Yesterday I got a simple question with a topic I haven’t covered so far: How safe hardware wallets are?

It is a real opportunity to continue the series of texts with practical questions and answers about bitcoin and blockchain in Serbian language, but also to peek into the philosophy of hardware wallet security. If we would splitting hairs, demanding absolute safety, I am afraid we will never find something like that.

Nothing is perfect…

Hardware wallets are the safest way to store decentralized cryptocurrencies, albeit they are not perfect. All the most famous wallets, which have been in use for a relatively long time, had weak points and security flaws. For English-speaking readers, I recommend an excellent series of articles on the security of hardware wallets written for Bitcoin Magazine by Vlad Costea:

Bitcoin Wallet Reviews: What’s the Best Hardware Wallet on the Market? Part 3

Bitcoin Wallet Reviews: What’s the Best Hardware Wallet on the Market? Part 2

Bitcoin Wallet Reviews: What’s the Best Hardware Wallet on the Market? Part 1

Before I give an explanation for Serbian language readers, I must say that so far I have not had any experience with hardware wallets, because I have never had any significant amount of cryptocurrency that would justify the investment. But I am trying to follow that area, because very soon savings will no longer be possible other than through decentralized cryptocurrencies.

Manufacturers of hardware wallets presented in the texts have different approaches to securing them. Ledger is based on the principle of "black box" – access to chips is difficult, and in case of detection of a flaw, you must trust that the Ledger company will take measures to prevent theft.

The Trezor has the complete opposite – open access approach, and relies on a large community (in which there are many very capable developers) that reacts extremely quickly to detected omissions. Quite logical, because they protect their own interest.

As a manufacturer of hardware wallets, KeepKey is somewhere between Trezor and Ledger: It is not as open as Trezor, but it is not as closed as the Ledger.

Coldcard Mk3 and BitBox02 (which has been on the market for just under two years) are still ‘exterminating’ the detected flaws, so their development should be monitored and not used for the time being to hold larger amounts of cryptocurrency.

So, this was bad news – there are omissions. Should that worry you and how much?

…but relative safety is at the highest level!

Now comes the good news. Although they are not perfectly safe, they are the best means of providing security to your gained value in the history of the World. Bitcoin was created because your value was in the hands of bank thieves whose only task was to make their robbery acceptable through various ‘financial instruments’. Even a wallet on your mobile phone is safer than a banker. Hardware wallets are – provided, of course, you know how to keep your keys – much safer than holding gold. Remember how the Jewish community, which saved their assets in gold, fared in the first half of the 20th century in Germany. With decentralized cryptocurrencies, something like that cannot happen to you.

Hardware wallets are so secure that you have a much higher chance of losing keys (accidentally or through fraud) or the device itself than losing your funds due to a flaw in wallet technology. In the latter case, the keys are more important than the device itself, because the device can be replaced and the keys will work on another device as well. By losing the keys, you lose funds irretrievably, because – if you remember – with the absolute freedom comes absolute responsibility. But if you lose the Ledger device, due to the possibility of someone hacking the chip, you should transfer the funds to a new account as soon as possible.

You should know that wallets are so-called ‘cold storage’, ie they are not connected to the Internet or exchange data online, so it is not possible to hack your device. It is also practically impossible for someone to withdraw funds from your account during a short transaction session.

Which one should I choose?

Personally, the idea of ​​collective, open source safety care is much more acceptable to me than the idea of ​​trust in the manufacturer. The manufacturer is much more prone to corruption than the device. So I advise beginners to start with the cheapest Trezor device called Trezor One, which is the longest on the market, built on the philosophy of decentralized security like Bitcoin itself, and over time has proven to be extremely reliable. The downside could be the relatively small selection of cryptocurrencies you can keep on it. If you want a cryptocurrency that is not in the selection of Trezor One, the newer model Trezor T can store over 1600 cryptocurrencies!

The lucky ones who will have larger quantities to keep, can try all the wallets by dividing the funds among them, and in that way absolutely secure their funds. In that case, the only problem will be keeping all the keys from all the devices.

Important notes

Finally, two important notes regarding the purchase of a hardware wallet. The first is to buy only the original wallets sealed with a hologram, as shown in the previous video. The second note concerns the purchase process itself: if you can, buy the device directly in the store of an authorized dealer for cash. This way, you will not have to provide information about yourself when shopping and you endanger your personal safety.

What if I don’t have fiat to buy cryptocurrency?

In this case, you can join Hive and earn cryptocurrency with your valuable content that you can offer to the community without any financial investment. Through Hive and its cryptocurrency you can reach any other coins using automatic decentralized exchanges such as SimpleSwap or StealthEX

Feel free to ask what is not clear, I will answer as much as I know.

Good luck!