What is a Hardware Wallet?

What is a Hardware Wallet?

You don’t need a hardware wallet to participate in the world of web3—but owning one can help ensure that you and your assets stay safe and protected.

In this article, we’ll teach you what a hardware wallet is and why you should consider using one to keep your crypto and NFTs safe.

What is a hardware wallet?

A hardware wallet is a physical device designed to securely store your wallet’s private keys offline. They come in many different types of form factors—some look like credit cards, others look like USB sticks.

Hardware wallets do not connect to the internet and can only be accessed if you have the physical device itself, which makes them super secure.

What is a hot wallet versus a cold wallet?

“Hot” and “Cold” are terms used to describe the security of your wallet. “Hot” wallets mean they connect to the internet and “Cold” wallets keep your secrets safely offline.

Why should I use a hardware wallet?

  • Keeps your private keys off the internet and away from hackers!
  • Great place to store assets you don’t interact with frequently.
  • Greater control over your funds.

A hardware wallet can keep your most important things safe while your hot wallet can be your daily driver—the wallet you use day to day that does not hold your most prized possessions.

Are there any risks with a hardware wallet?

The biggest risk you face with your hardware wallet is if it is physically compromised—if your hardware wallet is lost, stolen or damaged.

Your hardware wallet can also become “hot” if the keys connect to the internet. Never upload or share your secrets online.

What kinds of crypto can you use a hardware wallet with?

While Rainbow is a wallet for Ethereum-based assets, most hardware wallets can hold a wide variety of cryptocurrencies, including Bitcoin, Dogecoin, and Chainlink.

Before purchasing your hardware wallet, we’d recommend doing your own research by checking with the manufacturer to see what types of assets your preferred device is compatible with.

Where can I buy a hardware wallet?

You should always purchase your hardware wallet from the official manufacturer—devices purchased from third parties can arrive to you already compromised.

We recommend Ledger Nano X hardware wallets—they work with Rainbow and many other apps.

How to secure a Ledger purchased from a third-party:

If you do purchase a Ledger from Amazon or another source that isn’t Ledger directly, you should confirm the following:

  • 24-word recovery phrase sheets should not already be filled
  • It should not come already setup with a pin
  • It should generate 24 words for recovery and make you re-enter them when you start it up the first time.

Running Ledger Live should automatically check if it's genuine, but if you want to make sure, you can do the following:

  1. Go to Settings -> Help
  2. Click Launch next to Device Setup
  3. Select Nano X
  4. Select Connect Your Nano X under Already Have a Recovery Phrase?
  5. Ledger Live will verify if the device is genuine or not

If you're really paranoid: