6. The Advantages of Hardware Wallets
There are several advantages to hardware wallets:
Private keys are never exposed to your computer.
The hardware is immune to computer viruses.
Your hardware requires you to confirm a transaction on your device (not the app on your computer) before any coins can be spent.
Most hardwares are encrypted with pin #’s, like your debit card, which adds another layer security.
The hardware company’s software is usually open source which allows users to validate the entire operation of the device.
Hardware wallets can host multiple cryptocurrencies.
The only downside to hardware wallets is that they cost money. If this is an issue, turning your USB into a makeshift coldwallet for Electrum LTC is a viable option. However, it might be worthwhile to consider investing in a hardware wallet because they are more secure; especially if you hold a significant amount of coins.
For example, let’s say you unknowingly download a virus onto your computer. When you open up Electrum, the app is susceptible to the malware just like any other software on your desktop. This means your coins are at risk because your private keys are now exposed. Here are two ways how a hacker might steal your coins:
If your wallet isn’t encrypted, he can set a command to send your LTC to a specific address as soon as Electrum is opened.
He can record and watch your screen to see if you accidentally reveal your private keys on the screen. Once he sees this, he can steal your LTC by importing them.
You risk neither of these options if you own a hardware wallet.
What Exactly Are Hardware Wallets Anyway?
Hardware wallets are securely programmed devices that store your private keys and never reveal them. This is an important feature because as we learned in Understanding Wallets, you use private keys to sign your transactions as well as to recover your address. These hardware wallets are also considered cold wallets because they are disconnected from the internet when you don’t use them.
How Does It Work?
We will specifically examine at how Ledger and Trezor hardware wallets work as they are two of the most reputable companies in this space:
First, the hardware creates an isolated environment which keeps your private keys safe on a secure chip. Then when you want to send LTC, you plug in your hardware through a USB port on your computer. Next you open a company specific app to manage your coins. This is what the Ledger Wallet app looks like:
Screenshot of my Litecoin Wallet through the Ledger Nano S. Trezor has an App on their website.
Now when you push send, the app sends a copy of the transaction to the hardware and asks for the digital signature. You then verify the transaction by clicking the “confirm button” on your device. The hardware signs the copy of the transaction internally and then sends it back to your computer. It’s through this extensive process that the hardware ensures that your private keys are never exposed.
What if I Lose My Hardware Wallet?
It’s okay because you simply need to use other BIP39/BIP44 compatible software such as Electrum to recover them. Simply go to the “How to Restore Your Electrum LTC Wallet” section in the middle of the article to follow how to use your “Seed Keys” to recover your LTC. Another option you have is to simply purchase another hardware wallet. Below are my recommended hardware wallet vendors from both Ledger Wallet and Trezor.
Ledger Wallet
Ledger’s flagship product is the Ledger Nano S Plus. If you’re in Europe, I suggest buying a Ledger product directly from their website as they are based there and shipping won’t be as expensive. However if you live in North America, it may be cheaper just to purchase it via Amazon rather than having to pay for international shipping fees.
Sidenote: Ledger Wallet is VERY responsive through their subreddit at r/ledgerwallet for support. So if you ever need help, go there.
Ledger Nano S Plus
The Ledger Nano S is my personal favorite because it’s portable and easy to use. It only stores 4 apps at a time on the hardware, but you can get access to all the other cryptocurrency wallets through their Ledger Manager.
Trezor
Trezor was one of the first hardware wallet companies to form. They are also pretty active on their subreddit r/trezor for support. Since they are based in Europe, I suggest you purchase it through their website if you live in that region. If you’re in North America and are looking for a cheaper option than the Ledger Wallet, then this might be for you.
Remember to share with your friends and donate below! Until next time, onwards and upwards. 😁
L.S.C. Donation Addresses:
LTC: LgGHRsbYHs93gKttBMehLzth3xDAU3tCSZ
BTC: 3HFCMjr6xQKSfmU7wCPzrZJVvgwrdf7Qzd (Segwit address. Legacy and Segwit chains accepted)