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April 25, 2022

What is a crypto hardware wallet and should I have one?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

Today, let’s understand what a crypto hardware wallet is and who should have one.

Remember, that in order to have control over your crypto wallet, you need a so-called private key. Just like your house key, it unlocks everything inside. Unlike your house key though, it’s quite clunky to use because it is usually a long string of characters and numbers nobody can remember.

If you’ve traded crypto on places such as Coinbase or Robinhood, your funds get managed by them directly and you never even have to think about that private key. They are called “custodial” wallets, because they have custody over your funds, not you. 

That’s easy for beginners, but you are placing all your trust in the company’s ability to secure and protect your holdings.

In comes the hardware wallet. At the core, all it does is save your wallet address and private keys on the device. But unlike your computer for example, it is entirely disconnected from the internet when unused, requiring anyone to have physical access to it. And unlike a simple USB stick, it is also hardware protected with an access code you have to enter on the device.

Hardware wallets like the Ledger or Trezor even have an intuitive interface to manage your crypto which can connect to your smartphone for ease of use. They also support almost 2000 crypto currencies and provide secure cloud backups should you lose it.

So what are the downsides? If you actively trade crypto, it is inconvenient to move funds between your exchange and the hardware wallet, and high transaction fees may apply depending on the blockchain. But if you are in it for the long haul, consider a hardware wallet and find a very safe place for it, just don’t forget your password.

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