When you bought your first cryptocurrency, it was probably through an exchange. Whether it’s Binance for the low fees, Kraken for the top-notch security, or even Coinbase for the free cryptocurrency, these are all centralized crypto exchanges.
However, as you start venturing deeper into the crypto world, you may have come across hardware wallets. So they are physical wallets, apparently secure, and store your crypto? What happens if someone steals your wallet? Why can’t you just keep your crypto in Coinbase?
In this article, we will be taking a deep dive into how hardware wallets work, as well as addressing some misconceptions about them. We’ll also be looking specifically at Ledger Nano X and a bit of the Nano S — these are the hardware wallets we’re using right now! (Not sponsored, I got mine a few weeks ago!)
So get cozy, this will be a long read.
Table Of Contents
- Are Hardware Wallets Worth It + A Look Into Ledger Nano X
Should You Choose a Wallet or Exchange?
For the beginner crypto toe-dipper, wallets and exchanges are literally the same things. I agree… to a certain extent.
Here are some defining features of crypto wallets and exchanges; let’s weigh the pros and cons!
Cryptocurrency exchanges are centralized trading platforms, an all-in-one solution for managing your cryptocurrency. Most exchanges allow you to buy, sell, trade, and swap cryptocurrency, of course, charging a fee every time you transact.
Beginners flock to crypto exchanges because of their ease of use. Simply sign up for an account on a crypto exchange, and you can start playing around with crypto however you choose! Some exchanges also offer incentives to join, like free cryptocurrency when you trade on their platform.
Another great reason to use crypto exchanges is the FIAT-crypto integration. Most people getting on board the crypto hype train use cash to buy cryptocurrency. Since exchanges take international currencies like USD as payment, this makes buying your first crypto really easy on exchanges.
Finally, cryptocurrency exchanges come with security protocols in place; such as passwords and 2FA (2 Factor Authentication). In terms of crypto storage, exchanges help to manage your wallet. Sounds good, right? More on that in the next section.
Crypto Wallets are software programs that essentially store your cryptocurrency. You can also buy, receive, and swap your crypto on wallets, but usually at a higher price than with exchanges. People usually integrate their wallets with another decentralized application (Like Uniswap, Sushiswap, etc.) to carry out transactions and swaps.
In that case, aren’t crypto wallets and exchanges the same?
Nope, because crypto wallets allow you to truly own your wallet, while exchanges don’t! Let me explain.
In the cryptocurrency world, there is a popular saying “Not your keys, not your crypto”. For every cryptocurrency wallet, you have an address as well as a password (also known as “keys”). Your address is public, enabling others to send you crypto funds whenever they like.
As for your “keys”, this is a 24-word seed phrase, randomly generated from a selection of 4096 words. This is your real crypto wallet “password”, not what you enter in a crypto exchange. Exchanges help you manage your seed phrase, so if the exchange gets hacked, your funds will likely be stolen (even if the hackers didn’t get past your password/2FA).
While this 24-word seed phrase may seem like an easy password to crack, it really isn’t. Here’s a good visualization, comparing the possibilities of seed phrase combinations to the number of atoms in the universe… yea, it’s quite a shocker. Thus, crypto wallets letting you manage your “keys” is one extra measure of security.
In short, I’d say that you have a choice to sacrifice either simplicity or security when choosing between wallets or exchanges. Ahh… the compromises we must take! Of course, exchanges and wallets are suited for different types of crypto investors, but that’s a discussion for another day.
Software Vs Hardware Wallets: Why The Latter Triumphs
If you’re a “HODLer” like me, choosing a wallet is the obvious choice. After all, you own your crypto keys, which means exchanges can’t lock up your funds without permission, and hackers have a much harder time getting to you. Unless you’re an active trader, I would recommend storing your funds in a crypto wallet.
At this juncture, you have 2 choices; to hardware, or to software. Is paying more than a hundred bucks truly worth a physical wallet that is just more secure? Read on to find out.
What Is A Hardware Wallet?
A hardware wallet is a physical device that stores your cryptocurrency “keys”, and is used to sign transactions within your account. Also known as cold wallets, they are offline — unconnected to a network that can be exploited and hacked by coders.
Contrary to popular belief, a hardware wallet DOES NOT hold your cryptocurrency. All cryptocurrency is stored on the blockchain, free for everyone to see. However, you need the crypto keys tied to the wallet in order to access the funds inside, hence nobody can just search up your address and steal your crypto.
Instead, a hardware wallet holds the private keys to your cryptocurrency, thereby enabling you to access your funds by connecting your device to the hardware wallet. You need your hardware wallet to sign transactions, so make sure you have it on hand for swaps, stakes, transfers, and more.
If you lose your hardware wallet, fret not! As long as your private keys are still in hand, you can always get another device and import your address (using your private keys).
