The Case for Hardware Wallets
Arguably the most ironic and humorous yet devastatingly worrying thing in Crypto is the concept of ‘private keys,’ and how in some cases they are everything but private and how so many millions of users fail to recognise the importance of them. When we all get into Crypto, few of us understand the absolute vital importance of storing YOUR coins on YOUR wallet. Coinbase, the platform most westerners use when joining the world of CryptoAssets, like others, make it so easy for us to store our coins with them and low and behold, we beginners naively fall into the trap of believing that this is the status quo and thus, it becomes the status-quo. That is where we are at.
Coinbase currently has about 12-million users and Binance has over 10-million. Although some of these users are knowledgeable enough and take the effort to store their funds offline on a cold storage hardware wallet, many do not. When you store your coins with exchanges, you are not given the private key. They are the custodians of your funds and therefore keep the private keys of your wallet without your access. Must I remind you of the events of Mt Gox in 2014 to stress how truly important it is to store your coins on a hardware wallet? In 2014, Mt Gox was handling roughly 70% of all BTC transactions and can be compared to a larger and more monopolised version of Coinbase today. The problem with storing your coins with a custodian like Mt Gox and Binance is that these repositories storing such large amounts of wealth are a hackers wet dream. Mt Gox’s systems were jeopardised and 740,000 units of BTC (worth €460-million back then) were stolen; all of them belonging to customers.
Fortunately, there are alternative way of storing your Crypto Assets. You have the option of using:
Desktop Wallet: A program that you can download and install onto your computer to store your funds (eg: Electrum). Prone to computer viruses and hacks.
Hardware Wallet: An external device that is usually connected via USB. It’s very similar to a hard-drive. One of the safest options as it stores the coins offline (cold storage). Although, users have to go online, via a website like ‘wallet.trezor,’ to interact and access the funds within the hardware wallet. An extremely safe method of storing Crypto Assets but expensive also.
Paper Wallet: A paper wallet is merely a physical version of both the public key and the private key printed onto a material, often paper, but can also be plastic or even materials like gold if cryptocurrencies made you that rich. As it is the purest example of a cold storage method, a paper wallet is regarded as the safest way to store cryptocurrencies; so long as the user takes care of the paper. To view your funds, you merely search for your public address in a Bitcoin explorer and then most online wallets let you send BTC via them anyway.
In the Past we have reviewed the following Paper Wallets:
To clarify, hot wallets are connected to the internet and are therefore susceptible to cyber attacks. In contrast, cold wallets are offline and therefore are immune from hacks.
Benefits of using a Hardware Wallet:
- Keys never exposed to your computer. Software wallets’ keys are.
- Hardware is immune to computer viruses & hacks.
- 2FA to enhance security.
- Efficient for long-term storage.
- Offers a recovery seed, that can be used to recover your private key if you have lost or broken Hardware Wallet device
Disadvantages of Hardware Wallets:
- Come with a cost. Exchanges like Coinbase do not charge a fee to store your coins with them…unsurprisingly; they want your coins so badly.
- Suppliers of hardware wallets have a limited offering of recognised cryptocurrencies on their product. Again, exchanges let you store a whole range of cryptocurrencies.
To conclude, I would yet again like to take the opportunity to stress the importance of investing in a hardware wallet. As the infinitely wise Andreas Antonopolous insists “Not your keys, not your Bitcoin.”
In the past we have reviewed quite a few Hardware Wallets and will be reviewing more in the future!
Interesting Facts:
• Coinbase store 98% of their users’ funds are stored offline.
• Mt Gox users are yet to be reimbursed for their stolen funds which could’ve been worth millions in their peak of 2017.
• A Japanese court, where Mt Gox HQ was, ruled earlier this year that over $1-billion would be refunded to the victims of the hacks and the redistribution will commence in February 2019. At the time of the hacks, BTC was worth $700. Say if the price of BTC is anywhere near what it is now, all of those people will be making a ludicrously large return on their original investment and may be eager to run off with their profits. In today’s fragile market, this worries us.
DISCLAIMER: THIS ARTICLE EXPRESSES OUR PERSONAL OPINIONS, PREDICTIONS, AND MARKET SPECULATIONS BASED ON THE WAY WE INTERPRET THE INFORMATION WE HAVE AVAILABLE TO US. IT IS BY NO MEANS TO BE CONSIDERED EXPERT ADVICE. WE TAKE NO RESPONSIBILITY/ LIABILITY FOR ANY ACTIONS TAKEN BY YOU BASED ON ANYTHING WE HAVE MENTIONED.
WE ARE IN NO WAY AFFILIATED WITH ANY COMPANIES, SITES, CRYPTOCURRENCY EXCHANGES AND CRYPTOCURRENCIES THAT WE MENTION IN THESE ARTICLES, THESE ARE SIMPLY THE ONES WE CHOOSE TO USE DUE TO OUR PERSONAL PREFERENCE.
