Hardware Wallet

Concept

A hardware wallet is a wallet (crypto wallet) that is designed to sign transactions offline (away from the live network) and cannot validate any smart contract recordings. It is a type of digital cryptocurrency storage on a cold network- i.e., one that is not connected to the internet or other nodes on a network. Hardware wallets have an advantage of protecting users’ keys from potential threats on the connected networks. A hardware wallet, also known as offline storage or cold storage, is completely isolated from online networks, and hence can provide maximum security for storing digital assets.

Hardware wallets store users’ private keys — the secret codes that can authenticate ownership of the digital assets stored— in an offline space. This technique reduces the risk of unauthorized access, hacking or theft of such assets. Hardware wallets suit long-term storage of large amounts of digital assets or for users who treat security as an utmost priority. Hardware wallets have multiple forms, including hardware equipment, paper records and metal backups, each with its own degree of security.

Hardware wallets versus software wallets

In use, most crypto wallets belong to the category of hardware wallets. These include all connected devices such as mobile wallets, desktop wallets and web-based wallet services. All of these store their own private keys online. However, keeping private keys stored online expose digital assets to network threats as well as fraud and liquidity issues, particularly in case the underlying service provider gets busted (out of business), among others. Hardware wallets, on the other hand, are connected to the internet only if and when the user chooses to move assets onto or off of the device. For hardware wallets, no third-party trust is required. Hence, the users remain in control of their assets, enjoying unrestricted access to their funds and assets at all times, irrespective of market developments.