Hardware Wallets Test

The most important in a nutshell

• There are different ways to store cryptocurrencies: Hardware wallets are considered the most secure.
• Among the most popular manufacturers are Trezor and Ledger, but other well-known companies also offer secure storage solutions.
• Inexpensive devices are available for around 50 euros, while products with more features cost over 150 euros.

“To the moon” is a metaphor from the crypto community. It is used to conjure up astronomical price explosions. Now the metaphorization seems to become reality. The space company Astrobotic and the crypto exchange BitMex want to transport a Bitcoin to the moon. Stored is the digital gold on a hardware wallet in the form of a coin.

Hardware wallets allow investors to store bitcoin and other cyber assets on a physical device. In most cases, they resemble USB flash drives. What makes them special is that the form of storage has no touch points with the Internet – so attacks by hackers are impossible.

There are now many different providers that make hardware wallets available. Ledger and Trezor are among the two best-known. But other manufacturers also promise secure storage of digital coins.

Hardware wallets: A comparison of the best providers

Own wallets are not mandatory

Such a digital wallet is not necessary in every case. Online brokers with crypto trading usually do not even have the cyberdevices paid out. There, an external custodian takes care of the safe storage. In advance, however, investors should check how reputable such custodians are. A location within Europe can already be a positive indication.

Crypto exchanges also hold investors’ cryptocurrencies in custody. Shortly after the purchase of Bitcoin and Co. the cyberdevices are on the exchange wallet. This means that the assets are displayed on one’s account, but the private keys are still in the possession of the exchange.

The so-called private key is the access key to one’s cryptocurrencies – whoever knows the random combination of numbers has access to the digital coins. Accordingly, the responsibility about the correct handling is high.

Private wallets protect against fraud, not negligence

Investors receive the numerical code as soon as they withdraw the cryptocurrencies to an external wallet. This gives many a good feeling, because crypto exchanges are not always trustworthy. The example of the ominous investment company Africrypt is alarming. Its founders are said to have made off with 69,000 Bitcoin. For the investors, this means a loss in the billions.

But even those investors who are exclusively in possession of the private key themselves are subject to risks. For example, the unique key can be lost – the digital assets are then gone.

In summary: An external wallet makes a lot of sense especially if investors distrust crypto exchanges, they like to take responsibility for their digital coins themselves or high sums are invested.

Wallets for every purpose

In addition to the exchange wallet and the hardware wallet, there are other types of crypto wallets, all with individual features. The hardware wallet is characterized by the fact that it is particularly secure. This is because it is a type of cold storage. A connection to the Internet is not necessary and digital interfaces are also kept to a minimum in other respects.

However, the physical wallet also has one disadvantage. It makes trading inflexible. After all, the operation requires more effort than it is the case with an online wallet or a mobile wallet. Especially with mobile wallets, investors have maximum freedom, but they sacrifice it in favor of security. Daily trading or regular payments with cryptocurrencies are easier to perform with online and mobile wallets.

Which wallet is right for me?

So the question of the right wallet is primarily a question of trading habits. If you are invested for the long term, you will make a good decision with a hardware wallet. No other form of independent safekeeping offers a similar amount of security potential. However, investors should make sure that they set up their storage medium correctly.

Tip: Sometimes it pays to keep several wallets at the same time. This way, investors benefit from the various advantages, especially since digital wallets are free of charge anyway.

Correct installation is the be-all and end-all

Investors should take their time when setting up the hardware wallet. After all, there may be a lot of money at stake later on. Before getting started, it is essential to check the packaging of the device: Is the foil undamaged, do the serial numbers match, are there any other abnormalities?

One of the few ways to hack a hardware wallet is to manipulate the device. To do this, however, it must have passed through the thief’s hands beforehand. An intact seal usually rules this out.

The seed is the heart

During the setup process, the physical bitcoin wallet generates the seed. This is a phrase consisting of 12 to 24 words. It is imperative that investors make a note of these words. If the wallet is damaged or lost, the coins can still be accessed. They are not stored on the hardware wallet, but are on the blockchain at all times.

The wallet calculates the private keys from the seed. These in turn grant access to the digital coins and are also necessary for the validation of transactions. The special feature here is that neither the seed nor the private key leave the hardware wallet – the process takes place holistically within the device.

Good to know: Each wallet has a public key, which is comparable to the IBAN of a checking account. The private key is similar to the pin or tan. Both together allow access to the wallet. To avoid having to write down the private keys individually, hardware wallets have a seed. This is the origin of the private keys and calculates them from the word combination.

It won’t work without a digital interface

However, hardware wallets cannot do without software. The software is responsible for the administration and provides the interface to the respective network of the cryptocurrency. There is also a PIN. Investors have to type this in when they connect their Bitcoin wallet to their computer or smartphone.

Hardware wallets in comparison

The best-sellers among hardware wallets are the devices from Ledger and Trezor. However, the growing crypto market has also fostered new competition among wallet providers. A comparison of the products should provide investors with information about the cost and security of the products.

