The world of cryptocurrency is filled with stories of hacks, phishing attacks, and people having their cryptocurrency stolen, and that's usually because they aren't using a hardware wallet. Most people use a browser wallet extension, which is highly convenient, but little do they know the dangers of using them.
Blockchain wallets are made of two long and complex "keys": a "private key" and a "public key", though the latter is usually called the "address". It is easiest to think of the public key as being like an email address, and the private key as its . While s can purchase an crypto phishing attacks need to be avoided, as they are the only way to trick s into giving up their crypto.
Crypto wallets have come a long way over the years, beginning as "paper wallets" where s would hand-write every character of the wallet's public and private keys onto a piece of paper, and eventually turning into today's "hot wallets" and "cold wallets". Hot wallets are wallets with an internet connection, and are usually a web browser extension like the popular Metamask wallet used for Ethereum-compatible blockchains or the Phantom wallet for Solana, but hot wallets are susceptible to malware attacks and considered unsafe for storing large amounts of cryptocurrency or valuable NFTs. That is where cold wallets (hardware wallets) come in. Cold wallets are devices that physically store the wallet's private key and use it to sign transactions without the key ever leaving the device, making them immune to malware attacks. The most popular hardware wallets are made by blockchain phones like the Nothing Phone (1) often include a hardware wallet in their design, which is why they are different from smartphones.
Are Hardware Wallets Totally Secure?
As Wired and Bitcoinist have reported in the past, there have been examples of security experts cracking a device in a lab (sometimes literally), but these vulnerabilities are quickly patched by the manufacturer once reported, and many of the techniques used are unorthodox and beyond the knowledge level of most thieves and hackers. Hardware wallets are typically locked by a PIN, some of which have a lockout system that only allows a few attempts before the device is rendered unusable, although its contents can still be restored onto a new device with the 12-24 English word "seed phrase" that was generated during its setup. If the PIN is compromised, then so is the device.
While cold wallets are considered (theoretically) impenetrable, they don't protect funds that are stored in smart contracts, as these funds are not assigned to the device's public key. s who deposit their crypto into a smart contract are trusting that its developers eliminated all security risks in the contract's code, but even they will miss many details. For example, malicious links designed to steal NFTs or through social engineering attacks.
Hardware wallets are indeed the most effective way to store cryptocurrencies, and can be used without any risk of a hacker stealing their private key. While they do have hypothetical vulnerabilities, all of which rely on being physically stolen, to date nobody has reported their device being stolen and successfully cracked. Because of this, cold/hardware wallets are considered the highest level of security for cryptocurrency and NFTs.
Source: Ledger, Trezor, Wired, Bitcoinist