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How does a hardware wallet work?

Hardware Wallets such as the Ledger Nano X, TREZOR Model T, BitBox02 or KeepKey all work according to the same principle. They are a special form of a so-called wallet, which is used to manage cryptocurrencies. A hardware wallet is a physical device that securely and inisolationly generates the private keys to the cryptocurrencies. Due to the extra hardware, they have some advantages over software wallets:

  • Private keys are often stored in a protected area of a microcontroller and cannot be transferred out of the device in clear text.
  • Hardware wallets are immune to computer viruses that steal from software wallets.
  • They can be used securely and interactively, private keys never need to come into contact with potentially vulnerable software.
  • The software is in most cases open source, so that the user or professionals can validate the entire operation of the device.

However, it is important to understand that hardware wallets are an attractive target for attackers and depend on several assumptions to maintain security. They are not a miracle weapon, and there are several realistic ways to hack a hardware wallet Especially if someone has physical access to the device.


Ledger Nano X
BitBox02


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