When you own Bitcoins, it is the same as owning money. You must secure them in a safe place. But unlike traditional currencies, Bitcoin is a digital currency. Thus, keeping and storing them takes a different approach. Since they don’t exist in any physical form, they cannot be stored in a place like a bank. Enter Bitcoin wallets.
Bitcoin wallets are used to receive, send and store Bitcoins. Think of it as your bank account that has a unique bank account number. Its equivalent is the unique wallet address used for transactions. You will also have private keys (like a PIN) which is what you need to keep in a safe place.
There are three different categories of wallets, hardware, software and paper wallets.
You pick which suits your style. If you are someone who wants quick access to easily track and exchange digital currencies, software wallet might be suitable for you. But if you consider yourself to be a long-term investor, a hardware wallet should be preferred.
Hardware wallet is where you keep your private keys in an offline, physical electronic device. This makes hackers difficult to hack. Thus, considered to be the most secure wallet. There have been no verified incidents of stolen assets from a hardware wallet.
Here are some of the advantages of using a hardware wallet:
- Hardware wallets can be used to send and receive transactions at any time.
- Sending Bitcoins through a hardware wallet can be done in an unlimited amount of times. This is the opposite with paper wallets as it is allowed only once for security reasons.
- Hardware wallets are resistant to computer viruses and malware that try to reveal the private keys. This is because of their built-in encryption procedures that make the private keys unidentifiable to unauthorized parties.
- Multiple cryptocurrencies can be stored in one wallet. This makes managing various cryptocurrencies effortless.
With that being said, there are also a few possible vulnerabilities in using one.
- Compromised Manufacturing Process – If there is a plan to sabotage something, they will find a way. The firmware and hardware is a possible point of infiltration during the fabrication.
- Compromised Delivery Process – Across the delivery time, it’s even easier to remove or replace hardware or software elements if the intrusion is intentional.
- Bad Random Number Generator – When you have a bad random number generator, there is a possibility of creating number patterns that could be predicted by a hacker.
- Bugs – The security of its hardware or software system is centered on the quality of its fruition. With the hardware wallets, hackers can access the internal structure if the firmware has bugs.
- Replacing the Receiver’s Address – A virus or malware on your desktop can track transactions and may replace the destination address. Hardware wallets cannot stop you from sending tokens to a wrong address. It is recommended to use a 2 Factor Authentication to confirm transactions.
With all these possible frailties, a choice of a trusted and reliable company with a good reputation is an important decision to protect your wallet from being compromised.
The three most popular and secured cryptocurrency hardware wallets are Trezor, Ledger Nano S and KeepKey.
Trezor pioneered the hardware wallet and became one of the most popular hardware wallets available in the crypto world.
Satoshilabs, a Czech Republic-based company is behind Trezor. It started back in 2011 when Marek “Slush” Palatinus, CEO of Satoshilabs, and Pavol “Stick” Rusnák (CTO) were looking for solutions on how to store Bitcoins in the most secure way. The concept of having a small device that would keep the private keys protected in an isolated environment came up. In 2013, they formed the company that is also responsible for other Bitcoins projects such as Trezor Wallets, “Slush” pool – a popular Bitcoin mining pool, and CoinMap – a worldwide map showing places accepting Bitcoins.
Satoshilabs engages to the Bitcoin community pretty well. This makes them highly respected around the Bitcoin world especially to the veterans of cryptocurrencies.
Trezor looks like a small calculator that has an OLED screen. It has a size of 60mm x 30mm x 6mm and weighs only 12 grams. There is a TREZOR logo on the front side just right above the OLED screen. The OLED display has a resolution of 126 x 64 pixels. On the underside is the MicroUSB port. The top side has an eyelet for a trailer. The back, though, is completely unused.
A hardware device typically costs between $70-$150. Trezor is priced at $99 each. It is one of the cheapest hardware wallets around. When you buy a pack of three, you can get it with $21 less for $276.
Buying Trezor using Bitcoins is possible through their website. If you prefer to use your credit card or PayPal, Amazon is selling. Avoid buying from eBay. There are reports of scams going on.
Shipping is available to many countries with charges accordingly.
Trezor wallet has a clean and well-designed user interface. It allows you to view transactions with send and receive tabs at the top. At the top left, there is a drop-down menu that gives you the option to switch cryptocurrencies.
Trezor is compatible with desktops, laptops, tablet and cellular phones as it supports Windows, MacOS, and Linux. For on-the-go users, an Android app is available. Another plus for Trezor is that it has a Google Chrome extension to manage the gadget and the data placed in it.
Trezor is designed to secure your private keys from potential online and offline dangers. It keeps them away from the internet. At the same time, the device can confirm transactions. You can check the screen for the correct address, amount and charges before finalizing deals.
The device can be used even with an infected computer without compromising your Bitcoins and your account.
Trezor can keep a huge variety of digital coins. It is also continuously adding more digital coins all the time. Basically, Trezor wallets support 700 coins and ERC-20 tokens.
