With major players in the global financial space embracing digital assets like Bitcoin, cryptocurrency has gone mainstream. With more and more people entering the crypto market, investors are seeing impressive returns. That being said, failure to secure your cryptocurrency can lead to disaster. That is why you will need to invest in a hardware wallet for your cryptocurrency.
What Is a Cryptocurrency Wallet?
A cryptocurrency wallet is exactly what it sounds like, a place to store and retrieve your cryptocurrency. The word “currency” can lead people to believe that digital assets are a tangible thing, similar to the dollars or coins that you carry around with you. In reality, what you are buying is essentially a line of code. Each “coin” or line of code is unique, which makes them impossible to counterfeit. Furthermore, this makes each “coin” easy to track as they are traded.
Therefore a cryptocurrency wallet is just a place where you can store the “keys,” or proof that you own a line of code or “coin.” It may sound really technical, but it’s not. Think of your cryptocurrency wallet as your own private bank. You can store your assets there and trade them between other people or vendors, like traditional online banking.
Why Not Just Store Your Crypto on an Exchange?
While you can always transfer cyrptocurrency between individuals, most people acquire their crypto via an exchange. An exchange is a website that allows a user to buy various cryptocurrency. You transfer fiat money (a.k.a. government issued currency, such as U.S. dollars or Japanese Yen) to the exchange. You can then use your fiat currency to buy digital assets, such as Bitcoin or Ethereum.
When you purchase crypto, the exchange will hold your digital assets on your behalf. This leads most people to wonder why they need a wallet at all. Since so many people leave their crypto on exchanges, they are enticing targets for hackers. A quick Google search will provide a long list of exchanges that have lost billions of dollars in assets.
The solution is to get your valuable cryptocurrency off exchanges and into a wallet. However, before you do, there are two different types of wallets to consider: hot and cold.
The Difference Between a Hot and Cold Wallet
Getting your digital assets off an exchange requires you to have a cryptocurrency wallet to transfer them to. There are two different types of wallets: hot and cold. If a wallet is “hot,” it means that it is connected to the Internet. Therefore, all software wallets, whether they are on your PC or your mobile phone, are “hot” wallets. Hot wallets are convenient, as they enable you to transfer, trade and spend your crypto very easily. However, because you are connected to the Internet, it means that your crypto is at increased risk of theft.
On the other hand, a “cold” wallet is one that is not connected to the Internet at all. This makes cold wallets superior to hot wallets in one key area: security. By storing your digital assets in a cold wallet, you are employing a level of protection known as “air gapping.” This means that your wallet is physically disconnected from a network, making it impossible for hackers to access your investments.
The Advantages of a Hardware Wallet
One of the most popular cold wallet options is a hardware wallet. These are small devices that store the private keys of your digital assets. Hardware wallets are one of the most secure ways to hold your crypto. This is because it keeps your keys offline, making it impossible for hackers to remotely access your holdings. Furthermore, if someone got physical access to your hardware wallet, it wouldn’t do them much good, as they are protected with a PIN. Finally, if your hardware wallet is ever lost or damaged, you can simply set up a new one with your seed phrase to restore all of your investments to the new hardware wallet.
There are a few things you need to consider if you are thinking about investing in a hardware wallet. The first is that they are not cheap. There are a number of different ones on the market, so prices vary, but the most popular options typically hover around the $100 mark. Secondly, hardware wallets are designed for security. Unfortunately, this means that accessing your digital assets requires more verification steps.
Where to Buy a Hardware Wallet
As mentioned above, there are a number of hardware wallets available. When choosing a hardware wallet, you’ll want to ensure that it supports the digital assets you are planning on investing in. Most hardware wallets support a large number of cryptocurrencies; however, there are some blind spots. Furthermore, different hardware wallets have different features. For example, Trezor is partnered with the popular software wallet Exodus. This means that you can pair your Trezor to Exodus in order to see the real-time value of your Trezor’s holdings.
Some other popular hardware wallets include Ledger and Keepkey. When you’ve decided on which hardware wallet is best suited to your needs, we recommend going to their website. This will tell you the best way to purchase the device. Most hardware wallet manufacturers allow you to buy directly from their websites. However, some will also have official resell partners that you can buy safely from.
How do you store your digital assets? Which hardware wallet is your favorite? Let us know in the comments!
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