Definition of Terms
Ownership of Bitcoin is proven through a private key. The private key is a secret cryptographic string that corresponds to the Bitcoin address. It is required to sign transactions from the Bitcoin address and send Bitcoin. The private key should never be shared with others and should be securely stored.
There are various ways to store the private key, such as in a paper wallet (a note on paper), a metal wallet (a note on a metal plate), a software or desktop wallet (in a program on a computer or mobile phone), or a hardware wallet.
It is recommended to store private keys in a hardware wallet because it is one of the safest methods for Bitcoin storage.
A hardware wallet is a physical device that typically looks like a USB stick or a small hardware console and is specifically designed for the secure storage of cryptocurrencies, including the private key. Security is ensured by physically separating the Secure Element Chip on which the private key is stored from the communication unit, e.g., via USB. In addition, access to the hardware wallet is secured by a PIN with at least four digits.
Some excellent and secure hardware wallets are:
Reasons for Storing Bitcoin in Hardware Wallets:
1. No Internet Connection:
Hardware wallets are physical devices not connected to the internet, making them immune to online attacks like hacking, phishing, and malware that target other wallet types.
2. Independence from Third Parties:
In a hardware wallet, your private keys are stored offline and securely. You have full control over your keys and are not dependent on third parties, as is the case with exchanges and other service providers. This reduces the risk of theft, fraud, or restrictions.
3. Robust Encryption:
Hardware wallets use strong encryption methods to protect private keys. Even if the device is stolen, it is nearly impossible to access the Bitcoin without your PIN.
4. User-Friendly:
Many hardware wallets are user-friendly and provide an easy way to sign transactions and manage your cryptocurrencies securely.
5. Longevity/Long-term Security:
Hardware wallets are designed to be durable. They are less prone to technical failures compared to software wallets or online exchanges. They are also less susceptible to fading, as with paper wallets.
Backup of Recovery Words:
Although hardware wallets are secure, it is important to create secure backups of recovery information and store it in a safe place. This ensures access to Bitcoin in case of loss or damage to the device. Typically, 24 words are written on a piece of paper included with the hardware wallet. With these 24 words, the private key can be restored on any hardware wallet using the same word list (usually the BIP 39 Word List).
Important: If recovery words are recorded incorrectly or lost, it will be nearly impossible to restore your private key if the hardware wallet is defective or lost.