What is Bitcoin Hardware wallet

What is a hardware wallet ?

Hardware wallet is a special type of cryptocurrency storage which maintains and secures private crypto keys of users in hardware device. This wallet is known for providing security and utility when users interact with blockchains. It allows users to work on multiple blockchains simultaneously. This is translated as utility factor because users can manage Bitcoin, Ethereum & Alt. Coins, Lumens etc on a single device.

Last week, Twitter CEO Jack Dorsey announced his payments firm Square would soon build a hardware wallet to store bitcoin. The wallet will be a type of plug-in device, much like a USB pendrive that stores, manages and secures a user’s crypto assets.

How is cryptocurrency stored?

Cryptocurrency is not stored in the hardware of wallet itself. But it is stored in blockchains. Wallet allows users to access in a portable fashion. It is more like a credit card which can access account from any ATM or swiping platform.

Advantages of wallet

Hardware wallet are extremely secure across the cyberspace because it is a hardware device. Wallet isolates key or access from rest of Internet. Thus, it is safe from online attacks.

Hardware wallets are said to be convenient as they can be connected to trading exchanges to complete transactions.

Hardware wallets are often stored in a protected microcontroller and cannot be transferred out of the device, making them secure. Their isolation from the Internet also mitigates the risk of the assets being compromised. Moreover, it does not rely on any third-party app.

Cryptocurrency keys can be stored in two kinds of wallets - software and hardware.

Software wallets are like smartphone apps that digitally store private keys. Most software wallets do not charge users to store private keys, but may collect commission for trading via the app. These wallets can be vulnerable to malware.

Hardware wallets and physical devices act like cold storage for confidential keys. The passwords are protected by a PIN, making it difficult for hackers to extract private keys as the information is not exposed to the Internet.

Disadvantages of wallet

Since the wallet is in physical form, the device could be stolen or destroyed. A 2016 study by the University of Michigan also noted prominent hardware backdoors that could be used by hackers to steal confidential data.

The device can also be expensive as compared to software wallets. Some hardware wallets can also have complex features, making it difficult for beginners to understand.

Websites referred - https://www.thehindu.com/sci-tech/technology/bitcoin-hardware-wallet-explained/article35275894.ece

https://www.gktoday.in/current-affairs/what-is-a-bitcoin-hardware-wallet/