Hardware Wallets Explained
Page is a WORK IN Progress
Before talking about Hardware Wallets and why they are awesome you should take a look a the sending and receiving Ada page of this guide to get an understanding of what private and public keys are and how they are used.
Cardano Nerdout made an excellent video explaining how hardware wallets work. Take a look at his youtube video.
Hardware wallets (HW wallet) are an excellent way to keep your Ada (and other coins) safe. These wallets are basically little computers that store all of your secret keys on a secure device making it almost impossible for your keys to be accidentally compromised.
Not only do HW store your secret keys they work as sort of an intermediary when signing transactions on the blockchain. When you make a transaction for instance on Yoroi, it gets transferred to your hardware wallet. The hardware usually needs to be unlocked using a separate spending password or pin. Once done you are able to sign the transaction on your hardware wallet using your secret keys (without exposing them to the internet) and then pass the signed transaction back to the blockchain to be submitted.
Just to clarify: your Ada is NOT stored on the device itself. Only your public and private keys needed to access your wallet and sign transactions are stored on the device.
This is different from software wallets made with Daedalus and Yoroi. These wallets have their secret keys stored on your actual computer (though usually they are protected with a spending password). This means your keys can in theory be accessed if your computer has been compromised and similarly your spending password has been cracked or stolen with keylogging software.
Hardware wallets usually use a mnemonic recovery phrase to generate your keys. This means that even if your original device is destroyed or lost you will be able to restore your hardware wallet and its secret keys as long as you have access to your recovery phrase.
Keep your mnemonic recovery phrase in a safe and secure place!
Ideally in a safe or location that is only accessible to yourself
Keep a backup copy in a second secure location in the event you loose access to the first
If you loose your recovery phrase you will not be able to recover your wallet.
NEVER store your recovery phrase on any electronic device that is connected to the internet (unless you know how to secure it - will discuss in a future guide).
There are numerous horror stories about people having their recovery phrases stolen or hacked from online servers and loosing all their funds.
Currently, there are numerous hardware wallets that support Ada. The two big companies that are best known are:
Before buying a HW wallet make sure that ADA is supported. NEVER buy a second hand wallet as they may have been tampered with!
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