In our first Blocksafety article, we walked you through the difference between custodial and non-custodial wallets. Now, we’ll talk about how to secure your funds in a cold storage wallet.
So long as your cryptocurrency is stored on your computer or laptop, there will always be a small danger that your wallet, custodial or not, can be compromised. This is because your computer is connected to the internet. During your browsing activities, you might for example fall prey to a phishing attack, where a hacker tricks you into giving them the seed phrase to your non-custodial wallet.
The solution to this is to keep your funds locked in an offline environment – or cold storage, in other words.
One such device is the Ledger Hardware Wallet, which also comes in a lite version called the Ledger Nano S.
The Ledger looks like a normal USB thumb drive, except that it has a small screen through which you can enter your password, and monitor / confirms the security of your funds. This screen is important, as it means that you do not need to rely on your computer or any third-party applications to use the device.
Your cryptocurrency is locked inside the ledger device, and never exposed to the online world unless you choose to send your funds back into an exchange. One of the coolest features of Ledger Hardware Wallets is that you can interact with participating desktop wallets (such as the Electrum Bitcoin wallet or Exodus multi-coin wallet) without exposing your crypto to any third-party risk.
You can also interact with smart contract platforms such as Ethereum, using participating non-custodial wallets and decentralized exchanges such as Metamask and Airswap.
One thing to keep in mind if you plan to buy a hardware wallet is not to store your seed phrase/passwords digitally, on your computer. This defeats the point of having an offline hardware wallet! Write down multiple backups on paper, and store them in a safe box, or a hidden location that comes to mind easily.
Ledger isn’t the only hardware wallet on the market. A similar and equally popular device is the Trezor. It could be argued that the Trezor is slightly more user-friendly and secure than the ledger wallet, although it costs more and is made of plastic rather than the ledger’s more physically robust steel design.
In the Ledger vs Trezor debate, it really is a case of your own personal preference!