Hot wallets and cold wallets both have some benefits, but their disadvantages cannot be ignored. A reliable solution to it will be Ledger, a hardware wallet.
When you hear the term Blockchain, what image comes to your mind first? If you judge the term by its literal meaning, it will translate to a chain of blocks. But we can’t judge a book by its cover, and this interpretation does not make any sense. So, what is Blockchain?
It is a technology that consists of decentralized data blocks that contain information about cryptocurrencies and their owners. People who own these assets are often worried about the security, privacy, and control of this information. How can the owners have control over all their digital assets? They can do that using private keys.
What are these private keys?
Private keys are used to protect this vital data from security hazards by encrypting it. People who want to learn what is inside the block has to decrypt it. This is also done using these keys.
As the name suggests, these keys are private and should remain so. So, it would be unwise to share them with others. Also, you need to keep them safe, because if they get lost, you cannot retrieve them back. If some criminal gets his hands on these keys, they will be in charge of your crypto assets.
How would you make sure that doesn’t happen?
You have to create and store these keys properly. Usually, there are two ways of doing so. These are:
- Hot wallets
- Cold wallets
- Hot wallet
A type of cryptocurrency wallet that runs on the internet, and it cannot be operated offline. These are quite popular, as you can set these up quite easily, and access them whenever you need it from anywhere in the world. You can use your own device to do that (mobile, etc.).
Despite all these factors, there are some problems associated with it too. These are more prone to security hacks, technical issues, and regulatory complications. That’s why experts don’t recommend it.
- Cold wallet
A cold wallet does not work like hot wallets, as it works offline. This is a paper-based mode, in contrast to its counterpart. Yes, this is comparatively secure than the wallets mentioned previously. But, you will encounter a lot of inconveniences while using them. And due to that, you might lose your assets which is not good news.
Even veterans face issues while using these wallets, and so, they are considered as a feasible option either. So, with these two out of the way, what is the actual solution? Well, the answer is hardware wallets.
What is a hardware wallet?
The third category of cryptocurrency wallet where the private keys are stored within the hardware. This concept is put forward by Ledger. This works similar to the way a cold wallet would work, but with fewer hassles.
Can you suggest any particular device?
As a matter of fact, we can. People are absolutely loving Ledger’s Nano S and Nano X, and we are too. These equipment are created to block even the sneakiest hardware attack they may encounter. Your 24-word private key will be secure when it is plugged into the computer, even when you are connected to the internet.
For security reasons, the device will ask you to validate transactions, just like you do with credit cards. The chip used for this purpose is SE (Secure Element), which is the most advanced chip out there. These devices come with a customized OS (BOLOS), which adds another layer of security.
Ledger is still working on making these devices fool-proof, by collecting feedback from users.
The company has also come up with Ledger Vault for corporate entities, cryptocurrency investors, and institutions. It allows people to control their assets. This solution works as a channel between the device (Ledger Nano S or X) and the Hardware Security Module for better governance, security, and control. It should be noted that this channel offers end-to-end encryption. A unique feature offered by this solution is the multi-signature authorization.
This allows companies to manage cryptocurrency assets (especially if they have a lot of them). The vault also contains facilities such as time lock, using which companies can freeze a particular transaction for a specific time, or vice versa.
It can be used during an ICO (Initial Coin Offering) or STO (Security Token Offering). Using the HSM module companies can govern and control the assets of their clients, after gaining permission from them.
So, you can see that Ledger is actually a revolutionizing concept. If you want to increase the security of your assets, try Ledger.