Intro
Hardware wallets are one of the most talked about subjects in crypto and yet you always hear about how people don’t use them. Let’s talk about why you should 100% have one and why the learning curve is worth it.
Before we start comparing wallet types it’s important to understand that hardware wallets align with crypto fundamentals. This technology was created so individuals can be their own banks. No reliance on a third party who can take advantage of you and lose all your money with bad practices (cough cough Celsius).
Simply put, not your keys not your crypto!
Trust that you have the brains and patience to be your own bank and manage your token keys. It will be worth it. Just because your hardware wallet gets run over by a truck doesn’t mean your crypto is gone.
As long as you save your 24 word recovery phrase you can spin up another hardware wallet that use those 24 words and have access to all your keys.
Token Keys?
All crypto wallets don’t actually hold crypto, they hold keys to access the control of tokens on the blockchain. For example if you have 5 ETH shown in a ledger wallet, there isn’t actually 5 ETH sitting in that wallet. Keys to access those 5 ETH tokens on the ETH protocol is what’s sitting in your wallet.
Centralized Crypto Apps Risks
Holding crypto long term on a Centralized App is literately the opposite of crypto fundamentals. When using centralized custodians like Coinbase or Celsius users only have a password and username to access crypto the app holds for users.
The company owns your keys, not a wallet you have 100% control of and this is incredibly important to understand. If that company goes bankrupt user assets 99% of the time are lost. Users have zero control of their keys at the end of the day.
In addition users can’t tell what their assets are being used for while the centralized app hold their keys. The company is utilizing user assets to make more money than the users are. They take a heavy cut of profits from user earnings with yield opportunities.
Software Wallets Risks
Metamask is the best example of a software wallet and also the most used soft wallet today. These wallets are normally an extension in a web browser or an app on your phone.
Because the wallet is software and all security is done on the software aspect it does open the wallet up to some risks. For example if a computer is compromised the attacker could execute transactions while taking control of your wallet. Or someone could try a SIM swap on your phone to try and get access to your software wallet
In theory a transaction could be executed on a users laptop or phone without any confirmation from a human.
The largest factor in my opinion is that accepting transactions is extremely easy with software wallets. It’s an underrated aspect of these types of wallets.
I think people are more likely to speed through transactions if there is little friction to submit a transaction. With fast transactions comes less attention to detail to the type of transactions users are making. This can lead to FOMO based transactions that lead to compromised wallets.
These type of wallets are great for using them as “minting wallets”. This is a wallet that doesn’t hold anything valuable when users are minting a new project. This helps protect user assets from scam mints and exploits. It’s good practice for wallet security.
Hardware Wallet Perks
With all the exploits we see during this bear market and all the risk people in crypto take on. Wouldn’t it make sense to use one of the most risk off options for key storage?
Hardware wallets take the risk of software exploits out of the equation, using a hardware wallet is the step users don’t want to skip in their web3 journey. As long as users don’t share their 24 words it’s next to impossible for a compromised computer to submit transactions from a hardware wallet.
Learn from the past
Note that the convenience of software wallets or CEX custodians is not worth the risk of losing assets. The list goes on and on of software wallet hacks and centralized exchanges going bankrupt and taking users funds with them.
The definition of insanity is repeating an action and expecting a different result. Be your own bank and take control of your assets. Take the time to learn how to use a hardware wallet and remove the middlemen.
Embrace the extra steps
When using a hardware wallet users must do the following before submitting a transaction:
- Connect hardware wallet to computer or cell phone
- Enter wallet pass code
- Enter ETH app
- Multiple clicks to review transaction before submitting the transaction on the hardware wallet
Don’t underestimate the amount of self reflection those extra steps can impose on an individuals FOMO. Having to look at the transaction a couple times can bring light to scams and slow users down before submitting transactions.
Imagine walking around with a bunch of keys to your house. Strangers everywhere ask you for a key to your home because they want to put something really valuable into your house for you to keep.
After giving the key away you trust that stranger to not steal all your valuables inside your home. This is the same as blindly submitting transactions on new mint websites and blindly submitting setApprovalForAll() transactions.
Easy to use
Hardware wallets are actually not hard to interact with. A common misconception is that if a hardware wallet is destroyed in a fire for example, all those keys are lost and all funds are gone forever. This is false!
As long as users have the 24 recovery phrase they can revive a wallet on a new hardware wallet device. Keep the 24 words in a safe place that is offline. Don’t put those words on your computer, otherwise it defeats the purpose of a hardware wallet.
Taking it a step further users can use fireproof paper like Shieldfolio! Great product and adds some organization to recovery phrase management.
Write the words down on paper and put them in a safe. Something I like todo is buy a second hardware wallet and make it a backup wallet.
Adding the 24 words into a backup hardware wallet does two things:
- Doing this confirms the 24 words are correct
- Now the user has a backup hardware device if the primary device is destroyed for some reason
Please take the time to learn about hardware wallets and purchase one soon. It can prevent lots of pain and regret. Before buying a hardware wallet I highly recommend reading about security from the ledger website.
How to mint this article on Optimism
- Visit Hop Exchange Bridge
- Send a small amount of ETH to Optimism Layer 2 from ETH mainnet (EXAMPLE)
- Navigate back to this article
- Click on the “Collect” button in the upper right and if needed switch to the optimism network when prompted by metamask
- With the ETH you sent to Optimism Layer 2 you can mint the article by clicking “Collect” again and completing the mint transaction
- Congrats you now have a NFT on Optimism and you might be eligible for future airdrops from Optimism
Written by Squirt11e
Dev / PM @DeadHeadsNFT
Team Lead @rebudNFT
Twitter @squirt11e
Web3 builder | NFT collector | DeFi believer | Glass always half full