How do Hardware Wallets Work?

To start off, hardware wallets are extremely secure. While hardware wallets may be a bit more tedious to use when compared to hot wallets like MetaMask, it gives you complete control over your assets, and even requires you to physically approve signatures and transactions before they’re executed - this provides an extra layer of protection against cyber-attacks, phishing sites, and malware.

Hardware Wallets Store Your Private Key

To be clear, cryptocurrencies are never stored within the hardware wallet itself - they live on the blockchain. The hardware wallet merely stores your private key. And the private key associated with your hardware wallet opens the lock to your address on the blockchain where your assets actually live. To access your funds, all you need to do is connect your hardware wallet to your computer to interact with your tokens.

The Safest Method to Store Cryptocurrency

Your private keys stored on the hardware wallet are protected by a PIN and an optional passphrase. Should a thief take possession of your hardware wallet, it’s near impossible for them to extract your keys. The keys are never exposed to the internet so they can’t be stolen. That’s why it’s known as cold storage.

If your hardware wallet is lost, the assets are backed up with a single seed phrase. A seed phrase, also known as a recovery phrase, is a list of words that re-generate your private key. You can use your seed phrase to move your keys to a different hardware wallet.

Be sure to keep your seed phrase in a safe place, because there is no way to retrieve your assets if that is lost.

Interacting With The Blockchain

Hardware wallets let you sign and confirm transactions on the blockchain. When you create a blockchain transaction, you’re “signing” a special message, and your “signature” proves ownership of your private key. It’s impossible to forge this signature without the private key, so no one else can make a transaction on your behalf without it.