Cryptocurrency hardware wallets keep turning up in the news and popular culture: the gadgets—which look like USB sticks and hold virtual currency like Bitcoin—have appeared on TV shows like Billions, and also in real world crime capers.
The appeal of the wallets is they offer “cold storage,” which means your cryptocurrency is beyond the reach of online hackers. But how exactly do they work? To get a hands-on feel for hardware wallets—you can also watch the video above—I obtained samples from two prominent manufacturers, Ledger and Trezor.
Here’s how it works: You take the device out of its box and use a cable (included) to connect it to a computer. You then connect to the manufacturers’ website, which directs you through a configuration process. In the case of Ledger, the company requires you to download a web application.
The set-up process takes about 15-20 minutes, and most of it involves writing down and confirming a series of random words like “baby” and “hedgehog.” These words serve as an emergency back-up in case your wallet is lost or damaged, allowing you to reconstitute your private crypto key on another device. (You can skip this step if you’re confident your device will be safe).
The next stage is to configure the wallets for the currencies you want to receive. The devices are not configured for every token under the sun, but do accommodate the major ones—Bitcoin, Ethereum, ZCash, XRP and so on.
Transferring funds to the wallet device is relatively easy. The Ledger and Trezor software creates a one-off address that you can copy and paste. In my case, I pasted the address into an online Coinbase wallet to send a small amount of Bitcoin to myself. The Bitcoin showed up promptly in the hardware wallet. (Transferring funds out of the wallet works the same way). Once your transaction is done, it’s simply a matter of storing the hardware wallet somewhere safe until you want to access your funds.
So which wallet should you buy?
I’ll begin by noting I’m not a cryptography expert, but that everything I’ve heard and read suggest both Ledger and Trezor are extremely secure. If it’s reliable cold storage you’re after, any of these companies’ products should do the trick.
Turning to the Ledger Nano S (the one featured on Billions), like it’s name suggests, it’s an itty-bitty device. You can easily fit it on a keychain or a necklace—or, for that matter, in a secret compartment in your clothes or shoes. It’s also relatively affordable. The list price is $99 but Ledger is currently selling them as a holiday special for $69.
As for operating the device, it has a two button toggle system I found a bit finicky. The Nano S also has a tiny memory, meaning you can only access three cryptocurrencies—which appear as apps on the device’s little screen—at a time. But this isn’t really a big deal unless you own many currencies and plan to move them around frequently.
The Trezor Model T is about twice the size of the Nano S, and relies on a touchscreen rather than buttons to operate. This feature made it easier and more enjoyable to use, and the Model T permits easy access to numerous currencies. The convenience will cost you, however, as the device is currently selling for $179.
I should note Trezor also has an entry level model called the Trezor One that is slightly smaller, and relies on a button system. It sells for around $100. Likewise, Ledger has an upscale touchscreen model called the Ledger Blue that is the size of a cell phone and sells for $299 (currently on sale for $199). I didn’t test either of these.
So should you buy one of these hardware wallets? Unless you own a lot of crypto and/or are paranoid of hackers, these devices are more in the “nice to have” rather than “essential” categories. That said, the devices look cool and using them makes clear (in a way reading about them does not) that it’s possible to hold a lot of crypto wealth in a secure and untraceable way.
Both the Trezor and Ledger products come in handsome boxes, and could serve as stocking stuffers for someone who is really into cryptocurrency.