What Is a Hardware Wallet?
What Is a Hardware Wallet?
Like any currency, your Bitcoin and altcoin must be accessible when you need them and secure enough to give you peace of mind that your money is safe. The first Bitcoin wallets were software for receiving, holding and spending money and worked much in the way that a traditional bank’s online app would function. However, as the use of cryptocurrencies evolves, new technologies are being developed for consumers who desire additional security and convenience.
A hardware Bitcoin wallet is a physical device that provides cold storage of Bitcoin or altcoins. As with any emerging technology, there are many products currently on the market, with varying degrees of quality and usefulness. Here’s what you need to know about hardware wallets and their benefits for altcoin users.
How They Work
Both hardware and software Bitcoin wallets require the use of encrypted keys to make a transaction. The problem with software wallets is that because they connect to the internet, their keys are vulnerable to hacking. Hardware wallets, on the other hand, are offline devices that generate a private key. The private key is stored exclusively on the device, while a separate software app uses a public key to connect to the internet. The public key can accept and initiate transactions, but it requires a connection with the private key to validate them.
A hardware wallet is, effectively, a form of two-factor authentication. If your hardware wallet is stolen, it is useless without a connection to the public key. If the public key is hacked, your Bitcoin will be safe, as the private key is required to confirm any transaction.
Hardware Wallets in Action
Using a hardware wallet is simple. First, the wallet must be connected to an internet-enabled device, typically with a USB cable, QR code or other method. Many wallets use a PIN or password to authenticate this connection. Once the wallet is connected, users log on to a web-based interface where they can send and receive money. Because the website doesn’t work without the wallet, there’s no danger of hacking or other security issues.
Hardware Bitcoin wallets have several benefits. Because a hardware wallet’s private key never leaves cold storage, there’s no risk of it being compromised. Because they don’t connect to the internet, hardware wallets are immune to viruses. They also ensure that, even if connected to a device with a key logger, there would still be no risk of having your account hacked.
Hardware wallets eliminate a lot of the hassle associated with paper wallets, which require a printed private key — an earlier, more simplistic form of two-factor authentication — to use. Most hardware wallets are open source, which typically results in fewer bugs and errors.
Hardware Wallets for Aureus Users
Aureus is currently working with BitLox to develop a proprietary Bitcoin and altcoin hardware wallet for our users. While many devices are compatible with altcoins, the BitLox product promises to be the best altcoin and Bitcoin hardware wallet for Aureus users. Keep checking our blog for the latest updates.