A Hardware Wallet is a type of cryptocurrency wallet that’s based on a physical device, such as a USB thumb drive with buttons and a screen, that stores your private keys to your cryptocurrency funds.
A hardware wallet is considered a cold wallet in that it isn’t connected to the Internet, keeping your wallet (and wallet funds) away from hackers and theft.
When you want to access and transact with your digital assets, the hardware wallet needs to be connected to a computer or mobile device using USB or Bluetooth.
Once the hardware wallet is connected to the Internet, you can perform all of the actions of a hot wallet, such as a cryptocurrency exchange wallet on Coinbase, for example.
Hardware wallets also have the added benefit of transacting in a secure manner even when connected to an Internet-connected device like a computer.
When completing transactions related to your hardware wallet funds, the signing of the transaction by your private keys is still done offline, within a special part of the hardware wallet not connected to the Internet.
Once that is complete, the signed transactions are sent off to the blockchain for verification.
Hardware wallets, while considered the most secure method of storing your private keys because no third party is involved, do require more responsibility and trust from you.
By using a hardware wallet, you are trusting yourself
- to not lose the device,
- to keep the device free from damage,
- to keep the device away from others,
- to remember your device password or PIN,
- to set up/backup your recovery phrase
Ultimately, you have to make a decision about how safe and secure you want to keep your crypto assets and how much easy access and convenience you need to your crypto assets on a day-to-day basis.
Ledger is most well known for its Nano series of hardware wallets.