Hardware wallets are widely recommended, but they are not for everyone. This guide is part of our guide to hardware wallets explained.
What a hardware wallet does
It is a small device that holds your private keys and signs transactions, without ever exposing them to your phone or computer.
How a hardware wallet keeps keys away from your computer
Your computer or phone
Online and exposed. Prepares the transaction.
Hardware wallet
Holds the keys. You check details on its own screen.
Signed transaction
Only the signature goes back. The key stays put.
Three questions to ask yourself
- How much would it hurt to lose this? If the loss would be serious, stronger protection is worth the effort.
- Who holds your keys now? On an exchange, a company holds them. See hardware wallet vs exchange.
- Will you look after a backup? With a hardware wallet, you become responsible for your recovery phrase. There is no helpdesk.
When you probably need one
- You hold a meaningful amount for the long term.
- You do not trade often.
- You keep crypto on a phone or computer that also runs other apps.
- You are concerned about an exchange failing.
When you may not
- You hold a small amount.
- You trade often, and you are comfortable with exchange risk.
- You are new, and not ready to manage a backup. Learning first with a small amount may be better.
What it protects against
| Threat | Does it help? |
|---|---|
| Malware on your computer | Yes, mostly |
| Exchange failure or hack | Yes |
| Stolen phone with a wallet app | Yes |
| Fake websites asking for your phrase | No, you must refuse |
| Approving a bad transaction | Only if you check the screen |
| Lost backup | No |
| Physical coercion | No. See physical threats |
The new risks
A hardware wallet swaps some risks for others. Instead of depending on a company, you depend on yourself. You can lose your phrase, fall for a fake support scam, or buy a tampered device. Most losses among hardware wallet owners are caused by mistakes with the phrase, not the device.
If you decide to get one
- Learn how to choose and where to buy safely.
- Follow our first-day setup checklist.
- Write your phrase down correctly.