What is a Bitcoin wallet?
A Bitcoin wallet is a software program that stores the private keys to your bitcoin. The wallet allows users to send, receive, and store bitcoin. There are various types of Bitcoin wallets like:
Hot Wallets - A hot wallet is any wallet that is stored on a device connected to the internet. These are software wallets that are available online or as mobile and desktop applications.
Cold Storage - Cold storage refers to hardware wallets that are built for the sole purpose of storing the seed phrase (private keys) of a Bitcoin wallet offline.
Hardware (cold) wallets are considered safer than hot wallets because they are inaccessible from hacks and bad actors online. Hardware wallets were developed as a convenient method for users to store their private keys on a device that never needs to touch the internet. With every hardware wallet, a mnemonic seed phrase must be written down and stored in a safe place. This backup method is used in order to recover bitcoin funds if the device is lost. If a user decides to use a hardware wallet, all responsibility relies on the user for storing their bitcoin safely. Both hot wallets and cold wallets have different specifications, storage, and security features. Most users prefer a hot wallet to make quick and easy Bitcoin transactions whereas a hardware wallet is more suitable for storing large amounts of bitcoin.
Here is a list of our top hardware wallets for 2021:
Trezor is one of the most popular hardware wallets for storing Bitcoin. It is the world’s first hardware wallet developed by Satoshi Labs in 2011. The Trezor wallet creates an isolated environment for offline transactions that minimizes the risk of exposing the private security key even in malware affected desktops. The wallet uses a unique PIN to authenticate the user even while offline. An incorrect PIN entry will trigger the device into a lock mode. The user may back up their wallet with the 24 words that are generated by the device using an RNG (Random Number Generator). This 24-word seed is generated offline and is displayed on the wallet’s screen when the device is offline. If the device is ever lost, the 24-word seed will allow the user to recover the wallet and funds on another device. The Trezor Model T is the premium version of the Trezor One. It has a color touchscreen that is larger than the One. Both the Trezor hardware wallets offer the same top-notch, sophisticated security.
The Trezor One is a small device with an OLED screen. It requires a randomly generated nine-digit pin and a 24-word recovery seed phrase to ensure security if the device is lost or damaged. The Trezor wallet can be paired with Android devices via apps such as TREZOR Wallet, Mycelium, and Multibit HD.
- Highly secure wallet for storing Bitcoin and other digital currencies
- Makes currency accessible for online trading
- Keeps currency ultra-secure for offline storage
- Trezor T supports more coins than Trezor One
- One of the more expensive hardware wallets
- The screen makes it difficult to type on at times
- The flash drive slot is not very useful
Coinkite is a hardware company that is well known for their Opendime product (like a USB thumb drive to store the private keys of a Bitcoin wallet) and their Coldcard hardware wallet. Coinkite is based in Toronto and was founded in 2013 by Rodolfo Novak and Peter Gray. In 2018, Coldcard was developed to provide all of the necessary tools for users to perform more dynamic tasks like supporting new wallets as well as importing existing ones for better fund management. Coldcard requires open-source software that is viewable by anyone around the world to troubleshoot and test for weaknesses within the source code. One of the most sought after security features that the Coldcard has to offer is their air-gapped feature that prevents the seed words from connecting to online devices.
- Air-gap support
- Easy navigation
- “Brick me” feature to wipe the device if needed
- Black and white screen
- Price is on the higher end
- Air-gap feature may not be suitable for beginners
Ledger is based in Paris and continues to create secure infrastructure solutions for its hardware devices. The Ledger wallet was introduced in 2014 and has sold more than 1 million units in more than 165 countries. Ledger uses a unique operating system called BOLOS which can be integrated into secure smart chips for wallets. It is also used for Hardware Security Module (HSM) that is used for different enterprise solutions.
The Ledger Nano X is the perfect union of hardware, security, and mobility. It offers unparalleled protection using integrated smart chips. Its Bluetooth feature makes connecting to laptops and mobile devices much easier. The Nano X can also store different cryptocurrencies simultaneously.
- Easy to use interface
- Lower price compared to other wallets
- Nano X uses highly convenient Bluetooth technology
- The recent breach of customer data from the Ledger servers has dampened the public image of the company. All user funds are secured on each device but sensitive shipping information was released to the public.
- Requires to pair applications (an extra step for initiating withdrawals).
- Some steps for transactions may be confusing for beginners.
Keepkey was founded in 2015 by Darin Stanchfield. The company’s initial headquarters were in the US and later acquired by the Switzerland-based exchange Shapeshift. KeepKey is considered one of the most well-built and affordable wallets. KeepKey uses 12 randomly selected words as seed words for account recovery and uses a technique called “Recovery Cipher” to scramble and shuffle the letters of the seed words. This security feature ensures the safety of the funds in the wallet even when the computer is infected with malware. Some users may find the KeepKey wallet size to be inconvenient when compared to a Trezor or Ledger Nano.
- Easy to use, large LCD screen
- Sturdy and withstands wear and tear
- Highly secure and affordable
- Recovery cipher feature adds an extra layer of security
- Larger size makes it inconvenient for transport at times
- Poor customer service
- Supports fewer coins when compared to other hardware wallets
Tips for purchasing a hardware wallet
- Always buy directly from the manufacturer’s verified website.
- Buyers have the option to use a specific email just for hardware wallet websites. This improves privacy for the buyer.
- Buyers have the option to use their real home address but in order to increase privacy, they may want to have the device sent to a PO box.
- To increase privacy even more, a buyer may also use non-KYC bitcoin to pay for the device rather than a credit or debit card.
- Extremely convenient if the device is shipped directly to the buyer’s home.
- Time saved from having to travel.
- Must trust that the hardware wallet manufacturer is not storing sensitive shipping information.
In Person (conventions or meetups if they are taking place)
- Always buy directly from the manufacturer or a trusted third-party.
- Verify that the packaging is not tampered with.
- Buyers have the option to buy with physical cash or transfer non-KYC bitcoin to the seller’s Bitcoin address.
- May be more convenient for individuals if the conventions are near their place of residence.
- Privacy is easier to manage. No names, emails, home addresses, or credit card details need to be shared.
- Conventions are harder to come by since travel and meeting restrictions have taken place.
- Less convenient for those who have to travel long distances.
- Buyers are responsible for making sure that they are buying from reputable sellers.
- How does a Bitcoin wallet work?
Bitcoin wallets store a secret piece of data called a private key. This key is used to sign Bitcoin transactions and provide mathematical proof that they have been authorized by the wallet owner. The signature prevents a transaction from being altered by anyone after it has been issued.
- Why are hardware wallets preferred over software wallets by Bitcoin users?
Hardware wallets are preferred over software wallets due to the following reasons:
- They are immune to computer viruses and malware attacks, unlike software wallets.
- The user’s private keys are stored on an external hardware device like a USB and cannot be transferred out of the device.
- A hardware wallet uses stringent safety and security features to safeguard bitcoins.
- Who needs a hardware wallet?
Anyone who wishes to take full control of their bitcoin. Hardware wallets store the private keys offline making them immune to any type of remote hacking. The recovery seed of hardware wallets allows users to easily store and recover all their assets in case the wallet gets damaged or lost.
- Is a hardware wallet and cold storage wallet the same?
A hardware wallet uses cold storage to store the private keys. In other words, a hardware wallet uses an offline device or smartcard to generate private keys offline. The terms have been used interchangeably, but cold storage means offline storage.
- What is the major difference between a cold wallet and a hot wallet?
The key difference between a hot wallet and a cold wallet is that hot wallets are internet-based or connected to the internet, while cold wallets are not.