How to choose a hardware wallet

A hardware wallet is a small device that keeps your private keys offline and signs transactions on its own screen. It is the standard tool for long-term savings. This lesson explains what to look for. We do not recommend brands.

What it does

Your phone or computer prepares a transaction and sends it to the device. The device shows you the details. You press a button to approve, and it sends back a signature. The key stays inside.

Malware on your computer cannot read the key. It can still try to trick you, which is why the device's screen matters.

bitcoin.org calls hardware wallets "the best balance between very high security and ease of use".

Do you need one?

Ask whether losing the amount you hold would hurt. If yes, a hardware wallet is cheap insurance. If you hold a small sum while you learn, a careful phone wallet is enough for now.

Six checks

1. Where you buy it. Buy directly from the manufacturer or a reseller listed on the manufacturer's site. Do not buy second-hand or from a marketplace listing. The case below shows why.

2. Open design and independent review. Look for published firmware code and security research by outsiders. Check how the maker responded when flaws were found. No device is flawless.

3. A screen that shows the whole transaction. You should be able to read the full address and amount on the device itself. If the screen shows only a code you cannot interpret, you are signing blind.

4. A standard backup. The device should produce a standard seed phrase of 12 or 24 words. That lets you recover your coins on a different maker's device if this one breaks or the company closes.

5. Support for what you hold. Check that it handles your coins and works with the wallet software you plan to use.

6. An active maker. Firmware should be updated regularly. Check the date of the latest release.

A tampered device

In 2023, the security firm Kaspersky examined a hardware wallet that a victim had bought through a classifieds site. It looked genuine. Inside, the chip had been replaced and the firmware altered.

The device did not generate a random seed phrase. It used one of 20 phrases the attackers already knew. They waited a month after the first deposit and then took the money. The device was sitting unused at the time, because the attackers already held the keys.

Two lessons follow. Buy from the official source. And be suspicious of any device that arrives already set up.

What a hardware wallet cannot do

• Protect a leaked seed phrase. If you type the words into a phishing site, the device is beside the point.
• Stop you approving something harmful. It signs what you confirm.
• Replace a backup. Devices fail. The seed phrase is what lasts.

Features you can ignore at first

Wireless connections, touchscreens and apps for many coins are conveniences. The six checks above are what protect you.