Those who know about the essentials of cryptocurrencies have learned about hardware wallets too. As the name suggests, these are tangible equipment that are used for storing digital assets. Besides being a physical entity, these wallets have some other peculiarities making them distinct. Thus, learning about these tools certainly makes sense, especially for new crypto users.
Delving Into Hardware Wallets
Like online or digital crypto wallets, the hardware counterparts also use public and private keys. They hold the same significance as they do in the online wallets. The reason the hardware wallets are considered so safe is that they remain offline. Crypto users must know that hardware wallets are often called cold wallets, but they aren’t the same.
The cold wallets never interact with smart contracts and they don’t ensconce the assets. Hardware wallets, on the other hand, offer more functionality. They do stay offline always, but make the management of assets better.
Features of Hardware Wallet
There are interesting use cases of hardware wallets that make them more adaptable.
Multiple Accounts on Multiple Chains
Hardware wallets enable users to generate private keys for multiple blockchain addresses. This means that crypto holders can use one hardware wallet for their diversified portfolio. To keep them safe, the wallets also generate a seed or recovery phrase. A single phrase key can be used to gain access to all assets in a wallet.
This particular attribute makes the handling of digital assets very easy for everyone.
Signing Transactions Offline
That’s right, hardware wallets let you proceed with transactions offline. This is a very important feature as assets can be stolen only in the online environment since online wallets need users to connect to the internet to send/receive money.
However, when the transactions are processed offline, such possibilities are nullified. At the same time, it delivers a great degree of convenience to the digital asset users.
Cold Storage Use
As mentioned above, cold storage refers to the stark stashing of assets. When one has cold storage, they can just preserve their coins and they can’t use them any other way. They can’t use them to interact with Web3 applications or with any other DeFi-based service.
Notably, a hardware wallet can also be used as a cold wallet. However, the opposite scenario is not always possible. The users will have to check with the wallet manufacturer for the availability of such a feature. So, for obvious reasons, hardware wallets become the go-to choice for crypto users.
A Sneak-Peek into Hardware Wallets’ Functionality
After understanding its features, one should know about its functionality too. It helps in gauging the performance of the wallet and in performing primary troubleshooting as well.
Computer Chip
Like most electronic devices, hardware wallets also contain a computer chip. It won’t take someone who is tech-savvy to figure out that the chip is an important component of the wallet. Much of its performance depends on the quality of the chip. Thus, users must be sure about the capabilities of the chip.
A secure element chip is a popular and dependable choice for wallet users. It is tamper-proof and delivers great performance too.
Operating System
The operating system ensures that the chip interacts with the wallet seamlessly. More than that, it enables users to manage their assets. It helps the users to see and understand all the tasks and features. At the same time, it’s accountable for making the most of the chip and other security features.
Depending on the brand of a hardware wallet, users have to deal with different operating systems.
User Interface
While the OS allows the users to interact with the hardware, it’s the UI that makes it usable for the users. It allows the users to instruct the wallet to perform certain tasks. More importantly, it helps the users to use different solutions. It makes their interaction with Web3 and other DeFi services easier.
Here’s How a Hardware Wallet Processes a Transaction
Steps that users will have to follow for processing a transaction on a hardware wallet.
Step 1: First, users need to connect their wallet to the interface on their respective devices.
Step 2: Then, the users initiate the transaction following the instructions on the wallet.
Step 3: After that, the wallet shows all the details that users need to check before approving.
Step 4: Once they’re sure about the details, they can click/tap on “sign” to proceed.
Step 5: The wallet shows another prompt to confirm the transaction which is a part of its two-factor authentication.
The wallet uses a private key embedded in its chip to sign the transaction offline. Then, it sends the transaction to the smartphone or laptop using the cable or Bluetooth. The receiving device can forward this transaction to the blockchain network without coming in contact with the private key.
Hardware wallets mitigate the risk and amp up the functionality. However, choosing them could be a tough task. Also, users should know that they need to pay a considerable sum to buy one. However, considering all the benefits, they’re worth every penny spent.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
Source: https://www.thecoinrepublic.com/2024/01/01/hardware-wallet-a-crypto-storage-tool-offering-robust-security/