Hardware wallets – what are they and how do they work?

There’s a bunch of different ways you can keep your Bitcoin or other cryptocurrency safe – but few options are as secure as a high-end hardware wallet.

If you’re relatively new to Bitcoin, you might not fully appreciate how vulnerable your coins can be – so it pays to be fully informed about all the options that are out there. We’ll take a look at what a hardware wallet is, how it works – and some of the most popular devices on the market…

What is a Bitcoin wallet?

As you probably already know, Bitcoins and other cryptocurrencies are made up of a collection of private ‘keys’. However, the particular crypto network only works with client software that manages those keys, allowing users to make transactions.

A ‘wallet’ is one such piece of client software – it provides a pair of keys (one public and one private) so that currency can be accessed – and the algorithms that mean transactions can be carried out across your chosen crypto network.

A hardware wallet is exactly as it sounds – a physical device that does the above.

What exactly does a hardware wallet do?

As you’ll know, there are two types of Bitcoin key, a public one, required to transmit Bitcoin to that wallet – and a private one, required to send or spend your Bitcoin. Most hardware wallets will generate the private key that’s required for a Bitcoin transaction to take place.

A hardware wallet will also chart the transactions executed on the device – although rather than displaying the complex blockchain transaction that’s taken place, the device will display a ‘hash’ – essentially a code that identifies the nature of the transaction and puts it into one particular category.

Some (but not all) wallets display key information on a small screen – a really important feature that means information can stay within the wallet itself. The reason for this is fairly simple – a Bitcoin wallet is extremely difficult, if not impossible to breach. Your computer on the other hand is extremely vulnerable – so, transmit data from your super secure wallet to your fairly insecure computer – and there you go… a vulnerability.

Having a screen means this vulnerability is removed – as keys do not have to be passed from one device to another.

Hardware wallets have an additional security feature – a button – or maybe two.

Where clickable buttons are being phased out elsewhere in tech – they still have an extremely important part to play in Bitcoin wallet security – that’s because they can’t be pressed electronically. For instance, you’re about to confirm a transaction – there’s an outside possibility that this transaction isn’t being performed by you – however, since your hardware wallet and button reside in your hand, you’re the only person who can push the button. Simple – but effective.

Buying a hardware wallet

Keen to find out which is the best hardware wallet? Well, the good news is, it’s not going to take you long to research all the possibilities.

Hardware wallets are, for the time being, a very specialised piece of equipment – and the relatively low popularity of cryptocurrency vs. standard currency means you’re not likely to see them on supermarket shelves anytime soon.

We’ll give you an overview of the 2 most popular products on the market today:

Ledger Nano S

Ledger offer some excellent, tried and tested cryptocurrency products – although by far the most popular is the Ledger Nano S.

To the untrained eye, the Nano S would resemble a USB drive hanging from your bunch of keys – although the contents are likely to be far more valuable (and a lot more difficult to access!)

When you set up a Nano S, you’re required to enter a PIN, consisting of 4 numbers. Enter an incorrect PIN too many times and your wallet is wiped – meaning theft of the device would be extremely unlikely to result in your currency being lost. That said, your Bitcoin isn’t gone forever – the Nano S creates a one-time recovery phrase that is recorded elsewhere at setup – allowing you to recover the wallet if it is lost or stolen.

Building on the already secure concept of physical buttons – the Nano S has two buttons that require simultaneously pressing to authorise any transaction, adding an extra layer of security.


TREZOR were the first company to launch Bitcoin hardware wallets – and they’ve continued to grow their security from day 1 – making them one of the safest choices on the market.

Back up and function is very similar to the Ledger Nano S – with a generated pass phrase that allows for a secure recovery of the wallet’s contents should it be lost or stolen. Physical button presses are also required for transaction authorisations.

2017 saw the first recorded breach of a hardware wallet – and the device in question was a TREZOR. That said, the exploit was extremely difficult to enact – and the company rectified the issue almost immediately after it became apparent – the type of response you’d expect from a company that looks after significant amounts of client currency.

TREZOR devices can be recovered in a number of versatile ways too – including recovery to a number of web and software based wallets – handy if you don’t have another TREZOR to hand.

Where to find hardware wallets

Both the TRAZOR and Ledger Nano S tend to sell very quickly – and since they’re made in limited numbers, you can sometimes be waiting a while before you find a vendor with one in stock. If you’re in the marketplace and see one available – buy quickly – and you’ll avoid lengthy waits before your currency is secure.

General hardware wallet advice

Hardware wallets are not generally considered the best ‘beginner’ option for managing your Bitcoin. That said, it depends what being a beginner means to you – if it’s trading small amounts of cryptocurrency – then the cost and complexity of a hardware wallet might not make sense. However, if ‘starting out’ with Bitcoin means buying a small fortune’s worth, then buying and understanding a hardware wallet might be a good step.

Safety often means complexity – and this is especially true of hardware wallets – but understand them and work with their complex security and you’re unlikely to find a safer option.