and it also has some security measures not found on any other hardware wallet.
This hardware wallet is a windows app that gives the user space for 5 cryptocurrency wallets and also a vault. Although the vault can only send cryptocurrencies within the app. It comes with an extra USB key in the package, so in case of theft or loss, the user still has a backup key to access their wallet.
This hardware wallet has an open source software and hardware which utilizes a very safe high-performance cryptographic co-processor. It has pin code which is required for the transaction and a button to press when confirming a transaction. Its firmware can also be updated regularly.
Hardware wallets are highly secured and can be carried about with the user. Below are some of the pros and cons.
Here are the Pros and Cons Of Hardware Wallet
- They are made specially to provide extra security for the user’s stored cryptocurrencies.
- Due to the pin that the user usually provide during set up, they don’t have to input their private keys every time they connect to the to the computer. So even if the computer is corrupt, the funds will always be safe.
- Hardware wallets usually request for manual approval using a button. This feature ensures that the device cannot be hacked and funds transferred.
- The device has an open source which means that the user can monitor and confirm all of the operations of the device.
- Most of these hardware wallets usually generate an at if numbers called seeds that can be used to recover the necessary information and funds in the event of losing the wallet or theft on another device.
- Most hardware wallet uses a microprocessor that has been tested an trusted to provide ultimate protection against all types of attacks.
- Most of the hardware wallet is user-friendly and can be used NY, everyone.
With all these PROS, one might think nothing can ever go wrong but the hardware wallet has its own fair share of disadvantages and below are some of the CONS of having a hardware wallet.
- Viruses that are capable of swapping cryptocurrencies receiver’s address might be present inside the computer. A hardware wallet can’t protect the user from such attack. Anything that is connected to the Internet can be 100% guaranteed.
- Random Number Generation (RNG) might not really be as secure as the user thought. Hardware depends on this RNG to generate the private keys but it is very hard to verify the randomness and highly specialized hackers might predict this number and rob the user of their funds.
- Presence of bug:- No electronic device is 100% accurate and so us the hardware wallet. A bug present in the hardware can allow a hacker unauthorized access.
- Corrupt delivery process:- The delivery process might be corrupt and a secured hardware device will be replaced with an exact corrupt model and that’s the beginning of theft.
Every advantage has its own disadvantage and a hardware wallet is no different. But when it comes to cryptocurrencies, the user definitely needs a place to keep their funds and a hardware wallet is the best mist secured means of making sure the funds are exactly where they were kept.