Is hardware wallets really the best option for storing cryptocurrencies?
Hi all.
Hardware wallets are definitely far safer than storing cryptocurrencies on online exchanges. But all hardware are prone to failure, so I assume it is a (small) possibility that the hardware wallet itself breaks, causing you to loose all the cryptocurrencies stored on it.
Would it be better to store cryptocurrencies somewhere online like Dropbox, potentially in an encrypted file or folder? That way one wouldn't need to worry about hardware failure. Then again, the cryptocurrencies would only be as safe as the Dropbox account itself, so maybe this probably isn't an ideal choice either.
Or maybe a paper wallet would be the best option, as long as it was stored somewhere safe?
Are there maybe other options that are better than the three ones already mentioned?
Greetings,
protoken
Hardware wallets are a good option because even if the hardware itself is lost/stolen/damaged, you can still recover using the recovery seed. If you lose the recovery seed as well, then you're screwed. Same with any cold storage, really.
I haven't heard of recovery seed before, but this sound really great. How exactly does the seed work - is it just a code/password type of thing? Where does one enter it to recover the wallet?
Well, with hardware wallets, such as the Ledger Nano S, it gives you a 24 word recovery seed, a mnemonic phrase. Say you lose your Ledger. You purchase a new one and when you get it, it asks you if you want to create a new one or if you want to recover an old wallet. You'll select to recover an old wallet and enter that mnemonic phrase. At that point, it recovers the funds in that wallet that got lost. Ledgers are also compatible with myetherwallet.com so you can interact with the wallet there as well. Any wallet you get that's not on an exchange should provide you with a recovery phrase. It's recommended to keep this and backed up in different locations in the event one is lost/damaged.
Excellent. Thanks for the info! I placed an order for a Ledger Nano S, and expect it to be shipped some time in September. Looking forward to moving my funds to the hardware wallet.
There are few security problems with bitcoin that prevent the currency to become mainstream and this is one of those things. What happens when you loose your hardware wallet? There is no way to restore your earnings. On the other hand cloud based wallets are being hacked on a daily basis.