A hardware wallet is also an all-in-one solution. By this, I mean that you can access multiple Dapps, interact with different blockchains, and even transfer countless cryptocurrencies, all using the same hardware wallet! Just think of this hardware wallet as your secure “log-in” device.
How Do Hardware Wallets Compare To Software Wallets?
On the other hand, software wallets are usually accessible on your computer or mobile device; which means they’re online when your device is connected to the internet. Take note that hardware wallets are always offline; you can even use one on an infected computer without a problem!
Software wallets are usually free — partly because the creators want more people to use their software. They’re extremely compatible with other Dapps and blockchains, especially notable wallets like Metamask and Trust Wallet. Integrating your software wallet with other blockchains will be slightly more complicated though, but a simple Google search will do the trick.
In terms of convenience, software wallets surely score a win. Software, being intangible, allows you to just start the application on your laptop, typing in the password, and you’re good to go. However, hardware wallets require a physical confirmation from the device itself, so it will take twice as long to make a simple transaction.
Nevertheless, this is just a mild inconvenience when taking security into account. Remember the “infected computer” scenario? Since software wallets do not require private key verification and only rely on a password to authenticate the user, any experienced hacker will be able to steal your funds if there is existing malware on your computer.
In a nutshell, having a hardware wallet makes a whole world of a difference. If spending a couple of bucks and sacrificing a little convenience could give me peace of mind over my crypto stash, I’d gladly do it.
Ledger Nano X: Features + My Personal Experience
Finally, the segment we’re all looking forward to! Before I get into the journey of getting my Ledger wallet, let’s talk about some of Ledger’s key features!
Ledger is a crypto hardware wallet manufacturer HQ’d in Paris, France, and was founded by eight cryptocurrency experts in 2014. Sharing the “top hardware wallet” title with fellow company Trezor, Ledger is as reliable as you can get today.
With over 4 million customers so far, being featured on multiple established newspapers, and of course, being certified “great” by us, Ledger is a good hardware wallet choice in general. Now, on to the details.
Ledger’s first product was the Ledger Nano S, and while the design is old, the wallet is still highly appraised by many today. A few months after, Ledger released Ledger Blue, a premium version that looks more like a kindle (with a larger touchscreen) than Nano S.
Thereafter, Ledger launched the Ledger Nano X in 2019, giving extra features like Bluetooth connectivity, a battery, and more. Ledger is also planning to release Ledger Nano S Plus, an upgrade to the Nano S, sometime in 2022.
Aside from that, Ledger also sells accessories including the Cryptosteel Capsule Solo (a literal wallet safe), The BillFodl (metal piece to store your private keys), and other productivity tools. Not forgetting that Ledger is in the process of making their very own crypto card, with thousands of people already on the waiting list!
Last but certainly not least, Ledger also has their “exchange”. This is more of a crypto management platform, allowing you to buy, sell, swap, stake, and track your cryptocurrency in real-time. Integration of other Dapps should also be done on Ledger Live.
Learning and Support
Apart from their revolutionary hardware and accessories, Ledger also provides extremely useful educational resources for free! Also known as Ledger Academy, this is the learning hub of Ledger, aimed towards beginners and intermediates in the field trying to learn more about crypto, blockchain tech, and Ledger in general.
As for customer support, Ledger has an email hotline you can reach out to. Some of you may also know that their “unofficial” point of contact is the Ledger Twitter page, where their support team is the most active. In fact, they have commented on my rather unrelated Tweet before… just by tagging @Ledger!
Ledger has many other materials for public eyes, so do visit their website to find out more!
Now… on to my Ledger personal experience.
Getting My First Hardware Wallet: Ledger Nano X’perience
Like many of you pragmatic, economically conscious crypto-HODLers, I myself considered a hardware wallet out of my league. This was mainly due to 2 reasons…
- A decent hardware wallet costs more than a hundred bucks
- Keeping my crypto in an exchange was more convenient
For those reasons, I opted out.
However, after researching more about how hardware wallets keep my crypto safe, resounding agreement from crypto communities, and even certified by Gami himself, I knew I just had to get it.
Perhaps “Not your keys, not your crypto” was the clincher for me.
After browsing around for a quick minute, I figured that Ledger Nano X was the right wallet for me. Used a discount code for 20% off, and my Ledger finally arrived after a week of waiting… a pretty quick delivery time considering I live halfway around the world!
Upon unboxing, I was taken aback by how sleek the Ledger wallet looked. Compact and lightweight, boasting a classy pivot, as well as the stainless steel finish; Ledger designers did a fantastic job!
The next step was configuring the Ledger wallet. Ledger Academy’s step-by-step set-up guide made this process methodical and simple, really helping me input the correct details into my Ledger. Truly, setting up a password, confirming my seed phrase, and downloading some Dapps was made easy by Ledger’s learning resource!