The main coins that it serves are Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Litecoin (LTC), DASH, Zcash and Stellar (XLM). Yet, due to hardware constraints, certain cryptocurrencies are not fully supported.
Check their website for the list of all coins that are supported.
Security And Privacy
As the pioneer of hardware wallets, security is made sure to be of high quality. Trezor protects you from both physical and digital theft.
When setting up for the first time, a PIN code is required. This is also needed for spending. If someone is making incorrect guesses, the interval between invalid pins will be raised by a power of two. This will take you more than 15 years if you will try 30 guesses.
Since you control the private keys, the entire wallet can be backed up using the 24 words generated during set-up. This 24-word seed is created using RNG (Random Number Generator) from the device and the computer. While being offline, the seed will then be displayed on the screen. Achieving this guarantees that the seed is never on an internet-connected device.
For extra security, you have the option to add a passphrase to the 24-word seed. This additional passphrase will act as the 25th word.
In the event that your Trezor is lost, stolen or damaged, you can recover the entire wallet using the 24-word seed and the passphrase. So, make sure you remember the passphrase as the 24-word seed will not be enough. Without the passphrase, the wallet cannot be recovered. Recovery can be done with another Trezor wallet or with other wallets like Mycelium or Electrum.
Before making an outgoing transaction, you will be asked to confirm it through the device. This feature secures you from hackers doing illegal operations as you need to physically press the buttons on the device for confirmation.
With regards to privacy, Trezor is remarkable. Once you receive the device, Satoshilabs has no way of monitoring your activities. There are no serial numbers on the device. All its software is open source. Not even usernames or passwords are needed when using Trezor.
The only time your data can be leaked is upon setting up your account using Trezor’s myWallet. For private actions, use the Chrome extension. Another option is to disconnect the internet of your computer and use python tools to set-up your device.
Your privacy is determined by the wallet used with Trezor such as Electrum, MultiBit HD and Green Address on desktops. For Android devices are GreenBits and Mycelium. For web is myTrezor.com.
You can refer to this page for detailed information about their security and threats.
How To Set-Up Trezor
Before connecting the Trezor device to your computer/laptop, you must install the Chrome app extension. Alternatively, you can download and install the Trezor Bridge for Mac OS, Linux, and Windows when not using the Chrome browser.
Once done, connect the device and install the firmware. This is not shipped with the device from the factory but instead is loaded onto the device.
After the firmware is installed, you will be asked to confirm the firmware fingerprint. It should be the same as what is on the device screen then press continue.
To complete the installation, the device should be disconnected then reconnect again and continue setting up.
Once reconnected, you can use the Trezor wallet on the browser and start by naming your device. This can also be changed at any time.
You will then be asked to produce a PIN. The device will display a set of random numbers from 0 to 9 just like the picture below. With this pattern, press the corresponding field on the browser for your desired PIN. This helps secure against malware from reading the PIN on the computer.
This will be done twice with the set of random numbers different from the first pattern. The PIN can also be changed at any time through the device options.
Next, the device will show you a list of 24 words. You need to write this set of words down as this is your Recovery Seed. Keep it safe and away from danger. A seed is a list of words that you will use to recover your Bitcoins in case the device will be lost or damaged.
You will be asked to check the 24-word seed again then the PIN and you can start your transactions.You can recover your cryptocurrencies through other wallets. The use of these words as a backup tool is a Bitcoin standard. Again, keep the list in a safe place as this is the key to your cryptocurrencies.
Trezor Vs Ledger Nano S
Trezor and the Ledger Nano S are the top 2 popular hardware wallets. Thus, they are always compared together. Both are making security a top priority and are excellent products. One major difference between the two is that Ledger Nano S is not totally open source and is more secure with password encryption. Trezor is more like a mini computer while the Ledger Nano S uses a secure chip.
Another difference is that in recovering a damaged or lost wallet, you don’t have to connect the Ledger device to a computer. However, Trezor has a more advanced integrated wallet software compared to Ledger. Trezor performs somewhat better in handling and operation.
Trezor Vs Keepkey
These two hardware wallets are almost just the same. KeepKey is like a port of Trezor’s code and firmware. The main difference is the outer look and feel. Trezor is made from plastic while KeepKey is aluminum. This makes the KeepKey feels more like a premium device and making it the most expensive hardware wallet available. But the size of the Trezor is better as it is smaller and easy to handle even with just one hand.
Is It Worth It?
Anybody who is using Bitcoins as investments should make security a top priority. Thus, getting a hardware wallet is a must. Sure, you can get other wallets for free. But the peace of mind you get because of security from using hardware wallets are more valuable than the price of the device.
Trezor wallet is an excellent choice at a reasonable price. The set-up is easy. Its security is top-notch, and the design of the device and its user interface is effective. So yes, it is worth it to get a hardware wallet for the sake of your cryptocurrencies.