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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 transmitted in plain text from the device
  • immune to computer viruses stealing from software wallets
  • can be used securely and interactively, private keys never need to touch potentially vulnerable software
  • the software is open source in most cases, so that the user can validate the entire operation of the device.

However, it is important to understand that hardware wallets are a high-quality goal and depend on various assumptions that apply to maintaining 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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