Ledger Nano

French company Ledger received $380 million in a funding round in July 2021. This solidifies Ledger’s leading position in the crypto market. Currently, the French offer two devices: The Nano S for 59 euros and the Nano X for 119 euros.

Tip: It is highly recommended to buy a hardware wallet directly from the manufacturer. Used items on online marketplaces like Ebay could be rigged, resulting in a potential loss of your Coins.

Limited memory

The main difference between the two models is their storage capacity. Per cryptocurrency that you want to store on your ledger, you need storage space. However, the respective application is only necessary during the transaction process; afterwards, investors can delete it again: The private key remains on the wallet in the process and storage space is freed up.

The Nano S offers space for around 3 to 20 such apps, the Nano X for about 100. By the way, the direct competitor Trezor does not require free memory.

The Nano X has one special feature. The associated Ledger Live application enables transmission via Bluetooth. This simplifies trading even more. Ledger supports the majority of all cryptocurrencies on the market.

Tested security

That the products are also secure is confirmed by France’s National Authority for Information Systems Security (ANSSI). It has officially certified Ledger. Ledger Live can also be used to buy cryptocurrencies such as Bitcoin or Ethereum directly. The software is also suitable for beginners and does not require any prior knowledge.

Trezor is open source

Trezor’s security is taken care of by the community itself, among others. As an open source product, users can work on the source code, which verifies that there are no hidden backdoors. This is not as transparent with Ledger, which some users criticize.

Besides that, Trezor has the usual security features of a hardware wallet: Generally, the hardware wallets of the Czech manufacturer Trezor are considered very secure.

Like Ledger, Trezor has two models on the market: the Trezor One for about 58 Euros and the Trezor Model T for about 190 Euros. The differences are more serious than with Ledger. The storage space is less relevant for Trezor, since the processes run via a web service that provides the applications for the different coins.

Lack of compatibility

A major drawback of Trezor Ones is the lack of support for some of the most popular cryptocurrencies. For example, Cardano or Ripple cannot be stored. This is possible with the more expensive model, which is compatible with most cryptocurrencies.

The Model T also impresses with a touchscreen and the option to use a micro SD card. The cheaper model has two buttons for operation. Besides that, there are other features like the Shamir Backup, which allows denomination of the seed.

Cheap alternative Keepkey
Comparable to the Ledger and Trezor products is the KeepKey hardware wallet from the Swiss company Shapeshift. At 49 US dollars, the device is one of the cheapest. At the same time, it convinces with its simple operation, quick setup and high security. Unlike the competition from Ledger and Trezor, KeepKey supports significantly fewer digital coins.

Coinkite as a Bitcoin custodian
Another noteworthy provider is Coinkite with its ColdCard Wallet Mk3. The device convinces with numerous security features that make life difficult for both digital attackers and analog thieves. For example, there is the integrated “Duress Pin”. It only grants access to a small amount of Bitcoin. In case of a real threat, a large part of one’s Bitcoin remains safe.

By the way, the Mk3 is only compatible with the cryptocurrency Bitcoin. Still, the device is more suitable for more experienced users. In terms of price, the ColdCard Wallet Mk3 is around 145 Euros.

BitBox 02 – the Fort Knox among hardware wallets
Another Bitcoin-only product is the BitBox 02 from Shift Crypto. However, there is also a multi-edition that supports other cryptocurrencies. Otherwise, the BitBox 02 offers high security standards that are second to none. For example, there is a TOR function that ensures anonymous surfing. Another plus point is the usability. The reduced interface helps even beginners to press the right buttons intuitively. The BitBox 02 is available for 119 euros.

Conclusion: Don’t rely exclusively on technology
Almost all of the hardware wallets in the comparison impress with their security measures. Investors can place their assets there without hesitation. Of course, they must not forget that technology is only half the battle. The careful handling of pin and seed remains personal responsibility.

The wallets appear in different forms and different connections. Personal preference is the deciding factor here. However, investors should pay attention to the supported coins. If you own a large number of different cryptocurrencies, you should make sure that they are also supported by the respective device. There are also differences in price – measured by the benefits, however, you should not save money here.

Paper wallets are free
A cost-effective alternative to a hardware wallet is a paper wallet. As the name suggests, the private keys are simply stored on a piece of paper. Care should be taken when creating the keys. While the keys are being created, the website code should be running in offline mode.

While paper wallets do not struggle with technical defects, they are more susceptible to other damage, such as cracks or water. Therefore, a paper wallet should definitely be stored in foil.

Frequently asked questions about hardware wallets
When do I need a wallet?
Anyone who owns cryptocurrencies and wants to have control over their own coins themselves needs a wallet. Hardware wallets are considered particularly secure, while mobile wallets offer the greatest possible convenience.

What types of wallet are there?
Basically, a distinction is made between wallets that are linked to the Internet and those that also run offline. Hardware wallets belong to the latter and are particularly secure.

When is a hardware wallet worthwhile?
A hardware wallet is worthwhile for long-term investments. Then the cryptocurrencies remain particularly long and need the most protection.