Cryptocurrencies are decentralized digital money that is based on blockchain technology. Currently, Cryptocurrencies are one of the most traded assets in the world with over $50 billion in market value. One main difference between cryptocurrency and other trading assets is that cryptocurrency is decentralized, meaning there is no entity looking over the asset, and that includes the security of the asset.
Unlike other assets that have a bank or a governing body looking over the security of the asset, a cryptocurrency like Bitcoin does not. Everybody who trades cryptocurrency must know how to look after their asset by themselves or risk losing them.
Private and Public Keys
Instead of getting the account number and password to your assets in the bank, cryptocurrency holders receive a "private key". The private key is only available to the person who creates the cryptocurrency account and is unique to only that account.
The "private key" is comparable to an actual "key" because it is used to give access to all the cryptocurrencies in the account, and as the name suggests, it must be kept private. If someone else has your private key, they can gain access to your assets.
Generated along with the private key, is the "public key". The public key is open to be shared online so other people can find your account and send cryptocurrency to you.
Is Your Crypto Stored Securely?
Unlike other assets, cryptocurrencies are not stored with you. It is stored on the blockchain. What you hang on to is the private key, which gives you access to those crypto on the blockchain.
There are a few ways to store your crypto (private keys), some are more secure than others.
Least Secure: Exchanges
Exchanges are very popular among traders. They let people trade cryptocurrencies like BTC, ETH, BNB, DOT, XRP, and more quickly on the platform. However, when you create an account on an exchange, you do not get the private keys. This simply means that you do not have full ownership of your assets, this is very dangerous. Most people only use Exchanges to trade quickly and withdraw to more secure places once finished.
OK Secure: Hot Wallets
Hot wallets are wallets that exist on a mobile phone or on a computer that is connected to the internet. Most of the time they are mobile applications that let you create an account and provide you with private keys which you can keep. As long as your private keys are kept safely, your cryptocurrencies are secure.
However, mobile or PC Apps are always connected to the internet, this runs the risk of being attacked by online hackers who are looking to steal your cryptocurrencies.
Secure: Hardware Wallet
Hardware wallets are devices specially designed to store cryptocurrencies. When an account is created, the private keys are stored within the device and are kept safe away from hackers. Because the device is offline most of the time, it is difficult for hackers to pick the right time to attack.
Nonetheless, hardware wallet must be connected to an online device to be able to link with the blockchain and complete transactions which leaves some vulnerability.
Very Secure: Cold Wallets
Cold wallets are similar to hardware wallets. Their only difference is that the cold wallet does not need to be connected to an online device to complete transactions. This allows the device to be offline at all times (AKA. Air-gapped), meaning there is no time or opportunity for hackers to attack. It is the most secure way to store cryptocurrency.
Cold Wallets like the ELLIPAL Wallet also allow users to access DEFI and other investment features like staking, lending and swapping.
Air-gapped Cold Wallet - Most Secure Way to Store Cryptocurrency
Air-gapped is a state where a device is completely isolated from any form of connection. By connection, we mean anything that connects the device to another device or the internet, such as USB, Bluetooth, WiFi, Cellular, NFC. An air-gapped device is a device that is fully isolated and can never be connected to anything. Without any connections, hackers do not have loopholes to attack.
Why is it Important for Hardware Wallet to be Air-gapped?
Capable hackers always find a way to hack hardware wallet, as shown in the past: (Breaking the Ledger Security Model | Saleem Rashid). Fifteen years old hacker Saleem Rashid managed to hack the Ledger Nano S by connecting it to his PC through a USB cable and supplying malicious code to the wallet.
From this example, you can understand how connections lead to insecurity. You can imagine how other types of connections such as Bluetooth, WiFi, Cellular, NFC can provide even more attack vectors for hackers.
A fully air-gapped device does not allow any loophole for hackers to exploit. Until today, there haven't been any hacking reports of an air-gapped device, proving its superior security. Air-gapped hardware wallet are called "Cold Wallet".
Non-air-gapped Hardware Wallet
Here are some popular non-air-gapped hardware wallets in the world.
The Ledger brand is the most popular hardware wallet brand in the world. They hold the advantage of being one of the first companies to manufacture hardware wallet. With their simple device design that looks like a USB stick and affordable pricing, the Ledger is an easy choice for many. Nevertheless, recent device hacks and database hacks have created many discussions online.
Ledger's most famous product, the Nano S uses a USB to connect with a computer to carry out transactions. The newest model, the Nano X, uses both USB and Bluetooth. Using Bluetooth allows the Nano X to connect with a smartphone as well to carry out transactions.
It supports buying, selling, trading, accessing DAPP, managing NFTs which makes it a very useful wallet.
Trezor is the first company to manufacture hardware wallet for the masses. It is as famous and popular as Ledger. Trezor's best specialty is its open-source software. Many experienced traders prefer the Trezor because it is can be used with other third-party Apps outside of Trezor's PC App.
The Trezor uses a USB cable to connect to the PC to carry out transactions.
It supports buying, selling, trading, staking, managing NFTs, but no DAPPs.
Air-gapped Cold Wallets
Although there are many great hardware wallets out there, it is best to choose ones that are air-gapped for the best security. With connections such as USB or Bluetooth, it provides attack vectors that hackers can exploit.
Currently, every cold wallet depends on QR-code technology instead of USB or Bluetooth to keep its air-gapped state. The cold wallet will have a camera and it will be used to scan QR codes to perform set up and sign transactions. As using a camera to scan requires no physical or wireless connection, it allows the wallet to stay air-gapped.
ELLIPAL was one of the first wallet brands in the market that embraced QR code technology and educated its users on why air-gapped is a very important feature. It is fully built from metal which makes it very sturdy and gives a high-end feel. It is very suitable for long-term use. It has a large touch screen and doesn't have any USB port for charging. It also has anti-disassembly and anti-tamper features, on top of being air-gapped. Overall, a very secure device. It pairs with its smartphone App for transactions and setup.
The ELLIPAL has one of the highest numbers of coins supported among all the wallets in the market. It also supports importing accounts from other wallets. It supports buying, trading, DAPPs, and staking. It is a very useful wallet.