NFTexplained.info is a team of long term crypto investors who are well versed in the blockchain space, especially with NFTs; we have the goal of providing valuable, educational content. In this article, we will explore what a cold wallet is – with an emphasis on Ledger products – and the importance of these security tools.
Crypto cold wallets store private keys (i.e. the access to your crypto related assets) off line; this means you are not susceptible to losing your assets because of malicious hackers or security lapses by third parties who store your private keys online.
The typical hardware wallet has a certified secure chip and works in a similar sense to a USB drive in that they have storage capacity. Crypto hardware wallets commonly give you a 12 – 24 word backup recovery phrase which will allow you to recover your crypto assets even if your wallet is stolen. Each 24 word phrase is only ever stored on the specific hardwear wallet and never in the cloud.
Each specific ledger device randomly chooses from 2048 words in order to make a 24 word backup phrase. The odds of someone guessing this are 1/(2048^24) which is a great guard against random guesses or brute-force attacks.
If you were to lose your ledger wallet or if it was stolen, you would still be able to access your cryptocurrency or NFTs by entering your 24 word recovery phrase into any hardware or software wallet that supports 24 word backup phrases. You can also restore as many hardware wallets as you please (as long as you have the backup phrase).
Wallets vary materially in their cost and capabilities. While all wallets have a secure chip and some amount of storage, selecting the right wallet can be a chore. Understanding your needs is key to making the right purchase. In this article we’re going to explore a product family the team here at NFTexplained.info uses on a daily basis. This is an illustration and not a product endorsement.
The Ledger Nano S currently sells for US $59 and allows you to store NFTs and cryptocurrencies offline (however only up to three blockchain networks at a time). If you are looking to store more applications, the Ledger Nano S Plus (US $79) and the Ledger Nano X (US $149) will allow you to store up to 100 applications at once. If you are looking to figure out which Ledger wallet suits your needs the best, click here.
The Ledger family of products have a pin code which must be entered correctly before it gives you access to the device; this pin code is an additional layer of security. If you were to lose your ledger wallet to someone looking to steal your valuable assets and they enter the pin code wrong three times, the ledger wallet will factory reset. This removes all private keys, settings, and applications from your device.
That being said, your assets will always be recoverable with the 24 word backup phrase and the pin code ability to factory reset only acts as additional security for people looking to hack your account while in control of the physical wallet.
If you are looking to learn more about seed phrases/backup phrases, NFTexplained.info will link that article here.
There are many fake ledger links so our team will link the official website here.
Why Is It Important To Have A Hardware Wallet For Crypto Assets?
NFTexplained.info will look at what history has taught us about the importance of having a hardware wallet.
Storing private keys offline is crucial as private keys are essentially passwords to your assets. When they are stored online, hackers can access it to withdraw funds. In the NFT-based game Axie Infinity, roughly US $600 million was taken from the Ronin blockchain using hacked private keys.
Had users stored their private keys offline, the ability to remove funds and validate the request would not have gone through as private keys are what make this trasaction possible. Since the private keys were stored online, the hacker was able to complete the withdrawal request.
Fortunately, Axie Infinity’s owner said players would be reimbursed. If you would like to learn more about the play-to-earn game, we will link that article here.
This example illustrates the importance of keeping private keys offline and just how valuable having a hardware wallet is.
Do I Need A Hardware Wallet For Crypto?
It is highly recommended to have a hardwear wallet for crypto assets in order to prevent being hacked. Hackers can locate your seed phrase – which is stored by a third party – when you have a software wallet; this is not possible for hardware wallets as this information is stored offline.
Even for smaller amounts of crypto & NFT assets, it is still wise to have a hardwear wallet because of the peace of mind it will bring you.
Ledger offers an easy to use and pleasant experience that you will not have difficulties setting up. Since each specific ledger gives you the 24 word phrase, you will not have to worry about hackers finding these words – as long as you ensure the wallet is bought from the official site and has not been tampered with when you open it.
Digital wallets store information about your 24 word phrase (online) making you susceptible to hacks; digital wallets also make you less susceptible to phishing attacks as you have to physically confirm transactions which allow you to carefully think through your actions.
The ledger adds to this level of security by forcing you to press a button on the Ledger in real life to ensure the process is not fully online – physical confirmation is needed to confirm anything that you have done. The combination of pressing the button in real life along with the security a hardwear wallet brings, dramatically reduces hacking risks.
This is as long as you never upload your 24 word phrase to the cloud as that would obviate the benefits of the device; however, Ledger gives you three pieces of paper in which you should write the randomly selected words down for storage in a safe place. It is better to use pencil when writing this down as it is possible that ink may fade.
This entire process is quite simple and you will not have any difficulties in sending your crypto assets to your hard wallet.
What Is The Most Secure Crypto Wallet?
The most secure crypto wallets are hardware wallets as they store your private keys (access to your valuable digital assets) offline. This means hardware wallets do not make you susceptible to phishing attacks and third parties being hacked as your private keys are not online for hackers to see/steal.
Are Hardware Wallets Safe?
Hardware wallets are extremely safe and add a level of security that mobile or “soft wallets” can not offer. Hardware wallets are safe as they keep your private keys offline and give you a seed phrase which always allows you to recover your assets even if the actual storage mechanism is lost.
As our team previously mentioned, be sure to use the official site and ensure that your hardwear wallet has not been tampered with when opening it.
Is Ledger A Cold Wallet?
A cold wallet is one that is not connected to the internet and therefore stored offline; Ledger is an example of a cold wallet (also known as a hardware or offline wallet). Soft wallets store backup phrases online which make them susceptible to being hacked and are less secure.
If you are looking to pick up a hardware wallet, the Ledger Nano S is a great option for those looking to store a few applications (i.e. primarily Ethereum or Bitcoin). For those looking to store more applications, the Ledger Nano S Plus is a far better option as is the Ledger Nano X.
Our team has a full article comparing the Ledger products; if you would like to know which one will best suit your needs, click here.
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