At this point, I already had Ledger Live installed on my laptop. Whenever I accessed my portfolio manager on Ledger Live, it would require my physical wallet to be connected (via USB) to the laptop, allowing confirmation of transactions within the application. So, this was “signing my transactions” in real-time!
Gami and I also experimented with a little transfer of funds, just to test out the wallet. The three-step process is simple.
- Click on “Receive” in Ledger Live, and choose your wallet.
- Link your Ledger and confirm manually
- Get your address and confirm it is the right one showing up on your Ledger.
To get rid of any misconceptions, receiving crypto doesn’t require confirmation before the crypto enters your wallet. On the other hand, you need to manually sign the transaction (confirm) before funds can be sent out of your wallet.
So that’s all for now! I’ve been holding some major cryptocurrencies in the Ledger wallet ever since, but I should really get into staking! Speaking of that, Ledger can also connect to Dapps like Lido (for staling cryptocurrency), ParaSwap (for decentralized token swapping), Wyre (for purchasing crypto with FIAT), and many more!
Before we end the Ledger Nano X experience, let’s compare it a little with the Ledger Nano S, from Gami’s point of view.
Ledger Nano X vs Ledger Nano S: Defining Differences
A quick search on Ledger’s website and you should notice that Ledger Nano X is more than twice the price of the Nano S. In fact, the family pack of 3 Ledger Nano S wallets is cheaper than the Nano X!
So, what justifies this absolute behemoth of a price hike?
Aside from the Nano X being able to support 100+ Dapps compared to Nano S only capable of hosting 3, I believe Bluetooth connectivity plays a big role in this price hike.
Via Ledger Live, you can connect your Ledger Nano X to your mobile phone with Bluetooth. This is handy for trading on the go, especially since starting up your PC for a simple trade can be quite the hassle. Furthermore, Nano X has a built-in battery, which can last for a few hours on a full charge, and apparently a few months when turned off!
While this may sound like a trivial matter, a USB connection isn’t always ideal. One of the key issues we face with the Nano S is the USB connectivity — becoming loose over a few years of use. Anyway, even the Ledger Nano X cannot connect via Bluetooth when using a computer, so fingers crossed, Ledger should release this feature soon!
Another thing we hope can be improved for the future is the method of backing up our seed phrase. Currently, all Ledger models come with three sheets of paper for you to write your 24 keys on, and lock in a secure place. While this is alright, we were hoping for something more like a BillFodl, or a metal plate to securely store our keys on.
Perhaps we’re asking for too much… but hey, we’re already paying a premium.
If you’ve set your mind on getting a Ledger product, you can support us by using our referral link upon purchase. Truly, thank you in advance!
How To Find The Perfect Hardware Wallet For You?
Now that you’ve heard our experience using Ledger products, you may feel that Ledger products aren’t the right fit for you. Well, then what are your options?
I strongly recommend looking at crucial factors like Reputation, Functionality, and Community Preference.
Perhaps the most important of the three, pick a brand that has a great reputation. Typically, experts would recommend the two leading brands, either Ledger or Trezor. Trezor was actually the first crypto hardware wallet, created by Satoshi Labs; which is more focused on Bitcoin-related projects.
Buying a hardware wallet from a less-established brand could mean it is tampered with or does not have top-notch security. Both Ledger and Trezor wallets are heavily encrypted and share their code open source, so community members have vetted and tested their code for years now… enough to convince me they are reliable.
Please don’t get a shady wallet just because it’s a few dollars cheaper!
Next, you should look at what functions you require your hardware wallet to perform. Let’s say you need a lot of integrations to multiple DApps. In that case, Ledger Nano X would be a much better choice compared to Ledger Nano S. Or perhaps you’re looking for a wallet with a bigger screen, colorful lighting; the Trezor Model T will be your choice.
Essentially, the wallet of your choice should fit your crypto needs appropriately. Remember to choose wisely!
The last factor I’ve chosen to include is community preference, which generally refers to how other users feel about the brand in question. When I was making my decision between Ledger and Trezor, why I went for the former is partly because of the many people recommending Ledger over Trezor online.
After reading a few articles about how Trezor’s code was vulnerable and prone to hacking, this also led me to decide on Ledger. As such, it’s important to take others’ accounts into consideration before making your final decision.
Summary: Are Hardware Wallets Worth It?
110%, yes! Hardware wallets don’t just give you that extra layer of security, it helps you achieve peace of mind — typically not synonymous with crypto holders. While you pay the price (literally) and face some inconvenience, the ownership of keys is worth it.
Without a hardware wallet, I’m a hundred bucks richer. With it, at least I’m not “Penny wise, pound foolish”!